TIOL - COB( WEB) - 917
APRIL 25, 2024

By Shailendra Kumar, Founder Editor

THE cyclical history of war of attrition is back with a vengeance to wreak a severe dent into the global economy and the brittle geopolitical order. The point where war of nerves, meticulously-carved out diplomacy and shadow war, fail to produce any tangible results, open war breaks out with an air of arrogance, at least during the first phase of battle! This is what happened when Israeli missiles reduced to rubble a diplomatic campus of Iran in Damascus where some of the Iranian commanders were also killed and, without blinking much, Iran launched a fusillade of missiles and armed drones attack on the Israeli territories. A sudden spurt in hostility in the Middle East swung the needle of the geopolitical scareometer to the maximum! The US-led Western coalition experienced a chilling tremor rushing down their diplomatic and military spines, fearing escalation of Gaza war which may impact the entire Arab world and, thereby, a rude jump in the oil prices. Another bout of energy crisis after the Ukrainian invasion by Russia. Strait of Hormuz is indeed a vital sea route which accounts for over 20% of oil shipments. Middle East produces close to one-third of global oil shipments. It is thus far a close shave for the global economy!

Thankfully, the military and naval assets of the Western coalition of the US, UK and France, ably supported by some of the Arab partners like Jordan and Saudi Arabia, an arch rival of Iran, neutered 99% of the Iranian barrage of projectiles and the same was globally described on social media as 'pinprick retaliation' by Iran. So far so good! But what really frightened White House was the hawkish temperament of the Israeli War Cabinet helmed by Mr Benjamin Netanyahu, widely known for his low-boiling-point mental make-up! Since it was for the first time in the last 40 years history, Iran had desecrated the red line to indulge in extravagant direct assault on the Jewish state, the Western coalition was more than convinced that Israel would lose no time to settle scores! Such a damaging assessment of a 'live volcano' situation triggered a flurry of diplomatic efforts to prevail over Israel not to escalate the war and focus on finishing the job undertaken to erase Hamas! The coalition also made it clear to 'Bibi' (nickname for Netanyahu) that if he caves in to his jingoistic obduracy, the coalition would not stand shoulder-to-shoulder with Israel which is facing a charge before the ICC for tearing apart all the 'bones of humanity' in the Gaza strip. The White House also sent secret messages to Israel that the mood in the Congress is to ban all military aid to Israel if cooperation is denied to avert one of the greatest humanitarian catastrophes in Gaza. Mercifully, Israel cooled off its swollen nerves with some random drone-attacks off the hem of the nuclear establishment of Iran. Thus Israel rested with the popular tagline 'escalation dominance'!

For the time being, Israel, putatively known for its scorching attitude, paid attention to empirically-wise diplomatic sermons of its allies but the larger question is - how long will it hold back its fury? Was it really a du jour conflict? The fact that the red line for direct confrontation on each other's territories has been infringed, the hitherto shadow war game being conventionally played by Iran's proxies like Hamas, Hezbollah and Houthis, has evidently suffered erosion of their indirect importuning roles. Let's not forget how Houthis of Yemen has upended the global trade in the Red Sea for the past several months. Given the no-holds-barred scenario, Israel has begun pounding Hezbollah's dens in Lebanon and it would be difficult for Iran, reduced to a bundle of nerves, to defend them directly. Irked by the roles of proxies in the Middle East, other major players in the region such as Saudi Arabia, UAE and Qatar, also want Israel to cast them in stone as quickly as possible. Secondly, given the tattered state of its economy, the Islamic Republic of Iran does not have the military wherewithal to directly lock horns with Israel. As against its USD 7 billion defence budget, Israel's budget is more than USD 27 billion. Israeli Air Force is far superior and can penetrate all its shields to protect nuclear programme and other military establishments. Israeli pilots cannot be drubbed in dogfight by the Iranians. Whenever a full-scale war takes place, it is bound to destabilise both the geo-economic and geopolitical orders in the world.

However, the 'bear hug' approach of Mr Biden has thus far worked to cool off the frayed tempers of the Israelis leadership and has saved the global economy from a fresh bout of dent! To further isolate and punish Iran for its aggression, the US and EU have gone for a fresh load of secondary sanctions on suppliers of parts for its drone industry. Incidentally, Iran stands alone in the category of maximum pressure economic sanctions by the West. One may recall how Trump Administration had declined to honour the nuclear pact with it and had imposed a barrage of sanctions in 2018. Though the West is contemplating many new sanctions against its oil sales but it would further deepen the fissures between the US and China. China has entered into a 25-year pact with Iran for purchase of oils worth USD 400 billion. Therefore, if sanctions are imposed on oil trading, many Chinese banks and refineries would come under the fire which would certainly fuel the geopolitical tensions. Secondly, disrupting Iranian oil trade may spike crude prices which would definitely hurt Mr Biden, thick into the Presidential elections in November. Meanwhile, the US Congress has passed a legislation for crackdown on oil sales by Iran to China and Mr Biden needs to navigate this politically combustible labyrinth. Of late, EU and UK have also imposed sanctions on several Chinese companies for aiding Russian war efforts against Ukraine.

As a consequence of rapidly-swirling geopolitical events, a new axis of four West-ostracised nations has been developing at a furious pace. And they are - China, Russia, Iran and North Korea. Although they do not share much ideological moorings or even economic synergy but they do have a common foe - the United States of America. With a barrage of sanctions being imposed on all of them, they do have a common purpose to join hands and also align their economic and military requirements to the extent possible. For instance, after the Western companies left Moscow, Chinese car-manufacturers rushed in to fill the space by supplying petrol and diesel cars to Russia and Iran. China also makes tangible gains out of competition between Russia and Iran for the purchase of crude and gas. Since Russia offers heftier discounts, Iran loses out on this count. On the military front, since the Russian defence production is not able to keep pace with the weapons requirements for the Ukraine war, Moscow has been sourcing drones, missiles and other war materials from Tehran and also Pyongyang in exchange for more advanced technology. So far the 'marriage of convenience' among the four is working well to mitigate the hardships emanating from export controls and other Western sanctions.

All the four are also pursuing a common foreign policy. And the key hinge is to support a multi-polar world and the end of the American hegemony. China, Russia and Iran are now members of the same multilateral club like BRICS. Last year Iran joined as the 9th member of Shanghai Cooperation Organisation, a China-piloted latticework of security alliances. Iran last December inked a free-trade pact with the Russia-led Eurasian Economic Union which envelopes much of Central Asia. This bloc which is often referred to as 'Axis of Evil' by the West, seems to be keenly following the 'law of scaling' for their partnerships. To promote economic ties among themselves, they are keen to support a tariff-free bloc and a new payment system which bypasses the Western throttle. Their all efforts are geared toward de-dollarising their bilateral trade. To this end, they inked rouble-rial exchange in August 2022. Russia's answer to American credit card networks, Mir, and the Russian alternative to SWIFT, SPFS, are being aggressively promoted among the Iranian banks. From these facts what seemingly emerge as insights are the fast-widening fissures in the global geo-economic order and worryingly deepening canyons in the geopolitical order. Certainly not a good news for the acolytes of the phenomenon of bump-free globalisation! The decade-on-the-roll is certainly going to be a tough and illusion-less phase for the history of global economy which may not relive the Goldilocks periods of 1990s and early 2000s. All economies need to brace up and add an extra ounce of steel to their nerves of steel for arduous times ahead! Tenacity and resilience are going to be two key traits much in demand by most economies in the Global South! Amen!