The first indications of Iran’s intention to ship petroleum to Venezuela were discovered by TankerTrackers.com at the end of March, when the coastal tanker FORTUNE loaded fuel at Shahid Rajaee port at Bandar Abbas. The vessel has since passed through the Suez Canal and entered the Atlantic on Wednesday May 13^th. Four additional vessels – PETUNIA, FOREST, FAXON and CLAVEL have since followed exactly the same route as the FORTUNE, with only the CLAVEL indicating a final destination of Caracas. As of May 19^th, all 5 vessels are now in transit across the Atlantic on a direct course for Venezuela. The first of these vessels is due to arrive at Caracas on May 27^th, according to the Marine Traffic Voyage Planning tool.

Courses Of Action:

The US has seldom faced such a direct challenge to its policy of containment and isolation towards both Iran and Venezuela. The US withdrawal from the JCPOA, and the re-imposition of sanctions has proved largely successful in containing Iranian trade. Whilst Iran has continued to trade with China and Syria, the US stopped short of direct intervention, instead continuing to focus on exerting economic and diplomatic pressure. The decision by Iran to trade openly within what the US considers as its immediate area of strategic interest, will, most likely, be perceived in Washington as either an act of desperate defiance in the face of US sanctions or, at worst, an open provocation to US authority. Consequently,  the US faces a stark choice between allowing Iran to openly trade with Venezuela or preventing the transaction and quashing the prospects of a repeat situation occurring. Dryad Global believes a number of courses of action are possible, all of which hinge on US intent and the decision reached in Washington in the short-term.

Scenario One: The US Intercepts Iranian Vessels. Iran Responds With Retaliatory Action In The Middle East.

Likelihood: Dryad Global considers this scenario a realistic possibility.

Context: This scenario is predicated on a number of assumptions regarding the likely drivers of US activity and corresponding Iranian actions. Any decision to intercept Iranian vessels is likely to hinge largely on the perspective of a president currently suffering considerable negative press as a result of his handling of the US COVID-19 response. Set against the backdrop of the forthcoming Presidential Election, the possible cost-benefit of this action is likely to be assessed against whether the desire for potential electoral capital outweighs genuine national interest and foreign policy objectives. Further still, the consistent narrative that surrounds US executive engagement with foreign policy issues is increasingly linked with their prominence in US Republican orientated media and their impact upon the President’s image and worldview. President Trump has repeatedly shown a tendency to interpret events and execute diplomacy through the prism of social media and the resonance the issue will have with his core voting base. The prominence of stories related to the progress of the Iranian vessels within his social media timeline, or the amount of coverage it receives from Fox News, for example, may personalise the incident for President Trump and increase the risks of action.

The situation has evolved in such a manner that the US appears to have very limited diplomatic leverage in altering the course of events. Any military response is likely to significantly escalate a situation of brinkmanship, with Iran almost certainly poised to take counter action in the Middle East. For the US to prevent the shipment reaching Venezuela, the US would be limited to either blocking the vessels path or seeking to take direct control of a vessel. With 5 vessels inbound at significant distance neither option presents a favourable course of action. The US has the capabilities to conduct both operations, so the whether or not it chooses to do so is a question of political will.

Central to the narrative of political will is the recent controversial deployment of the U.S. Navy Freedom-class littoral combat ship USS Detroit (LCS 7) along with the Arleigh Burke-class guided-missile destroyers USS Lassen (DDG 82), USS Preble (DDG 88) and USS Farragut (DDG 99) to the US Southern Command (SOUTHCOM) under the auspices of counter narcotics patrols. This deployment was widely contested within the US DoD with Pentagon officials stating that the President overruled any and all objections stating, “it’s all politics.” A naval deployment by the US would likely require significant preparatory action and political investment, including public comment, which would imply a public build to US action. As yet no such indicators and warnings have emerged to indicate the US is considering this course of action.

Despite this there are signs that the US may be prepared to engage legal creativity in order to prepare the way for a military intervention. On 16^th May, an US government official announced that the US is considering legal moves to designate elements of the Venezuelan military as a foreign terrorist organisation. This is significant step. If such a designation was applied to the Venezuelan Navy or maritime forces this would result in changes to the rules of engagement between Venezuelan Naval forces and US vessels. By removing the protection for these vessels afforded under the Law of Armed Conflict (LOAC), and the associated legal mechanisms designed to restrict military engagement, the US significantly enhances the risk of miscalculation. The US has previously taken similar action, notably in April 2019 when it designated the IRGC as a foreign terrorist organisation. This action led to and legitimised the US strike against the IRGC General Qasem Soleimani, that in turn led to a limited military exchange with Iran earlier this year. Any move that re-designated elements of the Venezuelan military as a foreign terrorist organisation would allow the US to accuse Iran of providing material support and assistance to such an organisation and serve as further impetus for action.

