Iran's 10-day Velayat 90 naval exercises concluded last week. But events in the Strait of Hormuz, the passage between the Persian Gulf and the Arabian Sea through which some 35 percent of the world's seaborne oil trade (roughly 20 percent overall) passes, continue to draw widespread media coverage. On Monday, delays were announced to a 1.5 million-barrels-per-day overland pipeline on the western side of the gulf. (On an average day, 17 million barrels transit the strait.) Meanwhile, the British navy confirmed it would rotate its newest and most modern air defense destroyer, the HMS Daring (D32), on its maiden voyage to the Persian Gulf. Both events are Western responses to Iran's recent assertiveness in the strait. The Velayat 90 exercises coincided with a 4 percent rise in oil prices, which drove Brent crude back to its previous mid-November high and disrupted what had been the most substantial month-on-month decline since August. And only days after the Velayat 90 ended, Tehran announced a new naval exercise, to be held in February.
The Iranian navy conducts the Velayat exercises on more or less an annual basis, but the navy is not the only Iranian military element to conduct maneuvers in the strait. The naval arm of the Islamic Revolutionary Guard Corps (IRGC), the more hard-line and special operations-oriented branch of the Iranian military, will conduct the exercises slated for February, which are part of the regular Great Prophet series. It was IRGC gunboats in 2008 whose behavior near the USS Hopper (DDG 70) was aggressive enough to suggest they were likely prepared — if not intending, given Iran’s understanding of standing U.S. rules of engagement — to draw defensive fire from the American warship, one of three transiting the Strait of Hormuz at the time. This is one of many instances in recent years where the potential closure of the strait has been raised — without even delving into the Tanker Wars of the late 1980s. Tehran has worked since the mid-2000s to refine its ability to threaten the strait when it suits Iran’s political purposes.
Iran has mastered the art of crisis escalation and de-escalation. In this way, the regime in Tehran resembles North Korea, which has deliberately cultivated a perception of unpredictability and, despite crushing sanctions, has kept itself at the center of the international agenda of most of the world’s top powers for more than a decade. Holding IRGC naval exercises on the heels of Iranian naval exercises in the strait, in the midst of a global economic crisis, is almost certainly a deliberate choice; one carefully calculated in accordance with Iran's longstanding strategy of wielding its ability to threaten the Strait of Hormuz as a deterrent.
Iran is under assault from the Stuxnet virus as well as an active sabotage and assassination campaign. The country is under constant surveillance by U.S. unmanned aerial vehicles and space-based assets. Iran is now reminding the only country in the world capable of meaningfully attacking it — the United States — that Tehran retains a painful deterrent to attack, even now that the U.S. military’s withdrawal from Iraq has taken away Iran’s ability to attack U.S. forces there through proxies.
As Stratfor has argued in the past, this is Iran’s real “nuclear” option — not the rudimentary nuclear program it continues to struggle to pull together. That option is not defined by Iran's actual military ability to indefinitely halt the transit of oil across the strait — it is built on the weight of its threats to do so. As the reactions to the Velayat 90 exercises so clearly demonstrated, confidence — not nuanced understandings of military realities — conditions markets. Seaborne crude from the gulf will remain a critical pillar of the global economy for the near future; expanded workaround capacity will not change this fundamental reality. Through this cycle of escalating and de-escalating threats, Iran has made clear that it will continue reminding the world of its leverage over the geopolitically sensitive Strait of Hormuz.
