Iran Could Soon Punch Back After the FTO Designation

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Forecast: The Iranian regime has yet to retaliate for the U.S. designation of the Islamic Revolutionary Guards Corps (IRGC) as a foreign terrorist organization (FTO) in a meaningful way. Iranian action may become more likely as U.S. economic pressure against the regime reaches an all-time high, however, possibly in the coming weeks and months. IRGC commanders will also soon regain human and physical resources for planning a response that they have had to direct towards disaster relief efforts after heavy flooding and rain across Iran. The IRGC may respond to mounting U.S. economic pressure and the recent FTO designation by disrupting commercial traffic near the Strait of Hormuz or using its proxy network to attack U.S. forces in the region.

Regime officials condemned the FTO designation but have yet to take any real action against the U.S. Senior regime officials, including President Hassan Rouhani and Supreme Leader Ayatollah Ali Khamenei, rallied behind the IRGC and condemned the U.S. following the Trump Administration’s announcement on April 8 that it will designate the IRGC as an FTO. The Supreme National Security Council (SNSC) *declared the U.S. a state sponsor of terror and designated U.S. Central Command (CENTCOM) as a terrorist organization in response. Iranian parliamentarians presented a *draft bill that would require Iranian naval forces to stop the passage of U.S. ships through the Strait of Hormuz unless they had been inspected. Iranian reactions have not yet resulted in any real change, however.

The regime may currently lack the bandwidth to plan a meaningful retaliation because of aid relief efforts in flood-stricken areas. Heavy rains and flooding since March 25 have killed nearly 80 people, damaged approximately one-third of Iran’s roads and caused over $3 billion in financial damages, and left millions in need of immediate aid. IRGC, Basij, and Artesh forces have mobilized in assistance and disaster relief efforts in order to mitigate the vast damage caused by the floods, chiefly in southwestern Iran. Senior military officials, including former IRGC Commander Maj. Gen. Mohammad Ali Jafari, IRGC Quds Force Commander Maj. Gen. Qassem Soleimani, and IRGC Ground Forces Commander Brig. Gen. Mohammad Pakpour, have been in southwestern Iran personally overseeing and participating in disaster relief efforts. Soleimani *announced on April 7 that he would spend a month in southwestern Iran in order to help with the flooding. The news of U.S. designation came one day after Soleimani’s announcement and before the *arrival of IRGC-backed Shia militias into Iran to assist with flood relief efforts. The IRGC’s preoccupation with aid efforts has likely drawn away its senior commander’s resources and bandwidth from planning a response to the U.S. designation. As the flooding subsides, senior regime officials and IRGC commanders will likely regain more human and physical resources, providing them with more room to plan a response to the U.S.

Mounting U.S. economic pressure against Iran, along with the FTO designation, could result in an intolerable domestic situation over coming weeks for the regime. Reimposed U.S. secondary sanctions following the U.S. withdrawal from the Joint Comprehensive Plan of Action (JCPOA) in May 2018 have dropped Iranian oil exports and damaged Iran’s economy. The U.S. granted sanctions waivers to eight countries in November 2018, allowing the recipients to continue importing Iranian oil albeit at reduced levels. These waivers are set to expire in early May 2018 and the U.S. Trump administration announced on April 22 that it will not extend waivers to the eight original recipients. Iran’s oil exports reportedly fell to below one million barrels per day (bpd) in April 2019. Iranian oil exports will dip even lower in May when the existing waivers expire. Some analysts have noted that Iran could experience hyperinflation and widespread economic protests if its oil exports fall below 700,000 bpd. At that point, Iran may seek to use its perceived leverage in various theatres in order to exact economic concessions and sanctions relief in the event of a domestic crisis.

The regime could retaliate to mounting U.S. economic pressure in several ways, including disrupting commercial traffic through the Strait of Hormuz. Senior regime officials have continually threatened to close the strait since the U.S. withdrew from the JCPOA in May 2018 and after the reimposition of U.S. energy sanctions on Iran in November 2018. Senior Iranian military officials have also increased the frequency of provocative military actions near the Strait, including conducting military exercises and visiting strategic islands near the Strait of Hormuz. The regime could also leverage its regional proxy network to escalate against U.S. and partner forces in Iraq or Syria. Iranian-backed forces, likely at Soleimani’s order, attacked the U.S. Embassy in Baghdad and U.S. Consulate in Basra in September 2018, prompting the U.S. to temporarily close the consulate. The IRGC could also coordinate with the Yemeni al Houthi movement to disrupt maritime traffic through the Bab el Mandeb Strait. Soleimani previously boasted that the “Red Sea is longer safe [for the United States],” after the al Houthi movement attacked two Saudi oil tankers near the Bab el Mandeb in July 2018.

The regime may prefer taking action near the strait and in the Persian Gulf instead of escalating elsewhere in the region. The regime could believe that disrupting the global energy market would coerce prominent actors like Europe, Russia, and China to pressure the U.S. to reduce its economic pressure against Iran. Many in the regime perceive that Iran has unilateral control over the strait. Such actions would rely primarily on the IRGC Navy, the force least involved in operations in Syria and Iraq, as well as in domestic relief efforts and in preparations to suppress domestic unrest.  Military escalations between Iran and the U.S. in places like Syria would threaten Syria’s stability, drastically reverse many of Iran’s effort to rebuild it, and likely draw in Israel to a larger conflict. They would bear heavily on the Qods Force and IRGC Ground Forces and Basij elements already heavily committed in Iran and around the region.  The U.S. and its allies should not allow their preoccupation with Iranian threats in Syria and Iraq to obscure the risk of heightened tension or conflict in the Persian Gulf either alone or in conjunction with activities elsewhere in the region.