China’s Economic Reckoning
The Price of Failed Reforms
Shortly after taking office, U.S. President Dwight D. Eisenhower gathered senior advisers in the White House solarium to discuss policy toward the Soviet Union. In attendance was his hawkish secretary of state, John Foster Dulles, who had been a vocal critic of Harry Truman’s policy of containment and instead advocated an offensive policy whereby the United States would seek to “roll back” Soviet influence across Europe and Asia.
Afternoon light from the southern exposure would have contrasted with the darkening mood inside the White House. Diplomacy to end the Korean War was deadlocked. The United States was entering a nuclear arms race with the Soviet Union. Joseph Stalin was dead, but Eisenhower’s calls for dialogue with Moscow had gone unanswered. Defense spending seemed unsustainable.
“The Reds today have the better position,” Dulles argued. Containment was proving “fatal” for the West. (Dulles had recently fired career diplomat George Kennan, the author of that policy.) European allies were acting like “shattered old people,” unwilling to face up to Moscow. Eisenhower should break from his predecessor’s shackles, Dulles concluded, and pursue a policy of “boldness” to more directly roll back the communist tide.
Eisenhower challenged Dulles’s central assumptions. Dulles saw time as favoring Moscow, and so he demanded a more offensive strategy. Eisenhower saw time as favoring Washington, and so he thought a rollback policy could backfire. Unilateral moves, moreover, risked fragile alliances, which were Washington’s comparative advantage against Moscow. “We cannot live alone,” he told Dulles. “We need allies.”
Rather than resolve this debate informally, Eisenhower tasked experts from across the U.S. government to develop and then debate in front of him at least three competing national strategies. Kennan himself, at Eisenhower’s request, returned to defend containment.
Two months later, Eisenhower sat through a full day of briefings on the competing proposals, and he ultimately endorsed the essentials of Truman’s design. What is now known as Project Solarium set the contours of a U.S. foreign policy that lasted for the next 35 years, and it helped avoid a direct military clash between Washington and Moscow.
“No president before or after Eisenhower,” historian Robert Bowie wrote, “ever received such a systematic and focused briefing on the threats facing the nation’s security and the possible strategies for coping with them.”
No president has lived up to the Project Solarium standard, but U.S. President Donald Trump has set a new one on the opposite side of the scale. The current White House runs a foreign policy with irreconcilable objectives, no internal coherence, and no pretense of gaming out critical decisions before they are taken. Maximalist objectives are set with little thought to what might be required to achieve them. When the real world intrudes, with adversaries, competitors, or allies pursuing their own objectives independent from the United States’, Trump lurches from doubling down on risky bets to quitting the field altogether, as happened recently in Syria, leaving friends bewildered.
Nowhere is this incoherence more apparent than in policy toward Iran. On December 18, 2017, Trump signed his National Security Strategy, followed one month later by the National Defense Strategy. These documents set priorities among competing interests and direct U.S. departments and agencies to follow suit. Those the Trump administration issued emphasized a new “great-power competition” against Russia and China—with Asia now the priority region for U.S. engagement.
Much as his predecessor, President Barack Obama, had done, Trump sought to rebalance American priorities after two decades of overcommitment to the Middle East. Obama had intended to “pivot” from the Middle East to Asia. But the Arab uprisings beginning in 2010 led the United States to support maximalist goals in the Middle East, including the wholesale change of ruling regimes in Libya, Egypt, and Syria. The administration soon found that it lacked the means to manage the consequences of these policies, or, in the case of Syria, where removing President Bashar al-Assad was the declared policy, saw its stated objective outstrip any realistic American commitment. The rise of the Islamic State (ISIS) drew Washington back into the region militarily, but in a cost-effective manner, with limited risk to American personnel and a large coalition to share the burdens.
Those of us working on the Middle East following the adoption of Trump’s new National Security Strategy understood that we should not expect significant new resources, even for the military campaign against ISIS. In fact, resources would be cut. In early 2018, Trump eliminated long-planned stabilization funding for Syria, allocated military resources only where strictly necessary for defeating ISIS, and declared, “It’s time to come back home.”
And yet, despite these resource constraints and a supposed grand strategic shift toward Asia, the Trump administration expanded American aims across the Middle East—focusing above all on Iran. The administration stipulated that all Iranians must leave Syria, even as Trump himself made clear that he wanted to see all Americans leave Syria. Within months of endorsing the National Security Strategy, Trump unilaterally pulled out of the Iranian nuclear deal, increased sanctions on Iran, and embarked on a policy of economic strangulation—known as “maximum pressure”—with no objective on which his administration could agree.
