April 2015: The Iran Reset, Yemen, and Oil

Download: Coxe Strategy Journal: April 2015

This month we consider the implications of a nuclear deal with Iran in the context of the unfolding chaos in the Mideast.

Until last month, the Mideast was the scene of two major wars: (1) the Syrian civil war, in which a Shia regime backed by Iran was fighting supposedly moderate Sunnis and the fanatics of ISIS; (2) Iraq, much of which has fallen under the control of ISIS; as ISIS has striven to expand its control, Iraq’s mostly moderate—and mostly embittered—Sunni minority has been mostly sitting on the sidelines. Recently, crack Iranian troops entered the fray, assisted by US air power.

Then a new war broke out in Yemen, as Saudi Arabia and its Sunni allies launched attacks on the Houthi Shias who had captured Sanaa, the capital, and were driving toward Aden, where the Sunni President and his allies were trying to hold out. Because Aden is at the entrance to the Red Sea, it has been important for centuries. After the Suez Canal was completed in 1869, it became crucial to the British Empire, and was administered as part of British India until 1937. The discovery of gigantic oil reserves in the Gulf made Aden even more important. That pro-Iranian Shias might seize control of Aden was enough to start a war.

The latest Sunni/Shia conflicts come when President Obama is, Sunnis and Israelis fear, desperate to conclude a nuclear deal with Iran. This has, we believe, the potential to have a far bigger impact on world history than all the intra-Islamic wars.

Financial markets are beset by the geopolitical dramas roiling equity and commodity markets.
Investors had been assuming that the only Really Big Story this year would be the Fed’s decision on beginning a return to normalizing monetary policies.

But History is being made, and future historians will not be concerned with today’s stock prices or interest rates, but how the 14-century rivalry between Islam’s two branches flared into wars—and into resolving whether the world would permit Iran to produce nuclear bombs.