Iran Is No Longer Just Surviving | Robert Pape on the Escalation Trap

[00:00:00] Good morning, and welcome to the At the Waters Edge Podcast. Today we bring our next installment in our ongoing series, The Escalation Trap, with Professor Robert Pape from the University of Chicago. If you've enjoyed this content, please be sure to like, subscribe, and share with a friend. It really helps get the show out to more people. With that, let's get to our conversation with the professor. Well, good morning and welcome back. How are you doing today? I'm doing great. Good to see you again, Scott.

[00:00:25] Pleasure as always. So, weekly update. All the fun stuff appears that would happen in the past 24 hours. Let's see. Iran and Israel are shooting at each other directly again. So that's exciting. And the Houthis have said they're closing off the Bob Al-Mandeb Strait for all Israeli-associated shipping. And I'm sure they have a very robust vetting process to determine what shipping is or is not related to Israel. No one else needs to worry. Full confidence in the Houthis.

[00:00:54] The Houthis is not far behind, Scott. Yeah, yeah, yeah. So, I'm not sure if we can still even pretend there's a ceasefire in place at this point. Because as of this morning, they might still be shooting at each other as we're recording this. So, what's your take on where we're at and what this means for the conflict? Is there any walking back from where we find ourselves today?

[00:01:13] Yeah, no, there's not. And there hasn't been. This is day 100 and be specific, day 101 of the war. Okay. So, we've been talking about how this war was going to be over since February 29th. I'm sorry, 28th. Hours after the bombs fell.

[00:01:33] And it's now 100 days later. And the escalation trap is continuing. Now, just to be clear, we're nowhere near the end of this war. But we're not in the beginning either. And what people, I think, want to believe is that once we get through a beginning, there will be an end.

[00:01:50] And they want to believe this will end. Venezuela ended. You see what the issue with Greenland ended. This is a different war. It's just a different set of problems. These are not just another of the same. This was always the bad one. And this is what the bad one looks like and why it's an escalation trap.

[00:02:13] We're essentially in the middle. Now, what's happening in the middle is that Iran hasn't just survived. And it's not just seeking survival now. Now that we're in the middle, Iran's ambitions are growing. That's the bottom line.

[00:02:36] What's occurring is Iran's ambitions are growing to emerge, as I said it would over the next year or so, as the dominant hegemon in the Persian Gulf, which would make it the fourth center of world power, complete with nuclear weapons.

[00:02:58] This is exactly where the trajectory we are on. We're in the early stages of it, of course. It's not happening overnight. But this is the trajectory we are on. And the only way you're going to stop that trajectory is with escalation. There's no other way. It's not like, oh, they're just going to realize they should be nicer and so forth here.

[00:03:21] So and what's happening, just to give some teeth to this, is that if you look at Iran's behavior in the last over the last week, you can see the clear telltale signs of its ambition. So just literally a week ago, what happened is we had another round of more minor escalation here, where people described it as tit for tat. We hit some targets, but Iran didn't just play tit for tat.

[00:03:50] They upped the ante when they attacked into Kuwait and they attacked into Bahrain. They attacked not the forces literally doing the assaulting. What they did is they were attacking a somewhat wider set of targets. And it's important to notice that widening of targets here. So it wasn't, it was Kuwait, Bahrain, and then also the airport got hit, not just military, U.S. military bases.

[00:04:17] What this was, was Iran spreading its wings. It's the beginning of this ambition because they, to become the dominant power in the Persian Gulf, you need to increasingly push and help and have the Gulf states push out U.S. military bases. And that's, this is the beginning of that.

[00:04:41] Then what happened is Iran threatened that if Israel did not stop attacking its ally in Beirut, Hezbollah, the key stronghold Hezbollah has in Beirut, Iran would attack Israel's homeland and truly make a clear mark that would, that's what we're talking about now. Well, Israel, President Trump tried to stop Israel, did hold for about, you know, two, three days.

