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The True Iran Threat: Proxy Wars

As 2020 approaches, the ground conditions in a number of Middle Eastern conflicts have shifted in ways that are forcing Iran’s hand strategically, exposing the extent to which its proxies are shaping the regional landscape.

Major General Qassem Soleimani, Commander of Iran’s Islamic Revolution Guards Corps Quds Force and architect of Iran’s proxy forces.

Despite ongoing economic diversification efforts and acknowledgement of the challenges posed by climate change, as long as oil continues to dominate the Middle East’s economy, and the rest of the world continues to depend on it, Iran’s actions, but more truthfully its proxies, will have an outsized influence on geopolitical stability.

Though the attacks on Saudi oil infrastructure at Abqaiq and Khurais have faded from the headlines, the incidents will not be the last high profile hostile act attributable to Iran in the coming months. In fact, they should serve as a harbinger of what is likely to transpire in 2020. Since the signing of the JCPOA (Iran Nuclear Deal) in 2015, and especially since President Trump withdrew from the deal in May 2018, much foreign policy and security rhetoric in the West and US-aligned Middle Eastern states has been, reasonably, focused on Iran’s compliance with the deal and the threat that the country would pose, both to its neighbors and adversaries farther afield, if it obtained nuclear weapons. Though the threat of a nuclear-armed Iran is real and significant, it is not imminent, and the dominance of this issue in international public discourse has, until very recently, obscured the scope and urgency of the threats posed by Iran’s proxies.

Why Worry About Proxy Activity Now?

As 2020 approaches, the ground conditions in a number of regional conflicts have shifted in ways that are forcing Iran’s hand. This reality, combined with the fact that sanctions are taking a hard toll on the country’s economy, has brought the role of Iran’s proxies, operating throughout the Middle East, into sharper focus. With respect to Iran, the actions of these groups, though at times difficult to attribute directly, are what will shape the regional operating environment for our clients in the next year, especially in the energy sector.

In this article, we focus on four actors:

  • Hezbollah, the Shiite group that continues to operate in southern Lebanon and that has expanded its operations into Syria in recent years
  • The Houthis, the Shiite rebels who comprise one of the main forces responsible for the ongoing war in Yemen
  • Other Shiite militia groups operating in Syria that have been essential to the preservation of the Assad regime, including the Fatemiyoun Brigade (comprised mostly of Afghans), the Zaynabiyoun Brigade (comprised mostly of Pakistanis), and various coalitions of Bahraini forces
  • The Iranian Revolutionary Guard Corps Quds Force (IRGC-QF), which has been active in Syria since the beginning of the civil war and which, though it is a state actor, cannot be overlooked, given its role as the prime orchestrator of Iranian proxy activity

As Iranian President Rouhani feels more pressure at home, he will continue to become emboldened abroad, and for good reason. International responses to specific acts of Iranian aggression this year — attacks on oil tankers, the shooting down of a US drone, the targeting of Saudi oil infrastructure in September — have thus far been muted, underscoring two significant facts: the United States does not have an appetite for another large-scale Middle Eastern war and Sunni Gulf nations, especially Saudi Arabia, are not prepared to take unilateral military action.

For its part, Iran remains focused on securing sanctions relief and getting its oil to market. While recent reports reveal that there has been at least some willingness on multiple fronts — American, Saudi, Iranian — to entertain talks on these topics or otherwise deescalate the uptick in tensions, the status quo incentivizes additional small to medium scale Iranian aggression, in line with the types of attacks that have been perpetrated throughout 2019.

Without a doubt, the Iranian regime has studied the Trump Administration’s treatment of North Korea, which is also subject to heavy sanctions. President Trump has had high profile talks with Kim Jong Un and made some significant concessions without North Korea ceasing its hostile activity and, in some cases, even flaunting it. The Trump Administration’s recent maneuverings on Iran are beginning to reflect a similar pattern, and for that reason, over the course of the next year, we anticipate three primary regions will experience an escalation in proxy activity as Iran reacts to the winding down of Syria’s civil war, a consolidation of the conflict in Yemen, and changes in global oil markets largely driven by Saudi Arabia. We will also be keeping a close eye on Iran’s less publicized proxy activity in Europe, North America, and South America, which could take on greater importance as Iran feels more pressure in the Middle East.

