Iran has experienced meaningful attrition in a war it entered already weakened by international sanctions and a five-year drought.
These operating constraints nevertheless leave Iran with a rare window of opportunity to realize a postwar reality that leaves it in a relatively better position and its opponent in a relatively worse one compared to the antebellum. In a complex modern conflict, this must count as victory.
Iran must do three things well to achieve this “victory”: isolate the US from its allies, deprive the American casus belli of legitimacy, and set into motion a postwar consensus that imposes a cost on the US.
The present war has placed Iran in a rare position to create white space for a postwar normal that offers sanctions relief for its own economy, supply security for energy importers and exporters, and the opportunity for rapprochement across the Strait — based not on poetry but on the prosaic self-interest of each actor.
1. Ceasefire first
Step one is isolation. Iran cannot afford a broadening of the war coalition against it. It does not have the capacity to coerce the Gulf Cooperation Council (GCC) indefinitely through direct strikes, and each missile expended on a target in the Arab world both hardens the opposition and is one fewer missile available for use against US military assets.
A unilateral ceasefire against GCC targets is within Iran’s power to grant and would prevent a more active role in the war for GCC militaries. The ceasefire should be conditional upon reciprocity within 96 hours and tolerate basing and overflights that GCC governments may not have the power to resist. An Emirati aircraft in theater is a violation; the mere existence of America’s al-Dhafra Air Force base in Abu Dhabi is not.
2. Nuclear off-ramp
The stated goal of the war is to prevent Iran from acquiring a nuclear weapon. Whether invented or not, it does call upon an accumulation of commitments that third parties cannot easily unwind.
The UN’s International Atomic Energy Agency (IAEA) has lost its reputation for neutrality in Iran, which makes it a non-starter. This is where Iran needs an imaginative spoiler to create political space within which third parties can operate with plausible deniability.
Step two is to divorce nuclear inspections and sanctions relief from American indispensability. Iran should make a unilateral offer to permit inspections conducted by teams — whether under the aegis of the IAEA or another competent inspection body such as Euratom — that exclude Americans.
The mere existence of such an offer, which is compatible with the aspiration of nuclear nonproliferation even while it repudiates American leadership, provides European powers the political and moral cover to ease sanctions and deliver much-needed relief.
Without it, European powers may be unconvinced by the case against Iran but have no evidence of good faith to point to as a reason to engage. With it, Iran would build them a much-needed off-ramp.
Given the near-zero likelihood of Iran being able to both develop and deploy nuclear weapons in the midst of a war — let alone the suicidal isolation from the global community it would imply — this does not sacrifice any real choices on Iran’s part. It is a deeply asymmetric trade.
3. Hairline Fracture in the armor of exorbitant privilege
Step three is lasting damage to the basis of American power, which Iran is presently in a unique position to deliver.
American military power is based ultimately on its ability to sustain permanent fiscal deficits due to the dollar’s status as the global reserve currency — a position that former French Finance Minister Valery Giscard d’Estaing called “exorbitant privilege.”
In 1974, Treasury Secretary William Simon ensured that Saudi oil surpluses would be recycled to purchase US Treasuries. This made the dollar the trading currency for the world’s indispensable commodity, making the dollar the world’s indispensable currency, and the US the world’s indispensable power.
The weaponization of SWIFT revealed American willingness to use its privilege as an instrument of state power and has made de-dollarization even more urgent for its rivals. The situation is due for disruption, and the war has given Iran both the pretext and the position it needs to act.
Iran has already demonstrated a sophisticated ability to control flows of crude oil, petroleum products, and LNG through the Strait of Hormuz with fine-tuned precision. It can offer selective safe passage to exporters that accept payment in a short list of currencies that excludes the dollar.
In time, this can include a de minimis portion — in the vicinity of 3% — that must be transacted in Iranian rials, either via bilateral swaps or a dedicated clearing mechanism, declining to zero over the next 30 years. This places a demand floor under the rial while giving counterparties the runway they need to set up infrastructure.
This is rent collection, pure and simple, but protection for trade is not alien to the GCC. A list containing euros, renminbi, rupees, won and yen can convene a coalition of the commercially interested: China, India, Japan, and South Korea purchase over 75% of hydrocarbons transiting the Strait.
The added friction for exporters replaces the war premium already being paid, and at far lower humanitarian cost. What are a few points per barrel when mastery itself is the prize?
De-dollarization coalition
The needle Iran must thread here is a delicate one, but plausible given the multipolar interests that would be aligned. Iran cannot, and need not, take on the monumental task of de-dollarization alone.
It merely creates the outline within which it can occur, and other players can fill in the colors in their own national interests. This is not the end, but it can be the beginning of the end.
Duress earns compliance only as long as the duress remains credible, and Iran’s warfighting ability is under active attrition. The continued success of this settlement depends on the sustained interest of energy importers in maintaining own-currency transactions once the model is in motion, such that dollar reversion is no longer rational.
It also gambles that exporters are more incentivized to follow their actual customers’ preferences than their patron’s, especially when Iran is offering the same security through restraint rather than kinetic action.
An exporter could call upon an American convoy and expensive insurance to defy Iran, but to what end? Its poor prize would be the ability to charge dollars to a customer base perfectly content to pay in its domestic currency — and not pay a security premium.
The status quo injects uncertainty based on American expedience and places the very exporters it is meant to protect on the front line. Iran’s islah — reform, in the broadest sense — replaces this with stability motivated by the coinciding interests of a natural coalition of Asian importers and GCC exporters, who should welcome this over continued adventurism by a volatile policeman.
Iran itself has an opportunity for relief from the material deprivation and fiscal compression that have long characterized its national life. A long-termist state can use this brief parting in the clouds to craft a more stable and resilient integration into the global economy on its own terms, without concerns of immediate survival. In the interim, a 3% share of exorbitant is still pretty good.
Manosij Majumdar, a pseudonym, is an independent writer and analyst
