US-Iran Crisis in Perspective

I was hoping to start off 2020 on a positive note. However, the new year has started in chaotic fashion with the threat of conflict looming over the world as tensions between the United States (US) and Iran threaten to break out into all-out war. This state of affairs emerged in the aftermath of the lethal strike carried out by the US against Qassem Suleimani, widely regarded as Iran’s most powerful military general. Since the strike, Iran has threatened retaliation and President Donald Trump of the US has also threatened to carry out attacks against Iran should the Islamic Republic act on its threats.

Several analysts have downplayed the risk of a large-scale war between the US and Iran because frankly, neither party wants prolonged and open confrontation since this would likely inflict significant losses on both sides. Max Fisher, an international reporter and columnist for the New York Times, has predicted that Iran will likely aim for limited counterattacks against the US which do not lead to all-out war. Of course, the danger here is that a tit-for-tat between the two countries carries the risk of miscalculation and open confrontation which is the very scenario that both parties are trying to avoid.

The question for us in the Caribbean is why these developments taking place thousands of miles away in the Gulf region are important to us. First, the old adage that when the US sneezes the Caribbean catches the cold still applies. We are still reliant on the US as a major trading partner, a source market for tourism, a source of foreign direct investment and of course, remittances from our nationals in the diaspora. Should the US become embroiled in another conflict in the Middle East akin to its misadventures in Afghanistan and Iraq, this could prove to be extremely disruptive for us in the Caribbean to the extent that it imposes a significant economic cost on the US.

The second consideration for us in the Caribbean is that as part of its retaliatory measures, Iran may disrupt shipping in the Strait of Hormuz, a waterway which holds immense economic and geopolitical significance. The Strait of Hormuz lies between Oman and Iran and it is often referred to as the world’s single most important oil passageway through which an estimated one-sixth of the world’s oil moves. This equates to roughly 17.2 million barrels of oil per day from major oil suppliers such as Saudi Arabia, Iran, Kuwait and the United Arab Emirates. Exports of Liquified Natural Gas (LNG) from Qatar, the world’s largest exporter of LNG, also pass through the Strait of Hormuz.

Against this background, the logical implication of war or even a prolonged but limited conflict between the US and Iran is that global energy supplies will be disrupted, and the price of energy will also become volatile. In the immediate aftermath of the recent provocations, oil prices jumped to $69.50 per barrel, the highest since September 2019.

Higher oil prices will likely be reflected in our electricity bills, our supermarket bills and of course, the price that we pay for fuel at the pump. Essentially, conflict thousands of miles away has the potential to be quickly localised by virtue of our connections to the US as well as our participation in global commerce.

While the world can rebound economically after a war or low-level conflict, what it can never rebound from is the inevitable loss of thousands of young men and women who dedicate their lives to military service and whose egotistical leaders send them into frivolous wars. Moreover, the loss of innocent lives, or collateral damage as some may call it, can never make war a worthy venture. For these reasons, I am hoping that good sense will prevail and that both the US and Iran will pull back from the brink of no return.