Trump said that the objective was to ensure that Iran could never produce a nuclear weapon. His national security adviser at the time said that the objective was regime change. His secretary of state articulated 12 demands—among them, that Iran mothball its nuclear and missile programs, end support for proxy groups, and remove all militias from Iraq and Syria—that few Iran experts believed Tehran could meet absent regime change. In announcing these maximalist goals, moreover, nobody in the administration discussed new resource commitments to the Middle East. To the contrary, the acting Secretary of Defense told the Pentagon that the priority was “China, China, China.” The Iran policy was all ends and no means.
The assumption that drove this resource-free policy was that economic pressure through sanctions would force Iran either to return to the negotiating table on its knees or to collapse altogether. A contrary assumption—that Iran would not return to the table but instead fight back asymmetrically and draw the United States deeper into the region—does not seem to have been seriously considered. On this contrary assumption, an approach consistent with the National Security Strategy would have entailed a longer-term plan. Washington might have contained Iran in concert with U.S. allies and sought to improve the nuclear deal rather than abandon it, for example, while imposing specific costs for other malign activities, such as advances in missile technology and support for proxy networks.
Nowhere is this incoherence more apparent than in policy toward Iran.
Over the first year of maximum pressure, Iran did not significantly react, leaving open the possibility that the optimistic assumption might hold. But in May of last year, Iran began to go after U.S. allies in the Gulf, first targeting shipping and then attacking Saudi Arabia’s oil facilities. The Trump administration appears to have been caught off guard, responding uncertainly to each Iranian action, whether by incrementally deploying U.S. military assets, issuing threatening tweets, or making a scattershot effort to gather a naval coalition to protect shipping lanes. These halting responses demonstrated a lack of forethought as to how Iran was likely to respond to the new policy. The more cautious assumption now seems correct.
Beginning this past October, Kataib Hezbollah (KH), an Iranian-backed militia in Iraq, began what senior U.S. military commanders called a “sustained campaign” of rocket attacks on Iraqi bases hosting American forces. These were the first such strikes that KH had undertaken in more than eight years. Having failed to anticipate Iranian reprisals against maximum pressure, the United States later failed to deter the assault or to act effectively once it began. Senior U.S. officials have even speculated that the lack of any American response to the earlier attacks in the Gulf may have encouraged the subsequent attacks on Americans in Iraq.
The violence escalated quickly. The 11th KH rocket attack killed an American contractor, in response to which the United States ordered strikes that killed more than two dozen Iraqi militia members. KH and other militias then sought to storm the American embassy. In response, Trump called the strike on Qasem Soleimani, the head of Iran’s expeditionary Quds Force, outside Baghdad’s international airport. Iran then launched more than a dozen ballistic missiles, which appear to have barely missed American personnel in western Iraq. The chairman of the Joint Chiefs of Staff concluded that in his “professional assessment,” the missiles were launched with intent to “kill personnel.” The spokesperson for the U.S.-led coalition tweeted that “seemingly divine protection saved lives” during the missile attack. (A dozen Americans were reportedly evacuated for medical evaluation after the blasts.)
This cycle of actions and reactions has drawn nearly 20,000 additional U.S. military personnel back into the Middle East since May of last year. Washington appears to have narrowly avoided a significant conflict mainly because Iran’s ballistic missiles narrowly missed American service members. Trump implausibly claimed that Iran was “standing down” the morning after it had fired over a dozen ballistic missiles at U.S. troops, and despite Tehran’s having promised further reprisals.
No American official publicly forecast scenarios like this one when the maximum pressure policy began nearly two years ago. Economic pressure was supposed to enhance American leverage and make Iran more pliant going into new negotiations. Trump himself said he intended to end wars and move forces out of the Middle East region altogether. The unforeseen escalatory cycle is evidence of a policy not working as intended.
Iran is now behaving more provocatively, not less.
As for the aims the secretary of state listed two years ago, the maximum pressure policy is failing to achieve any of them. Iran is now behaving more provocatively, not less. It’s stockpiling more enriched uranium, not less. It’s spinning more centrifuges, not fewer, and continuing to support proxy groups in Iraq, Syria, Lebanon, and Yemen. Because Washington cannot point to any goal that the policy has advanced, it now touts economic pressure as an end in itself, as if the policy were designed simply to make Iran poorer, as opposed to changing Iran’s nuclear and regional policies (all of which are now worse) for the better.
The policy justifications are increasingly circular: when Iran attacks U.S. interests in the Gulf, American officials claim that this shows “panicked aggression” due to economic pressure. When the attacks pause, American officials claim that they’ve “restored deterrence,” at least until the next attack, requiring further economic pressure and a bolstered U.S. military presence in the region. There seems to be no serious effort, either within the administration or in Congress, to measure the policy against the goals declared from its outset.
