On the night of Saturday June 13th Israel launched a significant attack on the Islamic Republic of Iran, involving around 200 aircraft targeting sites in Iran. The attacks included strikes against nuclear and conventional military targets, infrastructure, senior military figures and government sites, as well as scientists working on Iran’s nuclear programme.
Israeli Prime Minister Netanyahu made it clear that the strikes would continue while Israel viewed Iran as a significant and ongoing threat. President Donald Trump joined in the rhetoric around the attacks, demanding that Iran agree to a deal that would prevent the country from achieving a nuclear breakout and with it the ability to create a viable nuclear weapon based on 90% enriched weapons-grade plutonium. Iran’s leader, Ayatollah Ali Khamenei, promised “severe punishment”.
Tel Aviv views Iran as a fundamental threat to Israel’s existence
Tel Aviv has long seen Iran as a fundamental danger to Israel and has sought ways to prevent Iran from enriching uranium to a sufficiently high level that would enable the construction of a functioning nuclear device. It generally opposed US negotiations with Iran, arguing that the latter could not be trusted and that the consequences of anyone in the region gaining the ability to construct a nuclear weapon would be very severe and change the facts on the ground quite dramatically.
Extensive planning and execution…
Apart from striking military targets, Israel also struck at Iran’s senior military leadership, with three senior figures being killed in the initial attack and more since then. Other targets included uranium enrichment and storage facilities, as well as the critical Fordow and Natanz facilities where Iran’s centrifuges were thought to be enriching uranium on the way to a viable device.
…but impossible to be sure that Iran’s nuclear research is completely disabled even after the attack.
It would probably be relatively difficult for Israel to disable or destroy all of Iran’s nuclear sites in one attack, although it is clear that they are trying hard to achieve that aim, including the current round of airstrikes against the three main Iranian nuclear facilities – Fordow, Isfahan and Natanz – with “bunker buster” GBU 57A/B bombs.
Many facilities are well-hidden, protected by mountains and man-made features like thick concrete as well as a significant number of anti-aircraft batteries and missile defence systems. To date, the US seems for the first time to be employing large bunker-buster bombs delivered by B2 bombers – the only munitions that may be able to penetrate and destroy the subterranean facilities. Without these munitions, and support from the US, it has been a much more difficult job to target and completely destroy Iran’s nuclear facilities. There will always be the risk that if Iran did want to produce an effective weapon, it would do so at hardened facilities that may remain unidentified at this stage.
Iran’s immediate response to attacks on the nuclear sites has often been to send drones towards Israel, most or all of which are destroyed. There has been speculation that other US assets in the region could also be targeted in response while attacks on shipping – particularly in the busy Straits of Hormuz – could disrupt energy supplies and lead to oil prices spiking.
Is it a gamble by Benjamin Netanyahu for his place in history?
Aside from the military response, the geopolitics of the attack are also extremely important. On the face of it, it is a gamble by Benjamin Netanyahu on how he is perceived over time in dealing with the perennial Iran crisis.
There is no question that Iran and Israel have been on a collision course over the past two years. Israel has confronted and degraded Hamas and Hezbollah, pushed the Assad regime to collapse, taken control of Gaza and substantially degraded Iran’s air defences, enabling a strike like the ones we have now seen take place.
Risks of conflict spreading
The risks of course are that the conflict could spread and – among other things – cause oil prices to rise with a consequent adverse impact on the world economy. Other countries – such as Iraq or Yemen – could be drawn in, as could regional powers or third-parties in the region, principally the US, despite President Trump’s desire to avoid any further “forever wars”, but also now with the UK with its forces in the region and Iran’s threat to attack western forces across the region.
It is impossible to rule out retaliation by the Iranians to these latest strikes against Iran. So far, however, that does not look to be the case – but it is very early days. There are certainly missiles in the air – in both directions – and explosions in the Middle East but an all-out confrontation between the various actors seems so far to have been avoided – these latest attacks may prompt a further escalation of the war. Netanyahu himself may have rescued his reputation after the events of October 7, but only time will tell on that point.
Iran has responded to Israeli attacks by firing its own missiles at Israel, some of which got through the Iron Dome missile defence system which is at times overloaded with incoming missiles to track and shoot down. President Trump, having started by threatening to attack Iran, saying that the Islamic Republic was “in a lot of trouble”, then changed his tone and agreed to wait a couple of weeks to see how Iran responded to the pressure on it.
Benjamin Netanyahu observed that, even if regime change was not an explicit objective of the Israeli attack, “it could certainly be the result”. Events in Iran and Israel may have brought forward a more powerful attack on Iran to destroy its strategic weapons.
Iran continues to talk tough…
Iran continues to talk tough about its ability to strike Israel. However, years of war culminating in the current Israeli attack on Iran and the wholesale destruction of its proxies, have meant that Iran’s ability to achieve that strike capability is much reduced. Missile and drone salvoes sent over Israel are reduced in scale when compared with those earlier in the conflict.
…but unclear what it can and will do
Still unknown is what Iran will do as far as its existing nuclear programme is concerned. As noted earlier, on the Israeli side there must be a great desire to target and destroy the enrichment facilities etc which Iran has built underground – if that proves possible.
That is likely to require the very largest ground-penetrating bombs in the US arsenal, such as the MOAB or, more likely, the GBU 57A/B. Iran, on the other hand, could attack US forces across the region, attempt to fashion a crude dirty bomb from existing stocks of fissile material – even at an enrichment level of 60% – or disrupt oil supplies through the Straits of Hormuz – which would clearly capture the world’s attention.
