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Welcome to The Geopolity’s What We’re Watching (3W), our daily look at the interconnected worlds of Geopolitics, Economics and Energy. Curated from the world’s leading sources of information, our analysis and commentary is designed to help you make sense of the events driving the major developments in the world.
Over the past two weeks, at 3W we have been closely watching the spread of the US – Israel Alliance War on Iran to Yemen, and from there Saudi Arabia. In our initial assessment we said, these events could be the outcome of Iran taking on a more offensive posture; or the result of the US – Israel Alliance using Yemen to tighten the thumbscrews on Saudi Arabia. Such that Riyadh would become a more active supporter of the Alliance. In our subsequent analysis, we explained that most likely it is a bit of both: Iran is indeed on the forward offensive via Yemen, but the US – Israel Alliance decided not to anything about it in order to create problems for Saudi Arabia.
With all that in mind, in this 3W update we first note that in a recent interview with Al Jazeera, Iranian president Masoud Pezeshkian formally denied Iranian involvement in the attacks on Saudi Arabia’s East – West Pipeline, both directly or indirectly through Yemen. Pezeshkian went even further, remarking that it is “not unlikely that Israel carried out this action in order to inflame tensions and fuel disputes” in the region. This possibility we at 3W also covered in our analysis of the event. (Since the attack, Saudi Arabia has restarted the pipeline, writes Bloomberg.)
Pezeshkian went even further, remarking that it is “not unlikely that Israel carried out this action in order to inflame tensions and fuel disputes” in the region
Beyond this, US president Trump has officially rejected Iran’s ceasefire proposal, writes The Associated Press. Iran offered this week to reopen the strait and resume talks on its nuclear program in seven days if the U.S. lifts its naval blockade of Iranian ports, waives sanctions on Iranian oil sales and observes a ceasefire that would include Lebanon. But on Saturday, Trump rejected the proposal saying Iran wanted to make a deal because it was “losing so badly.”
Iran responded on Sunday saying that the Strait of Hormuz will remain closed until a negotiated settlement is reached. “Our conditions are clear, and any move toward reopening the Strait of Hormuz is contingent on these conditions being met,” Iranian Foreign Minister Abbas Araqchi posted on social media, writes Reuters. “Only a negotiated solution can get them out of this deadlock.”
As a result, oil prices again surged on Monday, writes The National. Brent went up 4.09 per cent to $108.59 a barrel and West Texas Intermediate traded 4.21 per cent higher at $96.31 a barrel. Qatar meanwhile extended force majeure on its liquefied natural gas (LNG) shipments to Asia and Europe, the National writes separately. In India privately owned fuel retailers Reliance and Nayara have begun rationing diesel and gasoline, writes Bloomberg.
At the same time, the tensions in the US bond market remains, writes The Financial Times. Renewed selling pressure on US Treasuries sent yields on the 10-year bonds up as much as 0.05 percentage points to 5.23 per cent. The interest rate-sensitive US two-year yield was up by a similar amount at 4.91 per cent. US borrowing costs have soared in recent weeks, reaching levels not seen since before the financial crisis, as signs of persistent inflation and strong growth in the world’s biggest economy have prompted investors to bet on higher interest rates.
while sanctions make life very hard for the ordinary people of the country that is targeted by them, they have never in history succeeded in achieving the kinds of political changes that the US – Israel Alliance wants to see in Iran
Then on Monday, Axios writes that President Trump believes that despite his refusal of the Iranian offer, US negotiators will engage in more talks with Tehran this week. “I expect more talks with Iran [this week]. They want to make a deal, but it is not the deal that I want to make. It is what we would have maybe agreed to a year ago. They overplayed their hand,” Trump said. 3W notes that this is typical Trump bluster, giving the impression that the US is now in a much stronger position vis-à-vis Iran than it was before the current war. In our 3W view, it clearly isn’t.
Possibly underpinning Trump’s view of the world is the confidence at the US Treasury that the sanctions on Iran are now really working. “We’re seeing a new urgency from our partners,” said the Treasury official, Jonathan Burke, according to The Wall Street Journal. “They’re taking it very seriously.” Burke has been busy traveling to Oman, the UAE and Turkey to get these countries to fall in line with the US sanctions policy versus Iran. Overall, the US Treasury said it met with more than 50 countries, including other nations bordering Iran like Azerbaijan, and Georgia.
US Treasury secretary Scott Bessent added to the optimism, saying in an interview with Fox that the US naval blockade of Iran is so successful, that in two weeks’ time Tehran will run out of oil to sell on international markets, writes Yahoo News. “They will have nothing to trade for anything, probably within the next two weeks. They are going to make their final deliveries of oil to China, and then they will have nothing,” he said.
3W concludes the following from all of the above. There should no doubt that the current stalemate in the US – Israel Alliance War on Iran is causing economic pain.
The US likes to pretend that Iran is suffering so much that it will soon capitulate. We note, however, that while sanctions make life very hard for the ordinary people of the country that is targeted by them, they have never in history succeeded in achieving the kinds of political changes that the US – Israel Alliance wants to see in Iran. We do not see how things could be any different in this instance.
What the US tends to downplay, is the economic pain on itself and the global economy. This pain is also significant.
The question is not, however, who is hurting more. The question is, who can stand the pain the longest.
For the people in Iran, the current war is quite clearly an existential war, a war of survival. After all, Trump has repeatedly said that he is thinking about “annihilating” Iran. With decades of experience in dealing with sanctions, one would expect the Iranian to be experts at enduring the sanctions-related pain, therefore.
Over in the US, or in the Middle East, things are very different since the Alliance War on Iran does not serve the interests of the people there, is not fought for them, and in fact is fought despite them objecting to it! Their tolerance for economic pain resulting from this war one would expect is much more limited, therefore.