More sanctions are unlikely to change Iran’s calculus. There are few historical examples of sanctions forcing the sort of sweeping changes that Washington now demands from Iran. Iran’s malign activities also cost little (it spends approximately $2 billion to $3 billion per year on proxy groups throughout the region, according to the State Department). Its entire defense budget is a tiny fraction of what American allies like Saudi Arabia spend per year. Its population has long struggled economically, with per capita GDP historically one-seventh of Mississippi’s, the nation’s poorest state. And Tehran cares little for its citizens. (Its failure to close civilian air space when launching ballistic missiles against Americans in Iraq is the latest example of both malevolence and incompetence.) Iranians courageously protesting their ruling system deserve support, but revolutionary change from the bottom up is unlikely so long as the regime remains united from the top down with a monopoly of force and the proclivity to use it in the most brutal of ways. Worse, the maximum pressure campaign allows Tehran to externalize the blame for its dysfunction and to justify further crackdowns on Iranians striving for reform and accountability.
For all of these reasons, the record to date suggests that additional economic pressure will more likely result in counterpressure on Washington than in a better nuclear deal or significant changes in Iranian behavior and policies.
The strike on Soleimani brought U.S. policy contradictions to a head. Tehran has reacted by working to consolidate its grip internally. While Iran may not seek to provoke Washington into direct confrontation, it will likely continue its deniable attacks on American partners in the Gulf and step up political pressure on Iraq to eject U.S. military forces. The successful campaign against ISIS—a mission that brought nearly 20 Western partners into the Middle East to share costs and burdens with Washington—is suspended as coalition forces focus on protecting themselves against Iran. ISIS is under less pressure as a result. And a weak Iraqi government risks making the United States unable to stay in Iraq at all, an outcome that has long been Iran’s ultimate aim. If the United States and its Western partners leave, Russia will surely become Baghdad’s great-power security partner—an irreversible setback for Washington with grave consequences for the people of Iraq and the broader region.
The Trump administration could respond to these new circumstances by declaring that the Middle East its first priority after all. It could take initiatives to strengthen its military and diplomatic position in Iraq and clarify that Washington will defend its Gulf partners. Doing so would formally and intentionally make Iran the organizing principle of Trump’s entire foreign policy, as is happening now informally and unintentionally. Or the administration could de-escalate by opening a realistic path for diplomacy with Iran. According to France and other allies, the latter course would require the United States to outline clear and attainable demands while offering Iran some economic relief up front.
The continued application of maximum pressure absent recalibration in either direction, however, is an insolvent policy. Its unlimited ends misalign to limited means, and initiative rests dangerously in the hands of Tehran, which has a greater interest in its own survival than the United States does in forcing its demise.
Unfortunately, when Trump addressed the nation after Iran’s missile attacks, he said nothing about Gulf partners exposed to reprisals. Nor did he mention the Iraqis. Nor did he declare any real American interests in the Middle East. “We are independent,” he said, “and do not need Middle East oil.” Nor did he suggest any serious initiative to de-escalate and reopen a diplomatic process with Iran.
The impression the president left was that the Soleimani strike was a tactical operation to protect Americans, not part of a strategic reorientation one way or the other. Trump asked NATO “to become much more involved in the Middle East”—something the alliance is unlikely to do, given that it acts only with the unanimity of 29 capitals, many of which blame Trump for the current crisis. Curiously, even as his administration imposed new sanctions to further suffocate Iran’s economy and suspended its own fight against ISIS, Trump proposed that Iran and the United States “should work together” against ISIS.
This strategic muddle is the focus of discussion in regional capitals, as well as in Moscow and Beijing. Foreign leaders see Washington as pursuing maximalist policies under a minimalist president with no clear, let alone achievable, aims. Their shared assessment is that Iran can continue to harass U.S. friends in the Gulf, intrigue against the U.S. presence in Iraq, and consolidate Assad’s grip on Syria. So long as Tehran does not draw Americans into its fire, Trump will do little. If Americans are drawn into its fire, then risks of a major and uncontrollable conflict are extremely high. All with no serious prospect for diplomacy, which most view as a prerequisite for sustained de-escalation.
Such an assessment has drawn Saudi Arabia and the United Arab Emirates toward Russia and China—and even Iran—as hedges against a careening and uncertain Washington. In this respect, not only is the U.S. pressure campaign against Iran failing to achieve its stated aims but it is also benefitting the two great powers that the National Security Strategy is designed to confront.
Washington’s policy today is defined by incoherence: maximalist ends, minimalist means, false assumptions, few allies, all pressure, no diplomacy.
