The second Trump administration’s Middle East strategy will likely see the return of the Maximum Pressure policy on Iran. However, the former president faces a changed region, one that will both welcome and resist his transactional approach.
Here is what companies need to know in preparation for Trump’s return to the Middle East.
Sticks and carrots
Maximum Pressure refers to Trump’s first-term policy of countering Iranian influence in the Middle East through withdrawal from the Joint Comprehensive Plan of Action (JCPOA) and sanctions. Maximum Pressure 1.0 ultimately failed to roll back Iranian influence across the Levant. With Maximum Pressure 2.0, the US would be reasserting and potentially even stepping up sanctions against a weakened Iran.
But US policy and priorities may no longer be entirely running the show. Regional stability is taking centre stage: the Gulf Cooperation Council (GCC) states have repaired their fracture, and the rapprochement between Iran and Gulf Arab states is resetting norms. This shift provides a regional incentive to improve US-Iran relations: Gulf Arab states are uniquely positioned to aid Iran’s struggling economy under the right conditions. How this combination of carrots and sticks might influence Tehran is an open question.
Trump may even seek to renegotiate the JCPOA, as he tried (and failed to) in 2019. His administration ultimately saw Maximum Pressure as a route toward a subdued Iran that might reduce its uranium stockpiles if given the right incentives. Despite Trump’s continued criticism of Iran – and following FBI reports linking Iran to the assassination attempts against him – Trump has said he would consider returning to the negotiating table “because the consequences are impossible.”
Devil in the details
Trump may struggle to align a Maximum Pressure 2.0 policy with other priorities. His promise of lower petrol prices was a popular campaign message. Sanctions that would reduce Iranian oil exports would also raise benchmark oil prices.
Trump may decide that he is happy to excuse away the consequences of a more robust sanctions campaign against Iran. He might also see if OPEC can fill supply gaps. This would put the collective in a difficult position, as preserving cohesion typically takes priority over other issues. Saudi Arabia and the UAE could welcome an opportunity to increase their market share, but this would necessitate a complete overhaul of the painfully negotiated multi-level quota system, which has only just been adjusted in early December. And some Arab states increasing their market share at Iran’s expense could reintroduce bilateral tensions exactly as and when they are not wanted.
Transacting at arm’s length
Trump will likely continue to be highly transactional, and regional leaders will likely work with this approach on some issues, especially in expanding arms purchases. The UAE may use the opportunity to unlock the sale of sophisticated aerial systems, which Trump approved in 2020. But there will be regional security constraints on – and domestic political considerations for – the Gulf states, along with issues like the sanctions-OPEC friction mentioned above.
There is also no guarantee that Gulf Arab states will welcome Trump with open arms. When Iran-backed groups targeted oil production and export infrastructure in Saudi Arabia in 2018 and 2019, the US did not respond. Regional leaders have not forgotten it.
The Gulf states could also see transactional leverage in Iran. They could lobby the US administration to support regional rapprochement as a means of protecting themselves while moving toward regional economic integration and as a stepping stone to an expanded Abraham Accords.
But there will be Gulf voices who continue to see Iran as the ultimate regional security threat and will support anti-Iranian policies. And if Trump perceives a country to not be in line with his view of and intentions towards Iran, they might find themselves subject to censure, if not secondary sanctions. These factors will complicate the internal debate within regional capitals about the national policy regarding Iran.
Many moving parts
With Trump’s Maximum Pressure 2.0 coming into focus against a backdrop of complex regional dynamics and ongoing conflict in the Middle East, companies should map out a range of potential scenarios and monitor key players. There are many moving parts here, but companies that stay engaged will be best positioned to mitigate disruption and take advantage when opportunities arise.