Equally, Iran may now resort to unconventional means after these latest US attacks, using terrorism or terrorist methods locally or overseas, chemical weapons, or even escalating further if they face a serious defeat at the hands of Israel which could challenge their control of the Islamic Republic. None of us know how this will unfold; there are a range of avenues that the conflict could go down, none of them particularly palatable.
Much has depended on Trump’s decisions in the last day or so – now we know that decision
We have said that much would depend on what President Trump decided to do in the next few days. Now we know what he will do – the US bombed Iran’s three main nuclear sites. There is a general consensus that the US is the only country that has conventional weapons large and destructive enough to target the deeply buried facilities at places like Natanz, Fordow and Isfahan.
Trump of course came to power aiming to be a peacemaker. It may not sit well that on his watch the United States launches attacks with the world’s most powerful conventional explosives to disrupt the plans of a Middle Eastern nation to develop their own weapons of mass destruction.
The last we heard of Donald Trump before the aerial bombings took place was his urging of Iran “to make a deal” and “surrender unconditionally”. He also suggested that the US could play a role – on the Israeli side – if the war continued or escalated and finally highlighted that Ayatollah Ali Khamenei was “an easy target”. I do rather wonder whether making a deal has been more important than preventing a war in some people’s eyes.
Major risk of the US being drawn into yet another Middle East war
There is also the distinct possibility of the US being dragged into yet another Middle Eastern war, something that the MAGA crowd in the US seem to want no part of (just ask Marjorie Taylor Greene). Given the history of previous failed military interventions in the Middle East, that reluctance is understandable. Netanyahu may be looking for an excuse for regime change in Tehran (albeit with an understandable concern about Iran and the bomb), that need not be Trump’s war as well – indeed some would say that it was exactly not what the US needed at this stage.
The UK and Europe did apparently warn Trump that any US attack on Iran could endanger westerners held in other countries in the region and potentially prompt an outbreak of global terrorism. European foreign ministers have until now been focused on diplomacy to bring the war to an end as quickly as possible. We must hope they are successful, because after these latest strikes against Iran, we may open a Pandora’s Box of regional chaos that may be rather more difficult to close than people imagine.
What would success look like in terms of the current Middle East situation?
We might consider the following indicators of “success”:
- No nuclear weapons held by or in unstable countries
- Current Iranian leadership removed
On the other hand, the indicators of failure would include:
- A demonstration of Iran’s possession of a nuclear weapon, however low-yield or rudimentary
- A widening of the current war, perhaps through unconventional attacks such as the targeting of western forces in the region
- Iran’s existing leadership remains in control of the country or there is no clear likelihood of change
Given the importance of President Trump and the Middle East to each other in the current situation, questions for President Trump are likely to include:
Now that the US has entered the war militarily, it has escalated significantly
Would the US public accept yet another Middle East war?
What is the strategy to get from war to peace?
Are the facts real and do they support the actions being taken?
· Who would take over in Iran in the event of war and are they a clearly better option than the current leadership?
Are the US and Israel prepared to own the chaos likely to result from a collapse of the Iranian regime as happened in Iraq and Syria?
This article has been approved by Tideway Investment Partners LLP; however, the views and opinions expressed in the article are not necessarily the views and opinions of Tideway.
The content of this document is for information purposes only and should not be construed as financial advice. We always recommend that you seek professional regulated financial advice before investing.
About the Author
Stephen O’Sullivan was an ‘anchor’ client at the founding of Tideway and has been a client of James Baxter since 1999.
Stephen studied economics at university and then joined the oil industry – working for BP in their refining and marketing business as an oil trader and then with Total in the corporate planning team for their upstream business. In 1989 he joined Coopers & Lybrand’s strategy practice for oil and gas and, with the end of the Cold War, he worked extensively as a consultant across the oil and gas industry in Eastern Europe, Russia and the other post-Soviet states as well as China, the Middle East and Southern Africa.
In 1995 he joined a start-up investment bank, MC Securities, specialising in Eastern Europe and Russia where he was the Head of Research and the Head of Oil & Gas Research. His team was ranked the #1 oil & gas research team across EMEA and the #1 overall research team for Emerging Europe and Russia for the next three years. They sold the bank to JP Morgan in 1998 and Stephen relocated to Moscow to become Head of Research and a partner in UFG, the leading independent investment bank in Russia. His team were ranked the number one oil & gas research team and the number one Russia country team for nine years in a row.
After the sale of UFG to Deutsche Bank in 2005, Stephen became Head of EMEA and Latin American research for DB where the team was ranked #1 across all industry sectors, in both strategy and in economics, in country research for Russia and South Africa and across the entire EMEA region in 2006 and 2007. In 2007 he left Moscow and moved to Hong Kong as Head of Asian Research for Australia’s Macquarie Bank. In 2009 he joined Barclays Capital in Hong Kong to lead the buildout of the bank’s Asia ex-Japan research business.
Since 2013 he has been an investor in a range of businesses in technology, real estate, retail and materials while living in Hong Kong. His major interests include China’s gas sector reform, China’s nuclear renaissance and the country’s global impact on energy markets. While based in Hong Kong he has also been a Senior Visiting Research Fellow at the Oxford Institute for Energy Studies, the world’s #1 ranked energy think-tank where he published several major studies of the Chinese energy sector. He is a contributing author to several international think tanks on global energy issues and has advised international law firms on the oil and gas sector globally.