Iran’s Proxies in Syria and the Future of Iran’s Relationship with Russia

While Iran and Russia have many aligned interests in Syria, the winding down of civil war hostilities is beginning to expose areas where there is either no clear power sharing arrangement or where there is potential for conflicts of interest to arise. While dynamics between Russia and Turkey continue to evolve, especially in light of recent meetings in Sochi, Iran’s goals have not changed substantially since the mid-September meeting Rouhani, Putin, and Erdogan had in Ankara as part of the tripartite Astana process. That meeting made clear Iran’s priorities in Syria:

  • Ensure that the Assad regime remains in power in order to preserve the ability of the IRGC-QF and other allied militias to operate with a free hand
  • Drive Sunni extremists out of the country, thereby strengthening the Shiite axis that extends from part of Afghanistan to Beirut
  • Begin recouping the investments, both financial and operational, that it has made over the last eight years

Iran and Russia are particularly likely to face a conflict of interest over Israel. Unlike Iran, which continues to categorize aggression toward Israel as its raison d’être and accordingly, is focused on using Syria as a base from which to execute hostile actions, Russia needs, at least for the next few years, to maintain a constructive, if not amicable, military relationship and friendly economic terms with Israel.

While the next year is unlikely to usher in major changes in Putin’s grand strategy or positioning, it is likely to be a time during which Russia reaches new milestones in laying the foundation for a durable, long term presence in the Middle East.

Russia arguably benefits from Iran continuing to strengthen its proxy forces in Syria and occasionally engaging in small scale skirmishes with Israel because such actions distract from Russia’s own activities and allow Iran to be viewed as the prime immediate threat to regional stability. However, if the aggression escalates to a level that risks overwhelming Israel’s defenses or penetrates beyond Israel’s border region with Syria, Iran’s actions will destabilize Russia’s long term strategy in the Middle East. Putin may have sanctioned Rouhani’s strategy for now, but he is likely preparing to cash in on the reality that Iran is, at best, a junior partner in post civil war Syria.

In addition, though Iranian and Russian interests still coincide with respect to driving Sunni extremists out of Syria, the recent change in position of Kurdish forces vis-à-vis Russia and the Assad regime presents a challenge for Iran as the Islamic State (IS), despite al Baghdadi’s death, takes advantage of the upheaval. At a certain point, Russia may be better off allowing a low scale Sunni insurgency to operate in the country, especially if insurgents can be convinced that the most desirable target is Shiite militias that continue to be allied with the Assad regime after active Russian military assistance winds down.

Such a shift has the potential to mitigate the risk of a Sunni group targeting a Russian asset and degrades Iran’s ability to capitalize on its investment in Syria fully. This outcome could be good news for those looking to benefit from Russia’s military and economic expansion in the Middle East, but it also means that investors and policy makers need to assume that a low scale insurgency will exist for years to come.

Violence in Yemen and the Broader Gulf of Aden Region will Continue to Escalate

The war in Yemen, beginning in 2015, was initially cast as a two-sided conflict between Iranian-backed Houthi separatists and a Saudi-led coalition that supported the government of Yemen led by President Hadi. However, the conflict, as The Guardian has reported, morphed into a war with at least three fronts: the northern front, where the Houthis continue to battle Saudi and Saudi-backed forces; the southern front, where the Southern Transitional Council, which until just recently was backed by the United Arab Emirates (UAE), was fighting forces loyal to President Hadi in an attempt to gain independence for the Aden region of the country; and a nation-wide theater in which al Qaeda and IS-aligned elements, including an extremist faction within the Yemeni government, Islah, are sowing chaos.

At present, relations between the various Sunni forces in Yemen appear to be on the mend and the UAE has effectively ceased its involvement in Aden. While these developments are positive, the strained nature of any new alliance that emerges out of a deescalation on the southern front and the Saudis’ well known frustration with the stagnating conflict leave plenty of opportunities for the Houthis to attempt to control the narrative in the coming months. Though they have claimed responsibility, albeit unconvincingly, for the September 14 attack on the Abqaiq and Khurais oil facilities, additional, smaller scale attacks on oil infrastructure, similar to those perpetrated earlier in 2019, should be expected in the coming months. These maneuvers, coupled with additional public relations moves like the recent release of prisoners under a UN-supervised exchange, will continue to obscure a resolution to the conflict in Yemen, prolonging an already horrific humanitarian crisis. On the commercial side, however, shifts in the conflict in Yemen heighten the vulnerabilities inherent in operating in the Red Sea and Gulf of Aden.

Aggression Between Saudi Arabia and Iran is Not Off the Table

Though the drone and missile attack on Saudi oil infrastructure has widely been traced to Iran, it remains unclear if the attack was perpetrated by a state actor or a proxy. As we look toward 2020, this incident underscores one of the core components of Iran’s operating strategy that we expect to become more visible in the months ahead: the blurring of lines between state actors and proxies.This reality cheapens the value of any diplomacy with Iran, if not completely undermining it, increasing the probability that Western nations and their regional allies, left with fewer tools, will resort to military action and even tougher sanctions.

