A banner shows the Iranian flag at the Islamic Revolution square in Tehran, June 14. The Iran war has brought about a significant change in global geopolitics.Vahid Salemi/The Associated Press
John Rapley is a contributing columnist for The Globe and Mail. He is an author and academic whose books include Why Empires Fall and Twilight of the Money Gods.
Now that the U.S.-Iran ceasefire extension has finally been signed, the question that arises is, what has changed? The answer is both little and lots. Little in the short term. Despite the Strait of Hormuz reopening, gasoline prices may stay elevated for a while as shippers wait to see if the passage is safe and global stockpiles are replenished.
But the long-term impact will prove substantial. The war has brought about a significant change in global geopolitics. This was symbolized when U.S. President Donald Trump asked Chinese President Xi Jinping at the Beijing Summit for China’s help reopening the Strait of Hormuz, like a supplicant to a superpower. In short, this war weakened the U.S. and strengthened China.
The ceasefire itself reveals America’s diminished position. The extension will last 60 days, at which time the U.S. will be moving into full campaign mode for the November elections. It’s implausible that at that point the Trump administration will opt to re-start a war that was never popular to begin with and has grown even less so with time.
The Iranian negotiators will know this and will probably drag talks out to their advantage. That’s always been their past practice, but now they have the added insight obtained in the war – namely, they have shown the world what the U.S.’s Achilles’ heel is.
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Students of strategy note that a key element of military power is fungibility, which is to say, the ability to spend what you have. There’s no point having the world’s most powerful and advanced military if you can’t use it. Mr. Trump could never hide that he didn’t have the option of using military force to bomb Iran into submission and seize its oil because the U.S. public wouldn’t support a prolonged conflict. All future rivals will thus note that the way to prevent U.S. aggression is simply to prepare to absorb the blows until the U.S. cries uncle – which in time, it will.
The peak of power is attained when you don’t need to use it – as Theodore Roosevelt famously put it, when you can talk softly because you carry a big stick. Mr. Trump reversed this adage, talking very loudly but, in the end, wielding a small stick. The world has seen it and won’t unsee it.
Military power, in turn, is underpinned by economic power and in a vital way, the war also eroded the U.S.’s economic position. A key element of Mr. Trump’s economic model, of what he calls energy dominance, has been shown to be flawed. Mr. Trump’s plan had been to block the development of renewable energy so as to steer available investment to the fossil fuels in which his country is richly endowed. By pumping lots of oil and gas and using that to drive down energy prices, the U.S. would have the abundance needed to dominate the AI revolution.
But relying on one source of energy has been revealed as risky. During the fighting, the rise in oil prices delivered a windfall to U.S. producers, Mr. Trump even boasting at one point that the world’s tankers were heading stateside. But while some commentators mistakenly inferred this represented a U.S. victory in securing control of the world’s oil, the diversion of supply to world markets lowered the supply available to local refiners. As a result, the U.S. experienced a particularly sharp increase in fuel prices.
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Mr. Trump admitted this week that this made things bad for the economy, forcing his retreat. Preventing future energy shocks from crippling the U.S. economy in this way would require either export controls or a big increase in output. The first would slow investment and thus limit supply growth, while the second has been rendered unlikely by the acceleration in the energy transition the war appears to have triggered.
China, in contrast, has built an energy system less on efficiency than resilience. Key to this is diversification of supply, which enabled the country to quickly switch from oil-fired generation to renewables and ramped-up coal stations. Having also built one of the world’s largest strategic oil reserves, it was able to stop imports and live off existing supplies.
That model stands as a superior example to other countries now building their energy systems, and they’re eagerly ordering Chinese solar panels. The development has also strengthened China’s position in the world economy – in effect, it has become the world’s swing consumer of oil. At one time, world energy prices were largely determined in the Persian Gulf, with U.S.-allied Saudi Arabia’s role as the global swing producer giving it considerable power. With China’s growing centrality to the global energy system, it’s not surprising that Saudi Arabia is drawing closer to it diplomatically and economically.
While the U.S. and China were seen as economic competitors, the U.S.’s overwhelming military capacity still left it unrivalled in hard power. But now that has been eroded just as China’s economic strength has risen, the balance between the two superpowers has altered permanently. Without firing a single bullet, China won this war.