More Oil, Same War: Why Increased Exports Aren’t a Sign of Iran’s Collapse

Max Boot is a historian, best-selling author, and foreign policy analyst. His latest book, a biography of Ronald Reagan titled Reagan: His Life and Legend, is his third New York Times best seller.

President Donald Trump’s war with Iran has dragged into its eighth month. But lately there has been some good news for the United States: More oil is getting out of the Middle East, at least more non-Iranian oil, than at any point since the United States and Israel launched the conflict on February 28.

Actual figures on oil exports are disputed, because many tankers are going through the Strait of Hormuz with their trackers turned off, but the private firm Kpler estimated that in September crude oil exports were just under 70 percent of the prewar level. The major U.S.-allied oil producers exported about thirteen million barrels a day, down from nineteen million barrels a day in February. Iran, by contrast, has not been able to move its oil exports through the Strait of Hormuz since the U.S. Navy imposed a blockade in July.

That has led to some predictable—and predictably exaggerated—chest-thumping on Trump’s part. The president last week boasted that “we have almost total control” of the strait, that “we took more oil out of the Strait of Hormuz over the last couple of days than at any point in history,” and that the United States will win the war with Iran “very soon.” His bravado is endorsed by some experts who have supported the war.

But does this suggest that the United States is on the verge of defeating Iran? The world has heard that too often from Trump and his aides over the past seven months to take his words too seriously. The reality is more complicated: While the increase in oil exports is a positive development, there is no reason to think that it portends Iranian willingness to accede to Trump’s ambitious demands, which range from ending its nuclear and missile programs to ending its support for proxy movements in the region to, well, ending the Islamic regime itself.

It’s important to keep recent developments in perspective. If oil is flowing so freely, why was the Brent crude oil price on Friday still over $100 a barrel—i.e., roughly 40 percent higher than the day before the war began? The average price of a gallon of gas in the United States has gone from $2.98 before the war to $4.47 last week. The price of diesel fuel in the United States has risen even faster: from $3.75 a gallon before the war to $6.52 a gallon last week. That’s an increase of almost 75 percent. The price spikes created so much cost pressure that Group of Seven countries announced on Friday that they would release one hundred million barrels of diesel and crude from their strategic stockpiles over the next four months.

The problem is that the Strait of Hormuz remains a treacherous route for commerce, with Iran continuing to attack shipping. The United States has managed to allow some ships to pass through but only with a massive, and unsustainable, navy deployment that currently includes two aircraft carriers and numerous other vessels.

But most of the increase in exports is coming not from the strait but from alternative, bypass routes through the Red Sea, the Mediterranean (via the Suez Canal), and the Arabian Sea. Those alternative routes are longer and more expensive than the one they are replacing: The Wall Street Journal reports that the cost of moving a tanker of oil from the Middle East to China has skyrocketed from $7 a barrel before the war to $35 a barrel today.

The conflict has also damaged refineries and processing plants in the Gulf, limiting the exports of refined petroleum products and liquefied natural gas (LNG). Iranian attacks knocked out 17 percent of the production capacity at Qatar’s giant Ras Laffan export hub for LNG. Qatar is making repairs as rapidly as it can, but restoring two damaged LNG trains could take up to three years.

So, the global economic shock caused by the war, although slightly easing, is not likely to end anytime soon. Of course, the economic crisis caused by the war is far more severe for Iran than for the rest of the world. Inflation is elevated in the United States (at 3.4 percent on an annualized basis in August, up from 2.4 percent in February), but it’s out of control in Iran, where it’s averaging more than 80 percent annually. And the Iranian currency is hitting all-time lows against the dollar.

Yet there is no indication that the economic punishment being suffered by Iran’s people will lead its regime to buckle. Iran, like Cuba and North Korea, has long experience in surviving U.S. sanctions.

Iran arguably made a mistake when it walked away from the generous deal that its leaders negotiated with Trump in June, which would have given Iran tens of billions—if not hundreds of billions—of dollars in unfrozen and unsanctioned funds while requiring in return little beyond reopening the Strait of Hormuz. That deal was evidently scuttled by hard-liners in the Islamic Revolutionary Guard Corps who began attacking tankers that were hugging the Oman coastline to leave the Strait of Hormuz. This ambiguous agreement also led the regime’s leaders to believe that Iran would be granted control over all maritime traffic through the strait.

Without that deal, Iran is more likely to lash out than to surrender; it retains plenty of missiles and drones it could use to target oil facilities and ships across the region. Indeed, in recent days, Iran has stepped up attacks on ships in the Strait of Hormuz; the U.S. Maritime Trade Operations Center counts at least seven strikes since September 28. Moreover, Iran’s Houthi allies are now in command of the Bab al-Mandab Strait, which gives them a potential chokehold on oil exports via the Red Sea. Iranian-backed forces have already damaged Saudi Arabia’s East-West Pipeline and could no doubt do so again in the near future.

That is no doubt why Trump is signaling that he may intensify U.S. involvement in the war with Iran after the midterm elections. The U.S. Navy is preparing to move another aircraft carrier and an additional Marine Expeditionary Unit to the region, adding to the two carriers and roughly fifty thousand troops already in the region. But there is no reason to think that Iran is any more likely to capitulate after more U.S. air strikes, given how many bombs and missiles the United States has already dropped on that country.

Trump and his supporters are fooling themselves if they think there is a military solution to this conflict. There isn’t. The only way to end the war is through renewed negotiations with Iran, which will likely result in a deal that does not grant Trump his prewar demands. Instead, they will likely have to reward Iran with concessions on sanctions and frozen assets. In other words, a deal a lot like the one Trump signed in June.