Brent crude oil, the international benchmark, fell 1 percent on September 25 after a Reuters report said U.S.-Iran talks could potentially open the Strait of Hormuz as part of a phased peace deal. U.S. and Iran negotiators in New York discussed a plan to end the conflict in phases, including Iran reopening the Strait of Hormuz and the United States lifting its economic blockade of Iran. Iran is recognizing the economic cost of a prolonged confrontation. According to a senior Iranian official, the most plausible way to end the impasse in negotiations would be a phased arrangement, with Iran allowing navigation through Hormuz in return for the United States lifting its economic blockade and Iran potentially gaining access to frozen assets. This would be another temporary fix as a senior European official indicated that the Iranians “have a very long list of demands.”
President Trump remains “open to talking with Iran under the right circumstances” but sees no need to negotiate as the United States is in a “very strong position” with control of the Strait of Hormuz and an Iranian economy that is “collapsing.” According to a White House official, “crushing sanctions” and “one of the most successful blockades in history” have crippled Iran’s economy and left Iran completely broke. Trump is content to let the “inevitable Iranian collapse” play out rather than be “played” by Iran.
The United States has layered new sanctions on top of its blockade of Iranian oil ports. The United States has extended financial sanctions by targeting companies from third-party countries that do business with Iranian firms through “secondary sanctions.” Most recently, it has targeted Iran’s remaining commercial airlines and support networks to help sever the economic lifelines sustaining the government and its Revolutionary Guards. Despite the sanctions, Iran still wants to preserve its administrative control of the Strait of Hormuz. Reuters reports that the United States wants pressure to produce concessions, Iran wants pressure removed before making them, and the Gulf states want the conflict resolved without allowing the region’s waterways to become enduring bargaining chips. The Wall Street Journal reports that some Gulf States want the United States to continue its pressure on Iran, believing it can provide the most success.
Meanwhile, Iran-backed Houthis are wreaking havoc along the Red Sea and on Saudi Arabia, threatening the Saudi’s ability to export oil from Red Sea ports. To help protect critical energy sites along the Red Sea that have come under fire from the Houthis, France announced that it will send troops and other military assets to Saudi Arabia after Yemen’s Houthis launched several missiles at the site. France will help secure energy infrastructure in the coastal city of Yanbu under an agreement with Saudi Arabia. The Yanbu region on Saudi Arabia’s west coast is home to major oil refineries and a port that serves as the starting point of a bypass route for oil tankers trying to avoid the Strait of Hormuz. If the Houthis damage the Yanbu port, oil exporters would be forced to rely more on the Strait of Hormuz on Saudi Arabia’s east coast.
The foreign ministers of G7 nations denounced the Houthi attacks in Yemen and against Saudi Arabia and urged Iran to end its support for the group. “We condemn in the strongest terms the unacceptable continued strikes carried out by the Houthis in Yemen and against the Kingdom of Saudi Arabia,” the ministers of Britain, Canada, France, Germany, Italy, Japan and the United States said in a joint statement.
The military chiefs of Saudi Arabia, Pakistan and Turkey will discuss how to support the Saudis under a defense pact signed in August. Turkish President Tayyip Erdogan said the defense pact, which stipulates that an attack against one country be considered an attack against all, could lead to intelligence, logistical or ammunition support, with the possibility of more advanced military support to come. The Saudi grand mufti made an unusual call for troops to prepare to sacrifice their lives in the fight against the Iran-backed rebels.
The United States is also negotiating with Arab states to create a $10 billion investment fund to repair energy infrastructure damaged during the conflict with Iran and build pipelines to bypass the Strait of Hormuz. Iranian missile and drone strikes have hit dozens of refineries, oil fields and natural-gas export terminals that will be costly to rebuild. The initiative, called the Partnership for Allied Construction & Trust, aims to reduce Iran’s ability to disrupt regional energy exports. The United States would contribute $5 billion, with eight Arab states–Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Kuwait, Oman, Iraq and Jordan–matching that amount through a new holding company. Until a cessation of hostilities with Iran is achieved, however, it would be premature to rebuild or repair the damaged energy infrastructure.
Conclusion
Iran has proposed a phased plan to cease hostilities and reopen the Strait of Hormuz with the United States lifting its economic blockade of Iran. President Trump is amenable to discussions with Iran, but he is content to let the “inevitable Iranian collapse” play out rather than be “played” by Iran. Meanwhile, France has indicated that it would deploy troops and military assets to protect the Saudi oil and gas port of Yanbu after Yemen’s Houthis launched several missiles at the site. The foreign ministers of G7 nations denounced the Houthi attacks, and the military chiefs of Saudi Arabia, Pakistan, and Turkey are to discuss how to support the Saudis under a defense pact signed in August. The United States is discussing a $10 billion investment fund with eight Arab states to repair energy infrastructure damaged during the conflict with Iran and build pipelines to bypass the Strait of Hormuz.
