Unthinkable (54 page)

Finally, it is important not to overstate the political problems our forces cause for the Gulf states. At times, the presence of American forces has caused domestic unhappiness in some Arab countries. We should not be blasé about this problem. It does exist. But at present levels, the forces we have in place are not creating any problems. Even if we have to augment the current force structure modestly to reassure our regional allies, there is no reason to believe that that increase would upset the status quo. That could change, and the United States should be leery of engaging in a massive force buildup in the region or positioning troops in countries where the public seems poised to reject them, but there is nothing about Iran's acquisition of a nuclear arsenal that suggests that either of those changes would be necessary.

In short, we should set aside the fear that a nuclear Iran would require a massive and costly American conventional buildup in the Gulf, and that this would draw desperately needed forces away from other, more important theaters. Exactly the opposite is the case: we have more than enough forces in the Gulf, those forces are small and quite cheap, the Gulf region is fragile enough and important enough that we would likely maintain similar-size forces in place regardless of Iran's nuclear program, these U.S. forces are not creating problems for the countries hosting them, and they are not keeping us from deploying forces we would like to in other parts of the world.

A GCC MILITARY BUILDUP.
As with a conventional American military buildup in the Gulf, a military buildup by the GCC would be unnecessary, and in this case it would probably
benefit
the United States economically since the GCC states would probably be buying from American companies.

One concern with such sales is always that it could compromise Israel's qualitative edge over the Arabs. Maintaining Israel's qualitative edge over the Arab states, its ability to fight and win a war against any combination
of Arab adversaries, is important to Israel and important to U.S. interests. Washington has formally committed itself to maintaining this edge as part of its wider commitment to the security of the state of Israel.
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If the GCC states were to build up their military strength, the United States would focus them on defensive systems: antiballistic missile, anti-aircraft, anti-mining, and anti-amphibious assault capabilities. There would be no need for them to acquire power-projection capabilities (which would be most dangerous to Israel) to deal with the threats from a nuclear Iran. The United States has an excellent track record of deconflicting GCC defense requirements with the need to preserve Israel's qualitative military edge. Despite decades of American arms sales to the Arab states, Israeli forces hold a greater advantage over the Arab militaries today than they have at any time in their history.
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THE REAL MILITARY COSTS.
Nevertheless, there may be real military costs associated with containment. The first of these is the possible need for revamped American nuclear forces and the certain requirement to continue to expand ballistic missile defenses. The best way for the United States to reassure its regional allies and maintain both deterrence and effective extended deterrence of Iran will be to retain escalation dominance. At some point in the future, that could require a more sophisticated and flexible nuclear force than we currently possess. It is yet another paradox of this problem, but it is a commonplace in the world of nuclear strategy that the best way to ensure that we do not have to engage in a nuclear war with Iran is to ensure that we are ready to win it—and win it in a meaningful sense, or at least in a sense that the Iranians will recognize.

This need for more sophisticated nuclear capabilities, not a massive conventional military buildup in the Gulf, could be the principal military cost of going with containment to the extent that there is one.

Several qualifiers are in order. First, the United States is already in the process of deploying an array of ballistic missile defenses in the United States and the Middle East to protect these areas from an Iranian
missile attack. The cost of these systems has already been included in U.S. defense spending projections and so they would not constitute an additional cost of containment.
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Perhaps the only missing piece is a ground-based mid-course defense system for the Middle East similar to that being built for the continental United States and proposed for Europe—both of which are intended to defend those regions from attack by Iranian medium-range ballistic missiles (MRBMs) and future ICBMs. Adding a ground-based mid-course defense system to the defenses already being built for the Middle East would cost something on the order of $9–14 billion over a period of twenty years.
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Even then, it is likely that the Gulf states could be expected to pay much of these costs if we jointly agreed to deploy it.

Second, developing the offensive capability to threaten Iran's nuclear forces with sophisticated nuclear forces could be helpful, but it isn't necessarily critical to contain a nuclear Iran. American nuclear forces already possess considerable flexibility, accuracy, and numbers such that we have escalation dominance and will possess it for as long as can be imagined. The United States also possesses a range of highly capable and flexible conventional capabilities that could be expected to do the job, in some ways better than nuclear forces and in other ways not quite as effectively. Developing more flexible nuclear forces would enhance America's overall superiority. Moreover, there is an argument to be made that the United States should undertake such a modernization of its nuclear forces for reasons beyond Iran, having much more to do with China, North Korea, and other threats.
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Thus the cost of such a modernization program cannot be laid entirely at the doorstep of containing a nuclear Iran. Nevertheless, it is a potential cost. And the more certain that the United States wants to be that containment will succeed, the more that Washington seeks to minimize the risks of containment, the more important it would be to pay these costs.

Another cost associated with containment would be a further increase in the intelligence network to monitor Iranian activities. Nuclear platforms such as ballistic and cruise missiles tend to be relatively small and
frequently mobile, and they often do not have much of a “signature” for intelligence collectors to pick up on, necessitating a greater system to detect and track them than bigger, more obvious targets like air bases and armored divisions. The United States would want extensive coverage of large swaths of Iran, with the ability to read out information in real time if necessary—especially if the United States hopes to preserve the option of striking Iran's nuclear forces to knock them out before they could be used. That surveillance will require lots of satellite coverage, lots of drones, lots of signals interception collectors, lots of computers to process the information, and lots of analysts to make sense of it.

