Conflict in the Middle East: The Difficult Balance Between Diplomacy and Deterrence

The Middle East is once again at a critical turning point after Iran has aimed over 180 ballistic missiles at Israel. While the global community awaits Israel's response with anticipation, the United States faces the question of how it can influence this volatile scenario. The goal is to limit escalation, curb Iran's influence, and prevent it from developing nuclear weapons. However, the Biden administration has weakened a critical component of American strategy. Under Donald Trump's administration, the U.S. withdrew in 2018 from an international agreement intended to slow down Iran's nuclear program and subsequently imposed strict sanctions. These measures aimed to hit the regime and curb its funding of proxies and terrorists abroad. American citizens were barred from trading with Iran, and 'secondary' sanctions threatened those who conducted business with Iran, for instance, by excluding them from the dollar banking system. In contrast, President Joe Biden often refrained from strictly enforcing these sanctions. To bring Iran back to negotiations and due to concerns over rising oil prices triggered by the Ukraine conflict, his administration granted sanctions relief to foreign entities and often left Iranian oil smuggling unchallenged. Faced with global trade restrictions, actors are seeking ways to bypass them. Meanwhile, a complex infrastructure has been established to help Iran shift its revenues internationally. Last month, Iran's crude oil exports reached 1.8 million barrels per day, mainly to China—a six-year high. As our reporting shows, a network of shell companies is operating through banks in China, Hong Kong, the Gulf states, and even in the West, to discreetly manage Iranian funds. Iran's revenues last year were estimated to be between 50 to 70 billion dollars. These financial resources could be used for rearming Iran and its allies. The American ability to exert influence through financial measures is now harder to reclaim. An escalation of financial conflicts with China or pressure on allies such as the United Arab Emirates to make their banks comply with American regulations could strain diplomatic relations. The challenge remains to keep Iran from the brink of further conflict while encouraging Israel to take moderate actions.