Lizzy Galbraith, Senior Political Economist at Aberdeen, has shared her insights on the Iran conflict.
“Progress towards a lasting ceasefire between the US and Iran, and re-opening of the Strait of Hormuz, remains a case of two steps forwards, one step back. The ceasefire, currently due to expire mid-week, is extremely fragile. After the US and Iran seemingly declared the strait open Friday, Iran promptly declared it closed again while the US blockade remained in place.
At the time of writing, it is unclear if a second round of negotiations will go ahead this week.
One explanation for this diplomatic whiplash is the power vacuum at the heart of the Iranian government. With a high percentage of key leadership killed, it is unclear whether any single figure has the authority and capability to reach an agreement with the US that all parties will follow.
It may also be that both sides are increasing their leverage ahead of the next round of talks while still fundamentally in search of a deal.
President Donald Trump has reiterated his threat of striking Iranian power plants and bridges should the ceasefire break down. The Iranian leadership seems to be treating this as a credible threat it wants to avoid triggering. And Iran has genuine strategic reasons to avoid a resumption of military strikes and end the US’s “counter-embargo”.
At the same time, Trump is probably still in search of an off ramp. The war remains unpopular at home, and any stabilisation in his approval rating ahead of the midterms probably turns on bringing gasoline prices down.
Indeed, it did seem that genuine progress was being made in the talks and it is possible to sketch out a credible landing zone.
Meanwhile, thinking of the strait as being either “open” or “closed” is likely too much of a binary description. Traffic through the strait over the weekend remained far below normal levels even prior to the collapse of the US-Iranian agreement, with Iranian tolling and mining concerns still strong deterrents.
Even under the best circumstances, traffic through the strait will only gradually increase with the US government referencing the need to carry out mine hunting operations. So the physical shortages not just in oil, but also LNG, fertilisers, jet fuel and helium, will continue to build even in the event of diplomatic progress.”