That said, since 2002 (and arguably for many years before that) the United States has been building up its capabilities to collect on Iran, the Iranian Armed Forces, and the Iranian nuclear program.
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It is not clear how much more would have to be done to build on the already extensive intelligence collection architecture now in place, but without access to the classified figures we should not assume it would be cheap.

Another military-related cost of containment would be the potential need to increase U.S. aid to Israel. Since the 1970s, Israel has been one of the top recipients of American aid every year, and it has frequently been the single largest recipient.
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From 2013 to 2018, Israel is set to receive more than $3.1 billion annually in American aid, although 74 percent of that money must be spent buying American weapons and equipment so that the aid is seen by many as a subsidy to American industry as well.
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The United States has already provided extensive financial and technological assistance to Israel for the kinds of systems that Jerusalem would want for dealing with the increased threat environment that it would face from a nuclear Iran, but it seems unimaginable that Israel would not look for additional help in these areas.
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THE OIL PREMIUM.
If Iran acquires a nuclear arsenal, the Middle East will be a more tense and dangerous place. There is little reason to believe that Iran will become more restrained and good reason to fear that it will become less so.

Terrorist attacks, nuclear crises, and general instability are exactly the kind of stuff that spooks the international oil market.
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Oil is highly responsive to geopolitical problems, especially in the Persian Gulf, both because of its structural instability and the enormous quantities of oil it still produces. As of 2013, roughly 20 percent of all of the world's oil exports passed through the Strait of Hormuz on a daily basis. There is little spare oil production capacity in the world, which simply heightens the jitters of the international oil market. Worse still, the majority of that spare production is concentrated in the Gulf states, overwhelmingly in Saudi Arabia.
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Anything that seems to threaten that flow—whether it might affect production or export—has an impact on the price of oil. It is what energy analysts call the “risk premium” of oil. The greater the risk of a disruption, the more it drives up the price of oil. That fear, and the price increase it causes, can persist (albeit at reduced levels) for years or decades. As long as people fear that there might be a significant loss in production or exports, the price will stay higher than it otherwise might. And if there is an actual cut in supply, the price will spike, at least until the supply is restored or it becomes clear that the cut is not as bad as originally feared.

It is hard to imagine that Iran's acquisition of a nuclear arsenal will
not
affect the price of oil. Unless Iran unexpectedly becomes entirely peaceful, people will rightly fear both more frequent problems in the region and the potential for those problems to get worse than they have been in the past. Especially early on, when there will be the greatest uncertainty about how the geopolitics will all play out, the oil traders (who tend to exaggerate risks in the face of uncertainty for various reasons) will assume it and the price of oil will rise accordingly.

Unfortunately, we do not have good estimates of how much a nuclear Iran might add to the existing oil risk premium or what kind of price spikes we might expect. Little work has been done on this question, and what has been done has some big problems associated with it (for those interested, see the lengthy endnote for this sentence).
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In truth it is hard to make accurate predictions regarding the impact on oil prices, as they
depend on when Iran crosses the nuclear threshold and general geopolitics at that time. A vast range of global political, economic, and security factors, ranging from the state of the Chinese economy to the political situation in Saudi Arabia to the status of the U.S. defense budget, will all affect the dynamics of that future oil market in addition to how Iran behaves, potentially creating significant deviations from any straight-line estimate of current conditions.

Nevertheless, history can provide some benchmarks. In January 2012, when the Iranians warned the United States not to return an aircraft carrier to the Persian Gulf, oil prices briefly jumped by $5–$10 (5–10 percent) per barrel.
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The 2006 Lebanon War caused a $4 or about 3.5 percent increase in the price of oil.
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Bigger wars in the Persian Gulf itself have had a considerably greater impact on oil prices: the Persian Gulf War of 1990–91 caused oil prices to jump by 93 percent for several weeks. However, the oil market only saw a 28 percent increase in the price of crude in response to the 2003 invasion of Iraq, which was coupled with a major strike in Venezuela. The Venezuelan strike accounted for an equal amount of oil taken off the market as the invasion. Consequently it is probably more accurate to say that the invasion of Iraq produced a 14–15 percent increase in the price of oil.
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The decline in the severity of the price shocks over time are a product of any number of factors related to global economic performance and the changing structure of the global energy market, but they also reflect both the market learning from previous crises and the deliberate efforts of various governments to address oil market jitters. Most oil analysts seem to believe that the general instability of the Middle East has already added a risk premium of anywhere from $5–$25 to the price of a barrel of crude.
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If all that a nuclear Iran's behavior produces is more events like Israel's 2006 war with Hizballah, there will be an impact, but it won't be meaningful—and could be drowned out by a thousand other factors influencing the oil market. Even if this increase became a more or less permanent oil risk premium, it would have a negligible impact on the U.S. economy. On the other hand, if a nuclear Iran means larger wars—or
a persistent fear of a larger war—this could have a considerably greater impact on oil prices. Most likely this would be on the scale of the impact of the 2003 invasion of Iraq (so about 15 percent), which would be painful but not catastrophic. However, if the fear of such wars caused the oil risk premium to climb instead to the level of the impact of the 1990–91 Persian Gulf War (a doubling of oil prices in essence) and remain there in perpetuity, this jump would have a pronounced economic impact, including a statistically significant impact on growth, inflation, unemployment, and other measures of economic performance. It seems unlikely that oil prices would climb to this extent, but it is not out of the question and that is among the risks of containment.
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