[00:05:07] But then Israel went further anyway into Beirut and Iran carried through its threat. And then, of course, Israel has retaliated for that. So this is not just a, you know, sort of a random breaking down of the, of the ceasefire. This is Iran protecting its ally in Hezbollah.

[00:05:31] On top of that, then last, just last, the end of last week, there was a major interview on CNN, which everybody should watch, where the senior military advisor to the Supreme Leader gave a public, directed to the Western audiences interview, where he is essentially demanding more power for Iran.

[00:05:59] He's demanding $24 billion up front to even get into further discussions anymore with the United States. This is, this is a pay, not, this isn't a pay, a signing bonus. This is just to get into the room, Scott.

[00:06:13] Then on top of that, he's explaining how Iran is going to, what, what this negotiation is really going to be about is solidifying Iran's fees for the ships that pass through Hormuz and solidifying America's withdrawal from the Persian Gulf. So this is what he, and then he says, and if this does not happen, we will widen and hit the Red Sea. And we'll talk about the Red Sea in just a moment of why it's so special, which I'm sure many of your audience know, but we'll put some points on.

[00:06:43] So the, so what you were seeing in its behavior and its rhetoric, ambition, Scott, this is not the behavior and rhetoric of a state that's trying to consolidate the current status quo, freeze things. It's suffering so much. Oh my goodness. Let's just get your foot off my neck. I'm, I'm, I need some relief. This is the behavior of a state and actor that's revising the status quo.

[00:07:12] Now, bit by bit, I want to point out in a calculated manner, this is not in a, in a sort of a, it would actually be easier for us if it was more spasmodic. But what you were seeing is the shift from survival to ambition by Iran. This was always the middle stage of the escalation trap.

[00:07:34] It's this, what the fork in the road looks like where Iran either emerges as the fourth center of world power or we escalate. And this is going to go on for months and months. President Trump has said multiple times now in the last week, he's keeping U.S. forces there. You see? So he said all the way through Labor Day.

[00:08:00] Now, we've, we've just extended this to Labor Day just to be super clear. I'm not sure. In fact, I, I don't have a crystal ball exactly, but I think it's highly likely that we're pulling out in Labor Day either here. I think that what we are, what we are seeing is the middle of the escalation trap. And this is going to continue.

[00:08:25] And you're going to see the middle is going to be probably weeks of boredom punctuated by hours of sheer terror. And this is what it means to be in the middle of essentially a grinding war. Well, I guess families should start thinking about what Christmas looks like in the Gulf if we're going to keep going down this road. But I think this is really quite wrong. It's right for our troops to understand that this is not changing.

[00:08:53] And the reason is because Iran is remaining absolutely firmly committed to its key goals and has added to those goals as time has gone on. So the key goal, number one, before the war was keep its enriched uranium on its soil. Now it's continue, it's keep control of the Strait of Hormuz. That was the end of the early stage. Okay.

[00:09:18] Now we're in the middle stage, which is spread its wings, ambition, control. Why? Because it's for its survival. Why does the United States want to be the dominant power in the Western Hemisphere? It's because this adds to its security. It's not just the oceans. It's keeping other major powers out of our neighborhood.

[00:09:44] Why does China want America's troops out of Asia so it can be the dominant hegemon in Asia? Why is Putin trying to spread Russia's wings into Ukraine and then also into the Baltics, etc.? It's trying to become the hegemon in essentially Eastern Europe. Maybe not all of Europe, but Eastern Europe. And what is Iran doing?

[00:10:14] It's following in all three of those footsteps. And those footsteps are what states do who have the power to become more secure. This is not because Iran is a religious regime. The IRCG doesn't seem to have much religion in it. This is not because it's just simply a military. It's because this is what states do for their security. It's an existential demand by these states.

