US-Iran talks had raised hopes that the clouds of war might ease a little, but after 21 hours of negotiations produced nothing, the meeting was abruptly called off and the faint glimmer of hope quickly vanished.
The worst part is that Trump has gone into a fresh rage, announcing that the US Navy will block the Strait of Hormuz; any vessel that pays transit fees to Iran and uses its ports will not be allowed to enter or leave.
The IRGC immediately responded forcefully, and the conflict is clearly escalating. The sudden turn has a reason. Ray Dalio, founder of Bridgewater Associates, who studies century-long shifts in hegemony, posted that in this geopolitical contest the financial battlefield is just as fierce: Whoever controls the Strait of Hormuz wins this war, because over the long term, it threatens the dollar’s status. That makes it easier to see why Trump suddenly blew up.
After Iran blocked the Strait of Hormuz, two developments made Trump deeply uneasy and convinced him they had to be checked.
First, Iran seized the opportunity to boost oil exports and set prices in yuan. Beyond opening new revenue channels and helping pay for the war, that also deliberately lifted the profile of the “oil yuan.”
Second, charging foreign vessels transit fees in yuan likewise strengthens the renminbi and works as a substitute for the dollar, building momentum for this new financial order. Trump clearly sees that this trend threatens the dollar’s status; if the gap keeps widening, the fallout could be endless.
Dalio views the Hormuz dispute through that lens and says the fight has already moved beyond control of a trade route, because signs point to a shift in the international financial system. He cited a comment by former IMF chief economist Rogoff, saying that if Iran and China gain the upper hand in buying oil with yuan and paying transit fees, more countries will be encouraged, in order to avoid US financial sanctions, to speed up a move away from the dollar and diversify into financial systems outside the dollar sphere.
In a recent interview with Al Jazeera, Rogoff put it even more bluntly, saying that “At one level, Iran is aiming to poke its thumb in the United States’s eye, adding insult to injury. At another level, Iran is dead serious about preferring yuan to avoid US sanctions and to cultivate its ally, China.”
Beyond collecting transit fees in yuan, Iran is also selling large volumes of exported oil to China at discounted prices, mainly in yuan-denominated transactions. Rogoff believes that if Iran and China win out on this front, it will push other countries to diversify their investments and gradually break away from the dollar-based financial system. He said his long-held view is that “the dollar’s dominance has already peaked.”
Yuan Oil Challenges Dollar
According to Bloomberg tanker-tracking data, Iranian crude oil and condensate exports averaged about 1.7 million barrels per day in March, topping neighboring Iraq. Before Trump announced yesterday that he would blockade the Strait of Hormuz, experts inside the government had already pushed the hard-line plan to cut Iran’s economic lifeline.
Trump’s deployment of troops to block the Strait of Hormuz serves two goals. It aims to stop Iran from exporting oil for profit and to prevent it from charging transit fees to ships from other countries. On the surface, the move is about cutting off Iran’s revenue and showing the world that “I’m in charge here.” But the deeper calculation is to stop the rise of the “petro-yuan,” which could eventually threaten the “petrodollar.” If that trend is not stopped early, the fallout could be long-lasting.
But Trump’s move is a dangerous gamble. The New York Times notes that a naval blockade is an act of war and could trigger serious consequences. In fact, senior Revolutionary Guard officials have already warned: “Any wrong move will drag the enemy (the United States) into a deadly whirlpool in the strait.” The military has also deployed missile batteries along the shores of the Strait of Hormuz, and US warships taking part in the blockade mission face the risk of attack.
Will Trump, because of the “financial war” behind the struggle over the Strait of Hormuz, be willing to use force again? Or will he once again pull a TACO, all bluster and no action, then back down? That will be what the world watches over the next few days.
Trump has ordered the Navy to block the Strait of Hormuz, and behind this struggle for control of the strait is a “financial war.”
Iran is demanding payment in yuan for transit fees through the strait, and selling oil in yuan as well; in the long run, this poses a certain threat to the dollar’s status.
What Say You?
** 博客文章文責自負,不代表本公司立場 **
A New York Times writer asked a good question yesterday: "Why the United States Can’t Quit Its Wars?" Quite rightly so. From Iraq and Afghanistan to Iran, the United States can never escape the fate of "easy to start a war, hard to pull the troops out."
The harder it strikes, the stronger its enemies grow. The more allies those enemies attract, the deeper Washington sinks. It has no choice but to keep raising the stakes. The Iran war is now trapped in exactly this vicious cycle.
