Russia and China Have Won The War in Iran

At the battle of Carrhae in 53 BC the Roman Empire lost to the Parthians of ancient Iran. Instead of engaging the enemy head on, the Parthian General, Surena, used mounted archers to unleash continuous waves of arrows in a strategy similar to the modern-day use of drones.

The Roman general, Crassus, presumed his foe would eventually run out of arrows, but camel caravans delivered a constant stream of arrows to the front and his legions were defeated. The parallels with the recent US-Iran conflict are striking. History certainly rhymes.

For many analysts, the favorable terms Iran achieved in its Memorandum of Understanding with the United States is evidence that the Iranians may have once again emerged triumphant in a war against a more powerful Western adversary.

That said, while rising oil prices presumably led Trump to seek a ceasefire, Iran also suffered tremendous damage as a result of the conflict and the subsequent promise of sanctions relief, unfrozen assets, and $300 billion in reconstruction funds encouraged negotiations.

The US made some initial concessions on the sequencing of talks (ceasefire first, nuclear file later) and removed Iran’s missile program and relationship with its regional proxies from the agenda. Iran, in turn, appeared to make some concessions on its nuclear enrichment program.

However, renewed conflict over the management of shipping flows in the Strait of Hormuz appears to have derailed the negotiations for the time being and it has become increasingly difficult to predict outcomes with any degree of certainty as volatile characters clash under conditions of extreme pressure in a highly dynamic situation.     

As pundits continue to debate which side may come out on top as tit-for-tat strikes continue, the whole world is suffering economic losses as a result of the conflict. The US also faces serious reputational risks with respect to its global leadership and ability to defend its allies.

In contrast, Russia and China find themselves in a stronger position as a result of the war. Both are believed to have supplied Iran with assistance including weapons components and intelligence support while avoiding negative economic outcomes. Trump even thanked Xi and Putin for their ‘neutrality’ instead of applying additional sanctions.  

The methods employed by Iran bear a striking resemblance to Russian tactics in Ukraine. Large numbers of drones are used to overwhelm air defences before precision missile strikes target command centres and radar installations. Payback for the intelligence and targeting support Western countries have been providing to Ukraine perhaps?

Despite this, Washington refrained from publicly challenging Russia's growing involvement and instead granted Moscow an economic benefit by relaxing sanctions on its oil exports. This allowed Russia to sell its crude oil at elevated global prices, including to India, which had finally begun reducing purchases under pressure from Washington.

The financial gains for Moscow have been considerable. Before the crisis, Russian energy revenues were declining sharply, with export earnings falling below $10 billion in February. As such, the sanctions relief could not have come at a more fortuitous time. Some estimates suggest that higher oil prices as a result of the Iran War could boost Russia’s budget revenue by as much as $100 billion.

China has also emerged as a significant beneficiary of Trump’s war on Iran. While 5 million barrels of oil per day normally travel through the Strait of Hormuz to China, the country was well prepared with large strategic reserves. This provided a much-needed buffer for China as well as the rest of the global economy.

Beijing increased oil imports in the run up to the war with Russia contributing approximately 300,000 additional barrels per day, lifting total daily Russian seaborne exports to China to almost 2 million barrels. These purchases expanded China's petroleum reserves to around 1.4 billion barrels, enough to cover roughly four months of imports.

Having filled its storage facilities with discounted Russian crude, China was also one of the few countries able to continue importing oil via Hormuz once the conflict started. Payments were settled in renminbi through China's Cross Border Interbank Payment System, signalling the prospect of a long-term alternative to the petrodollar.

While the United States entered the crisis battling inflation, for China, deflation remains an ongoing concern. As such, China is much better placed to respond to this energy shock. As production costs rise with energy prices across Western economies, Chinese exports could become even more competitive while alleviating some of Beijing’s worries about deflation.

The conflict in the Middle East has also provided China with valuable military intelligence. Observing US naval operations in the Persian Gulf, including carrier deployments, missile interception procedures and logistical networks has provided Beijing with crucial intelligence for any future conflict over Taiwan while depleting US munitions stockpiles.

Higher oil prices have also benefited China's electric vehicle industry with Chinese electric vehicles exports rising 40% in April alone. As oil prices fluctuate in response to the conflict, this has reinforced the attractiveness of electric vehicles by highlighting the geopolitical risks associated with fossil fuels.

At the same time, rising oil prices have pushed producer price inflation higher in the United States, leaving the Federal Reserve with an increasingly difficult choice. Higher interest rates could restrain inflation but risk driving an already slowing economy into recession. Cutting rates would support economic growth but could push prices even higher.

While prospects for the US and Iran to reach a long-term formal agreement remain uncertain, the recent return to kinetic action could also prove particularly costly for Trump.

As America moves closer to midterm elections and its strategic oil reserves are depleted, rising gasoline prices could influence the election results, possibility resulting in the US President’s impeachment.   

Ultimately, Iran may end up formalising its control of the Strait of Hormuz as the cost of the conflict becomes unbearable for the US and its Gulf allies. Some kind of toll system would also incentivise Tehran to allow shipping volumes to return to their pre-war levels

.

The US entered the conflict without clearly defining its strategic objectives and few of its apparent goals have been realised. While the IRGC may now hold more power than Iran’s religious clergy, regime change has not occurred. At the same time, Iran still has its proxies, its missile program, its enriched uranium, and de facto control over Hormuz.

In contrast, Russia and China have emerged as the big winners. Russia’s budget has been bolstered by billions while China's military and economic position has been strengthened.

Shubitz is an independent BRICS analyst.