[00:10:42] And you are not going to likely move them from this unless you militarily confront them from this. At the Water's Edge is supported by Grayzone Advisory. Grayzone helps businesses and organizations understand geopolitical risk before it becomes a crisis. If your company is exposed to conflict, supply chain risk, defense markets, or international instability, Grayzone provides executive briefings, strategic analysis, and decision support

[00:11:11] to help leaders understand what is changing and what to do next. Learn more at grayzoneadvisory.com. Is there a scenario where Iran overplays their hand because they have this ambition, they're flexing the fact that they're making these demands isn't surprising. The fact that they're making them publicly on CNN is a little concerning. At what point do they overplay their hand? We can only pray and hope, Scott. Okay.

[00:11:36] So they remind me a lot of Putin from 1999 up through 2021, where he didn't overplay his hand. And that went on for a long time. And then eventually Putin overplayed his hand on February 23rd, 2022, and went for it all with Keith. It wasn't just attacking into Ukraine.

[00:12:01] So the smart thing, the incremental realist thing to have done would have been for Putin to have gone for more territory in the Donbass. That is this incremental approach. This is the Bismarck view. This is the steady realist approach. This is what China is doing at, you know, building islands in the South China Sea. This is what that looks like and why it's so difficult to stop. Oh, my goodness. You can't. It's a series of fates accompli.

[00:12:31] You never trigger a red line that someone can, like, stand up and down and jump out and be mad about by the time it's done and the whole generation's gone by. You got it. So this is the this is and states don't, you know, live longer than leaders. So if they just can stay steady, they can actually get ahead. You see what I mean? And in the United States, this is, you know, we call this the spreading of manifest death, whatever you want to call it.

[00:12:54] We consolidate this over time in the North American continent and then in the Western Hemisphere. So far. Iran has not overplayed its hand. Now, we can hope it will overplay its hand. This would be spectacularly in our favor. OK, what would that look like? Oh, this would look like the most obvious thing, Scott. Again, I don't expect this.

[00:13:22] But but just so people would get an idea is go back and and replay the early stages of the Iran-Iraq war. There are certain islands around Kuwait. You'll even see that there have been like eight IRCG commandos who who got stuck in a boat around this. So it's tiny little bits of this. But what it would look like is a ground offensive or an actual offensive.

[00:13:47] You see, now this would be music to our ears because this is just what our precision air force and our naval power. Man, this is hammer and anvil smashed the vids bombing to win. Fingers crossed they invade Kuwait. OK, that's what we're going for. Exactly. So let's start working on triggering another invasion of Kuwait. We're back in 91, boys. Let's go. Well, just just to kind of give some historical analogy.

[00:14:12] This is what Bismarck did when he talked Napoleon the third or suckered him into attacking Prussia in 1870, which then consolidated the Prussian principalities into the Germany we all learned to love and then hate later on. So so Bismarck, that's exactly what he did, Scott. It was a sucker move. And Napoleon the third fell for it.

[00:14:37] Wait, are you saying that all these state dynamics have played out before that none of this is due? This is just like there's a historical record that we could look at and draw lessons from. Is that what you're saying? Stunningly, this is my view. Wow. That's that's that's remarkable. That is that is remarkable. Stunning stuff. I think a better crystal ball than than much of the other lenses that we try to read things through.

[00:15:05] Because we're as as you know, we we all go gaga over social media posts by anybody and and so forth. And we always are trying to overread or read into them. But what we're doing is we're reading into them stability when they're not stable. And we all know social media posts are not stable. That's how it works here, especially by leaders. Oh, my goodness. You know, they're they're posting two sentences, not like a thousand word essay or something. So you can't really have much stability.

[00:15:34] So this is the middle stage. We're in Scott. Now, the danger in the nearer term here, I don't think is going to be the IRCG, you know, gives us, you know, sort of our hard dream attacking access here. I don't think that's likely. I do think that the real what you you mentioned this briefly, but we should talk about this, which is spreading the control to the Red Sea. Yeah.

[00:16:03] Now, this would not be primarily, I think, with Iran itself, although it has some capability to do that with its missiles and its and its drones. If those missiles and drones can hit Israel, they can hit targets near and in the Red Sea. I think this is back to the Houthis. So this is a this is what has already happened.