While Iran has taken steps to upgrade its military capacity in recent years, the country’s leadership is clear eyed about the fact that it cannot take on a Western power (or Israel) in a conventional military engagement and come out on top. Its strength is in its ability to utilize proxies and exploit the fact that the power dynamic between the state and such groups is not hierarchical. Iran can ply these groups with financial support and materiel, but with the exception of the IRGC-QF, these groups have their own agendas outside of advancing Iranian interests, which can make direct attribution complicated.

The scale and nature of the Abqaiq and Khurais attacks certainly represents an escalation of hostilities. Given the pattern of Iranian aggression in recent months and the way Saudi Arabia, the UAE, and the United States have responded thus far — with restraint — Iran should be expected to continue testing the boundaries of its adversaries. Even if such actions do not substantially improve its own position, undermining its enemies may be sufficient consolation.

For those with business interests in Saudi Arabia, it is important to recognize that the Kingdom does have incentives to act upon any future Iranian provocation, particularly given the domestic political dynamics. The de facto leader, Crown Prince Mohammed bin Salman (MBS), continues to struggle to establish himself as a visionary leader who can transform his nation for the 21st century. One year after the murder of Jamal Khashoggi, the world has not forgotten what happened in the Saudi consulate in Istanbul. Nor have the incidents involving torture and detention in the Riyadh Ritz-Carlton, the bizarre, later-retracted resignation of Saad Hariri, Lebanon’s Prime Minister, and controversies surrounding women’s rights faded from view. Attempts to distract from these events with a media blitz about the Kingdom’s budding tourism industry have not been effective. Similarly, the war against Iranian-backed Houthi rebels in Yemen, which was one of MBS’ first initiatives, has devolved into a crisis with no end in sight.

Mohammad bin Salman bin Abdulaziz Al Saud, colloquially known as MBS, is the Crown Prince of Saudi Arabia.

MBS is in need of a high profile confidence building measure, which may make launching retaliatory measures on a Shiite neighbor that damaged the country’s most important asset a palatable course of action. The Saudi Aramco IPO raises the stakes, creating a much needed positive public relations opportunity for MBS, but simultaneously creating another target for Iranian aggression. It is true that incidents over the last few months have laid bare some of Saudi Arabia’s military limitations, but these limitations will not define the outcome — MBS has too much at risk for retaliatory action toward Iran to come as a surprise.

The Potential for Confrontation is Not Limited to the Middle East

While it is certainly reasonable to expect that the vast majority of Iranian targets will be located in the Middle East in 2020, Hezbollah in particular has become an increasingly visible threat outside of its traditional stomping ground.

  • While Israel will remain Hezbollah’s prime target, from both Lebanon and Syria, mounting evidence suggests that it is expanding operations in the Western hemisphere, both for targeting and fundraising purposes, particularly as sanctions continue to take a toll in Iran.
  • In South America, we are monitoring actions in the tri-border region between Brazil, Paraguay, and Argentina, which has been historically hospitable to a variety of malicious non-state actors.
  • In North America, our focus will continue to be on Hezbollah’s network of operatives along the eastern seaboard, specifically in the New York City and Washington, DC areas. In light of several high profile arrests and indictments in the last few years, including in September 2019, this type of activity should remain front of mind in any discussion about Iran’s reach.

Accounting for Risk

The challenge in the coming months, for both public and private sector actors with vested interests in the Middle East, will be to continue to apply appropriate levels of scrutiny to the actions of Iranian proxies. Though such activities may fade from the headlines periodically, as has happened in the wake of the US decision to remove troops from Syria and Turkey’s ensuing incursion against the Kurds, the potential impact of Iranian interference should not be underestimated.

As Iran continues to rely on proxies, effectively taking opportunities for meaningful diplomatic interventions off the table, fluctuating volatility in the Middle East can be expected to unsettle markets, even if for short periods of time. The Abqaiq and Khurais attacks shined a giant spotlight on the vulnerability of the oil industry. Despite ongoing economic diversification efforts and acknowledgement of the challenges posed by climate change, as long as oil continues to dominate the region, and the rest of the world continues to depend it, Iran’s actions will have an outsized influence on geopolitical stability. For that reason, it is essential to focus on the true levers of Iranian power: the proxies.

Interested in learning more?

For more information about how digital disruption could affect your business, or to schedule a confidential consultation, contact our team at Luminae Group.

Originally published at www.luminaegroup.com on November 7, 2019.

Luminae Group is a global advisory firm specializing in geopolitics and risk forecasting. Learn more: http://bit.ly/2lQednN

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