Indeed, even where the policy has been effective in choking Iran’s economy, it has done so at the cost of aggravating the very allies Washington needs if it is to sustain a competition against great-power rivals. The United States has increasingly imposed what are known as “secondary sanctions” on Iran. These constrain U.S. allies, including France, Germany, and the United Kingdom, as well as their private companies, from engaging in trade with Iran that is otherwise legal. Washington is effectively using its economic might to coerce allies into enabling a policy that those allies believe is self-defeating and unacceptably high-risk. This strong-arming may have lasting consequences for American stewardship of the global economy, which has long been based in part on the assumption that Washington would not weaponize the dollar’s dominance in pursuit of purely unilateral aims. China and Russia are seeking to exploit these concerns by developing trading networks, including with India and Turkey, that avoid the net of American sanctions.
At bottom, Washington’s policy today is defined by incoherence: maximalist ends, minimalist means, false assumptions, few allies, all pressure, no diplomacy. The Middle East in turn is stuck on an escalatory ladder, and Iran’s proxy groups may prove even less predictable with Soleimani dead. By Trump’s new standard, any attack that draws American blood may warrant an enormous retaliatory response. Yet with no diplomacy, plus additional sanctions, the risk that such an incident will occur—and the danger to Americans in the region—has only increased. And so the United States must maintain a significant military force forward and ready in the Middle East, even as its fight against ISIS has stalled and its guiding grand strategy calls for shifting resources out of the region altogether.
It is too much to ask that the Trump administration embark on a Solarium-like process to seriously review and resolve these internal contradictions. Major national security decisions made poolside at Mar-a-Lago, with no expert staff, are a far cry from Eisenhower’s model. Given that we are all in this together, however, and with the stakes as high as another war in the Middle East, it is not too much to demand clarity on priorities and strategic orientation.
Right now, there is none: over the past month, the secretary of defense has said that his “priority theater” is Asia, consistent with the National Security Strategy, then weeks later said that he’s prepared to “finish” a war with Iran should one start. Both statements cannot be true at once. To sustain a military posture sufficient to unilaterally “finish” a war with Iran—a country four times the size of Iraq, with nearly three times the population—requires that the priority theater remain the Middle East, not Asia.
Strategy is about choices, priorities, and resource allocation. If Iran is now the priority, then Washington will need to recommit to the Middle East, strengthen its military and diplomatic position in Iraq and elsewhere, and make clear that it’s prepared to defend Gulf partners from Iranian reprisals. If Asia is the priority, however, then Washington cannot credibly pursue what is effectively a regime change policy toward Iran. Beijing views what it considers a myopic American focus on Iran as a strategic asset, because it deflects attention from the Pacific, divides Washington from its allies, and allows China, together with Russia, to expand its influence across the Middle East. Beijing and Moscow now enjoy close relations with all countries in the region, from Israel to Saudi Arabia to Iran, and those capitals now see Putin—not Trump—as an indispensable power broker.
If Iran is now the priority, then Washington will need to recommit to the Middle East.
The administration lacks a process to resolve these contradictions, but Congress can force them into the open. Even after four decades of hostilities, Congress has never authorized the use of military force against Iran. But Trump’s maximum pressure campaign now requires the continuing threat of such force. With economic tools largely exhausted, Iran promising further reprisals, and no prospects for diplomacy, the United States must retain a significant military force in the Middle East region with a credible threat to use it. To deploy thousands of American troops to the Middle East while preparing contingencies to “finish” a possible war with Iran, moreover, begins to impinge on the constitutional prerogatives of Congress. Recent polling shows that most Americans want Congress to reassert its war-making authority.
There is no reason to avoid this debate until the next inevitable crisis, or to keep it behind closed doors hidden from the American people. If the Trump administration truly believes that the United States must be in a position to finish a war with Iran, then it should make the case to Congress and seek its authorization. Even the administration would gain by being forced to clarify its objectives, the means for achieving them, and the metrics by which it should be held accountable.
Reflecting on his years in office, Eisenhower observed, “We kept the peace. People ask how it happened—by God, it didn’t just happen!”
Through Project Solarium and then weekly National Security Council sessions, Eisenhower guided American foreign policy with deliberation, humility, and the careful alignment of ends and means. Trump, by sharpest contrast, appears for the moment to have avoided a serious conflict in the Middle East by dint of luck—because Iran’s ballistic missiles landed near but not on top of brave Americans sheltering on an air base in western Iraq. Foreign relations will always contain some element of chance, but the mark of a leader is to ensure that chance alone cannot draw the country into a military conflict that nobody wants.
The current crisis in the Middle East should be a moment to demand a return to the most basic principles of sound foreign policy, with clarity in objectives and the alignment of resources necessary for achieving them. Objectives that cannot be met absent unacceptable tradeoffs, costs, or risks should not be pursued. Americans can welcome Soleimani’s demise. He was a terrorist with blood on his hands. At the same time, they can rightly demand a coherent foreign policy guided by deliberative choice rather than gambles and fortune.