[00:16:28] And the Houthis have apparently already declared that they are going to go after Israeli traffic. And as you said, they might not be very specific about it. Well, what happened at the end of April is the Houthis started to float the idea that if Iran is going to get tolls around or fees, whatever you call them, around Hormuz, they're going to do this around the Red Sea.

[00:16:50] Now, that's crucial because not so much of Israel narrowly, but because the Saudis and the UAE, but it's primarily the Saudis, have been bypassing the Strait of Hormuz with millions of barrels of oil a day.

[00:17:09] I think it's something like three to four million barrels of oil a day have been doing an end run around Hormuz and traveling through pipelines to the ports at the Red Sea. So what that what that would mean to either threaten that, cut it off, increase insurance, all of that same pattern is that suddenly we're going to lose another three or four million barrels a day of oil.

[00:17:38] Now, just to put this in further perspective. So on the sub stack, the escalation trap, I've been laying out these long posts where the economic forecasting I've been explaining this, but I realized that it's it's hard for people to internalize all this. So just to sort of bring people more up to speed on some of these posts. So I've been talking a lot about how the course of the economic consequences would play out. Well, one of the big things people probably are already hearing about is the oil inventory drawdown.

[00:18:06] And that's something I'm talking about, too. But what they may not know is that a lot of those estimates that the financial analysts are making are assuming that the Red Sea oil continues unabated without risk whatsoever. And that has been a critical assumption in their modeling.

[00:18:30] And one of the reasons why the price of oil has been hovering around Brent crude, $95 a barrel and not $125 a barrel. And that issue of Red Sea oil, it may seem like a relatively small amount, three to four million barrels a day, but it's enough to create optimism. There's some psychology to these prices and there is an actual real supply. You see what I mean? It's not it's not nothing.

[00:19:01] It doesn't replace the 15 percent that's been taken off, but it's not nothing. And so you take that extra three or four million barrels of oil a day off or put it at risk. Those models are going to change in a heartbeat. You see what I mean? So suddenly it's not just the middle of July. We run to the bottom of the barrel of the inventories as we currently understand them.

[00:19:28] We also lose the next three or four million barrels a day. You see, this is a force multiplier. That's why I think the IRCG, that military spokesman for the Supreme Leader, notice he's he's putting a like almost underscoring. And bold. You know how when we I post these things, I try to underscore or put things in bold because people are skimming and so forth. They know everybody does that. Right.

[00:19:57] So he's doing that with the red sea, red sea. So I just want to keep underscore red sea Iran survival to ambition. Red sea. Those are the sound bites coming out of today. You know, it surprises me and also doesn't surprise me that the finance folks aren't accounting for geopolitical risk in the Red Sea with oil supplies. Because, I mean, the Houthis have previously sunk a tanker in the Red Sea. And they just did that for shits and giggles at the time.

[00:20:27] They weren't being asked by another world power. They weren't being motivated by the possibility of getting tolls. Because, granted, finance folks can't think more than 90 days ahead and forget what happened yesterday. So I get it. But do you have little cross canals, folks? It's important for financial models. Well, this is what really is the hard part to integrate, Scott.

[00:20:45] So military folks, they are really good at the tactics of military weaponry and also command with troops. That's just absolutely their bailiwick. Financial folks are really good at the tactics of deal making. You see? So it's not that they're like, you know, subpar intellects or so forth.

[00:21:12] It's not that they're not highly or hyper professional at their jobs. It's that they're really experts like the way a surgeon is, an expert in the organ that surgeon is operating on. You see what I mean? That is the way to think about these. And you need, of course, that hyper level of precision in the military and in finance, just like you do with the surgeon in the operating room.

[00:21:42] So this, I don't, I highly, highly think this is crucial and respectful and so forth. But that's not the same thing as integrating that with geopolitical analysis. That, it's just, you know, sort of a, it's sort of, well, I'm a super expert at this. This other thing, yeah, okay, I can kind of see enough and I can, you know, it's, but it's, it's, there's also expertise in that. And that's what the escalation trap is. It's, it's that bridge here.