Whilst the US clearly anticipates illicit Iranian trade, it is highly likely that the US has not considered that Iran would seek to trade openly in such a significant manner or in such a location. Indeed, the severely limited and deeply unattractive options for response are evidence that Iran has taken a calculated action that severely undermines US authority in its immediate area of interest and has the potential to compromise the Trump administration both politically and personally. This is a bold act by Iran, but it is one born of economic necessity and a desire to resist what it perceives as US aggression. Currently, the US has few attractive or clear options of response. Which perhaps explains the seeming reticence of the Trump Administration to comment on the situation or give a clear indication of its intended course of action.

Scenario Two: US Permits Iranian Trade With Venezuela

Likelihood: Dryad Global considers this scenario a realistic possibility.

Given the near total collapse of Venezuelan society and infrastructure, it is possible that the shipment could be portrayed as a humanitarian lifeline from Iran to a stricken nation and any US activity could draw condemnation from the international community. However, thus far the Trump administrations a dismissive attitude towards international norms and institutions may undermine the impact of this.

Context: In this scenario, the 5 Iranian vessels conduct their transit unimpeded by the US. For this to happen the US will likely have concluded that the implications of direct intervention outweigh the domestic political costs and geo-political ramifications of allowing Iran to trade unopposed with Venezuela.

Iran has thus far taken steps to provide the shipment with a veneer of legitimacy both in international law, and its willingness to conduct the transfer overtly with the full knowledge of the international community and key institutions. The later feature is unique to Iranian shipments with the majority being conducted illicitly.

In this scenario the established international legal position is likely to feature heavily in US decision making. There is little legal ambiguity around the legitimacy of Iran trading with Venezuela as an independent sovereign state and accordingly the shipment of product is protected under international law. Venezuela’s Foreign Minister, Jorge Arreaza, tweeted stating that Venezuela would consider taking the US to the International Criminal Court were it to take action. Notably, however, the ICC is currently unrecognised by the US. UNCLOS Article 110 (a-e) clearly sets out the conditions under which a vessel is able to be boarded within international waters, with neither clause appearing to hold any applicability in this case.  As discussed previously, there are considerable political drivers of action within Washington, however there are likely to be countered by significant resistance to any action that would appear fundamentally in direct breach of established international maritime law.

Scenario Three: US Opposition To Iranian Trade With Venezuela Succeeds In Halting The Transfer Of Petroleum

Likelihood: Dryad Global assesses this scenario as unlikely on the basis of the significantly entrenched opposition by the US to both Iran and Venezuela.

Context: This scenario would be one where Iran and Venezuela both calculate that the threat of a US response is not acceptable, and the offloading is cancelled, or the petroleum is offloaded to a neutral 3^rd party. Such a scenario is likely to be the result of a period of brinkmanship and or significant diplomatic concessions negotiated with either side and unlikely to be made public.

How Might Iran Respond To The US Intercepting The Shipment To Venezuela?

While we await a US response, Iran has been clear in its messaging that it will retaliate if the US seeks to impede its vessels. Given the heightened tensions between Iran and the US there is the potential that the risk to commercial activity could rapidly escalate were the US to act and Iran responds. Iran faces several possible consequences in conducting any potential response. Importantly Iran is ill equipped to deal with any significant regional escalation of tensions. Any response by Iran is unlikely to target US regional allies, such as Saudi Arabia or Israel, and instead focus on US assets. Doing so would allow Iran to portray its response as proportionate and reasonable.

A maritime response from Iran in the Persian Gulf, Strait of Hormuz or Gulf of Oman could see it target and potentially detain US flagged and associated vessels, including those carrying US owned and US bound cargo. In the event that the US intercepts the Iranian tankers bound for Venezuela, such an action this could be presented by Iran as a commensurate response to that taken by the US.  Whilst Dryad Global assess the chances of Iran detaining a US-flagged vessel as low, the prospect of the IRGC(N) impeding or harassing a vessel carrying a US cargo or interests is more probable and would follow past courses of action. Dryad Global remains firm in our assessment that Iran does not have the means or intent to close the Straits of Hormuz.

In addition to a maritime response, Iran has several land-based military options. While Iran has the capability to target US interests with conventional forces, it remains more likely that Iran would seek to conduct non-attributable action, in order to retain plausible deniability and contain the scope of any US response. A probable response from Iran is a drone strike, potentially against military bases in Iraq hosting US forces. Iran conducted such an act in January and all evidence points to Iranian responsibility for the drone attack on Saudi oil infrastructure in mid-2019. A drone attack on Iraqi soil offers Iran the greatest leeway in terms of possible targets, presents minimal risk to Iranian forces, and is commensurate with Iran’s wider geopolitical ambitions in the region.

Source: Dryad Global