The Wall Street Journal reports today that Iran's "Axis of Resistance" has expanded further of late. The al-Qaeda branch entrenched in Somalia, Africa, has stepped up its alliance with the Houthis, Iran's "sworn brothers." The pair could choke off the Red Sea exit at any moment. That would sever the other oil shipping lane beyond the Strait of Hormuz. Should that happen, America's troubles will multiply, and pulling out will become harder still.
Al-Qaeda's Somali branch joins the Houthis. Washington's headache grows.
According to the report, al-Shabaab, al-Qaeda's branch in Somalia, is the wealthiest of them all. It controls local ports, roads and gold mines, and it is raking in money hand over fist. Annual revenue exceeds US$100 million.
Yet bulging coffers are not enough. The group lacks advanced weapons, and its fighters need proper military training. Which is why it has cut frequent "deals" in recent years with the Houthis in Yemen, Iran's "sworn brother." Since the US attacked Iran, the two have grown closer still, united by common enemies in America and Israel.
Al-Qaeda was founded by bin Laden in 1988. It began as a "jihadist organization" resisting the Soviet invasion of Afghanistan, covertly funded, no less, by the CIA. When the Soviets went down in defeat, the United States took over the role of "invader." Al-Qaeda promptly turned its guns on America.
In 2001 Al-Qaeda orchestrated 9/11, the terrorist attack of the century. Washington has regarded it as the greatest threat ever since.
In recent years, its leaders have been killed by the US one after another. Rival "jihadist groups" keep grabbing its turf, leaving it in steady decline. Yet al-Qaeda remains powerful in parts of the Middle East and Africa. The Somali branch is a case in point. The US has long seen it as a mortal danger, and the American military has struck it as many as 40 times.
The "Perfect Partners"
To build up its military muscle, the group has in recent years bought large batches of advanced weapons from the Houthis through intermediary arms dealers. It has also sent fighters to Yemen for military training, learning, among other things, how to operate attack drones. The Houthis, for their part, have dispatched instructors to Somalia to pass on combat skills.
The US went to war against Iran in late February this year. That pushed the "deadly duo" into even closer contact. Al-Qaeda belongs to Islam's Sunni branch, while the Houthis are Shia. The two are age-old foes. But faced with the common enemies of America and Israel, both are willing to set aside their feud and point their guns outward in unison.
What is more, each side of the "deadly duo" has something the other craves. The Houthis need hard cash to fund their war effort. Al-Qaeda, keen to sharpen its fighting power to consolidate its grip, must acquire advanced weapons and military technology. This mutually beneficial relationship has turned the two into "perfect partners."
To Washington, two "terrorist organizations" banding together is a real nightmare. It is enough to rob it of sleep and appetite. The Houthis are entrenched in Yemen, facing Somalia, home of the al-Qaeda branch, across the Gulf of Aden. That is the gateway through which oil is shipped via the Red Sea. If the pair join forces, they could lock down this shipping lane for good.
The Choke Point
The Strait of Hormuz is already firmly in Iran's grip. If this other lane is cut as well, Saudi Arabia and the rest will lose their alternative route for shipping oil. Global energy supplies will go from bad to worse. Remember: 12 percent of the Middle East's oil is transported through this passage. The impact must not be underestimated.
The "deadly duo" could shut Saudi Arabia's backup oil route.
Worryingly, the "deadly duo" genuinely possesses the capability to seal the strait. The Houthis have precision missiles and large fleets of attack drones. They are now helping al-Qaeda install radar in Somalia and supplying it with attack drones and more. The two could coordinate operations down the road, striking merchant vessels and US warships that try to force their way through.
Whether the American military could juggle that many fronts at once would then be a big question mark.
America's current predicament recalls 2010. President Obama decided then to send 30,000 more troops to Afghanistan to fight the Taliban. The deputy assistant secretary of defense at the time, Lavoy, raised doubts. "Afghanistan has countless tribes, and every one of them harbors resentment towards America," he said. "Even if the Taliban did not exist, there would still be an insurgency in Afghanistan."
No matter how many troops were poured in, the war could not be won. Better to simply withdraw.
Those words describe the Iran war today just as aptly. By attacking Iran, America has opened a "Pandora's box," and "demons" like al-Qaeda have come pouring out. How many of them, one has to ask, can America possibly fight at once?
Lai Ting-yiu