[00:22:10] And that's why the predictions have been pretty steadily on the money for months now. But it doesn't tell you like what's going to happen like in the next 12 hours. But it does tell you not to overread confidence or not to underread what, what are the medium things that are actually going to determine the outcomes here. You mentioned something right at the top of this with Iran becoming a fourth center of world power. You mentioned, you know, regional hegemon with nuclear weapons.

[00:22:39] How do you think this conflict is impacting Iran's nuclear calculus? Because ostensibly they're still saying that they have no intention of creating a nuclear weapon. But from a state logic point of view, it's difficult to imagine them not pursuing one once all this wraps up, however it does. That's right. And you're starting to see some of the early signs that they understand that. And it's a little hard to know.

[00:23:03] But on some of the other podcasts here, and a lot of your listeners will know what I mean, there's some reports that Iran already has a nuclear weapon or is in conversations, key leaders in Iran with key leaders in Pakistan, that there have been some leaks about some readouts about some nuclear scenarios and so forth. This is exactly what the early stages of that all look like, Scott.

[00:23:29] So it doesn't mean that reality is here with us this moment. I think that's not really the way to understand it. It's that things move in increments, usually, Scott. And this is true in military operations. You know, it took really several months to prepare for the bombing of Iran. It didn't just happen all because President Trump decided on Friday, February 27 at 315, he wanted to do it.

[00:23:58] There was a lot more behind it than that. Maybe six weeks is probably the real period of time for that. But with nuclear weapons here, there's a lot of things that have to come together. And some of it is also preparing your public. So why, for instance, would this even come out in this way?

[00:24:18] It's because even if the public has moved in this direction and your leaders are moving in this direction, you still would want to do it if you're going to do it in a solid way in this more incremental fashion. Truth is, we talked about this before, about overreaching and so forth. It would be so great if they would just overreach. Okay.

[00:24:42] But they're being more steady like Putin from, again, 1999 to 2021. That's a 22-year period. So he was pretty steady during that window here. And so far, Iran has been pretty steady during the 101 days of this war. And so we'll see if this continues. But it makes absolutely perfect sense. And I don't just mean more likely. It would be stunning.

[00:25:10] Because if you look at the other countries that have tried to consolidate hegemony in a region of the world, they have nuclear weapons. They have nuclear weapons, you see. And the reason is because they need that as an anchor for their hegemony going forward in the modern age.

[00:25:30] And this is, you can also see Israel is not going to give up its nuclear weapons as it's bidding for hegemony around the Mediterranean part of the Middle East. So Israel's building a hegemony of its own. You see what I mean?

[00:25:47] And what you're seeing, and one of the reasons that this escalation trap started and was going to continue is because those two competing hegemonies here, that is Iran and Israel, this is going to be going on for quite some time. And if it was only Israel, this would be an issue, of course. But what you're seeing is with Iran, it impacts the world directly. And this is going to keep impacting the world. And it's not just, we're not done with that yet.

[00:26:18] So a lot of the financial people want this to all be over because I get these posts with these models. Well, here's the next pipeline that's coming in. Here's how things are going to be rerouted in Syria in 2027. This is what's underneath the lower price of oil. And that's all like great whiteboarding, but that all assumes nobody's attacking any of that infrastructure. Yeah.

[00:26:45] Routing oil through Syria, I don't think, is really a solution for the global oil markets. I'm not sure if anyone's been there, but... But look at it if you're trying to sell investment opportunities to people. I mean, this is what I think, again, it's why would this become, you know, I think you make money on those ideas here, you see. And what you're seeing, though, the reality is that this is going on and the countries are not all driven.

[00:27:14] If everybody was simply literally driven by a profit motive, the way, you know, sort of Wall Street is, you may well be able to get stability. This is one of the things I'm talking more and more about, Scott, on my... I've decided for at least a while here to keep these two substacks, the escalation trap, which is going to focus on everything here on our escalation. And then these other larger issues here on the Professor Pape substack.

[00:27:43] And I just gave a very big talk about 10 days ago, the live briefing on the Professor Pape, where I really laid out what this really means for the world in the biggest terms. Why this war is becoming the mirror image of the 1991 Gulf War, for example. And it's not just about the details of the escalation over the next few months in Iran.

[00:28:07] The 1991 Gulf War was really critical for kicking Saddam Hussein out of Kuwait. That was his bid for oil hegemony and regional hegemony in the Persian Gulf and would have controlled over 22 percent of the world's oil had he also not just Iraq, Kuwait, and Saudi Arabia. But what it did is it set the rules for the next decades in the post-Cold War world. It created...

[00:28:34] That's what put the exclamation point on the idea that there was an American unipolar moment. You see, it wasn't just the end of the Cold War. Subtract one from two great powers. You have unipolarity. No, no, I'm sorry. The ideas of U.S. escalation dominance, global power, global reach, that came from the Gulf War. You see what I mean? This war is the inverse set of lessons.

[00:29:04] It's not just there's a little squiggle here or there. That was the problem of AQI. That was the problem of ISIS. You see, we ultimately prevail there. So it's not that there wasn't some cracks in this before. This is the war, the 2026 war, that's going to bookend American unipolarity for real and is setting the stage for the next 20 years.

[00:29:29] And not just in Iran and not just in the Persian Gulf. This is going to impact, just as the 91 Gulf War, other regions of the world in general. And America in the first Gulf War came out as the indispensable nation. That was Madeleine Albright's term. Okay. And everybody believed it. That was not a political. That's what people believe. We were indispensable.

[00:29:57] Number two, that international commerce, the supply routes would be guaranteed stable. Guaranteed stable. So what did that mean, Scott? That meant the percentage of world, if not just the world would get richer, but the trade as a fraction of world product grew enormously from 38% of world product.

[00:30:26] Trade as a fraction of world product, 38% in 1990 to 60% by 2010. And that's roughly where it is today, except for the COVID switch. So think about that, 50% increase in how much trade matters. Why? Because of stability, which means cheap supply chains. What's changing? Stability and expensive supply chains.

[00:30:56] This is not just about this narrow set of things, you see, Scott. So we're getting a much bigger set of consequences that are coming out of this war. And that's one of the big things I want to articulate. I don't just want to focus on the, you know, sort of specifics. But I think we need to understand in a much bigger way, what does this mean, you see?

[00:31:26] And that's what I'm going to do on the Professor Pape Substack over time. We've started it already. It's going to continue. And it will probably lead to a book at some point. So people basically will get the early versions of that here. But it's the bigger thing is, it's we really, everybody's got a sense that this just, this is a little bit different. This isn't the 2003 war. It's not about nation building.

[00:31:51] So what does, what matters here in a big picture way? That's what I'm trying to address here. And what's going to matter is that this model, the Iran model is going to replicate. Well, lots there to dig into, but I know we're at time. We'll have to pick it up again next week. Quick recommendation though, not Professor Pape Substack, but the Professor Pape Papers. That should be the title of something.

[00:32:19] Well, it may be joined that way down the road. So right now it's, if I start to, these are each so big, Scott. Scott, the practicalities are, I'd have to destroy one. It's like, I got to destroy the city to save it. Is that, so if somebody's got a more brilliant idea, but this is not, this isn't going to just be, oh yeah, just get it. No, no, this isn't the way it works. So, so I'm going to muddle through this over time. And then maybe it will be just the Professor Pape.

[00:32:49] I like that idea, Scott, down the road here. And let's, I, you know, let's hope that we get like a four or five month lull in the world when that makes perfect sense. A couple hundred countries out there, nothing going on. I'm sure things will calm down soon. Well, they're not, this is the problem here. People, the Substack, the escalation trap tells me a little bit about the future and the future is not like, let's okay. Take that couple of weeks off now in Hawaii.

[00:33:20] All right. Well, thank you so much for joining us this morning. We'll check in again next week. Okay. We'll talk to you soon. All right. Bye-bye.