The US is preparing for a military takeover of Kish Island, the critical oil export terminal that processes 90% of Iran's crude shipments. The plan—reported in Axios based on four unnamed US officials—aims to choke off Iranian oil exports entirely. But a leading expert warns this approach will fundamentally fail.
Fanja Bachman Heritch, CEO of the Boss and Bizarre think tank, argues in Foreign Policy magazine that cutting off Iran's oil trade won't achieve what the Trump administration expects. His research reveals why.
Why Cutting Oil Exports Won't Work
The assumption in Washington is straightforward: Iran funds its war effort through oil exports, so strangling those exports should collapse Tehran's military capacity. The logic appears sound on the surface. Kish Island processes nearly all of Iran's crude oil exports, and giant tankers can only load there—Iran's coastal waters are too shallow for these vessels.
But this reasoning badly misunderstands the Iranian economy.
When sanctions reduced Iranian oil exports dramatically in 2019 during Trump's maximum pressure campaign, Iran's economy suffered pain but didn't collapse. The country maintained its war effort regardless. That failure has not yet registered with policymakers in Washington.
The $8 Billion Problem
The most revealing data point comes from recent Iranian budget figures compiled by SERI for 2024. Iran's total military expenditure amounts to just $8 billion annually—roughly $90 per citizen. To put that into context, the Pentagon reportedly requested an additional $200 billion supplemental budget just to fund potential operations against Iran.
Iran spends a tiny fraction of what the US and Israel spend on military. And critically, they don't need expensive weapons systems to maintain their operational tempo—they've invested heavily in cheap drone technology instead.
Iran is spending a tiny fraction of what its adversaries are spending, and that has to do with the nature of the capabilities they've developed in recent years.
The drones are so inexpensive that even if oil exports halt completely, Iran can still sustain its war effort. The 90 million Iranian citizens would face economic pressure, but the government could simply cannibalize civilian production to prioritize military needs.
A Dangerous Escalation
Some administration officials have advocated targeting Iran's industrial capacity directly—power plants, steel mills, and critical infrastructure rather than just trade flows. Israel has already struck a major natural gas facility, the South Pars facility in the Persian Gulf.
The author argues this represents a shift from targeting financial flows to destroying actual capital stocks—the physical infrastructure that keeps Iran functioning. Doing so would shorten the war but dramatically intensify it.
When Iran responded to the South Pars strike by attacking a LNG facility in Qatar, they knocked 17% of global LNG production capacity offline. If the US and Israel expand these attacks to civilian infrastructure, such incidents would multiply across the Gulf region.
Global Consequences
The stakes extend far beyond Tehran. The Gulf states—Saudi Arabia, Iran, Qatar, UAE—are major producers of oil and natural gas, but they also play critical roles in global food security through fertilizer production and agricultural supply chains.
These countries have emerged as significant investors in green infrastructure across the Global South. A Saudi company, Aqua Power, is one of the world's largest operators of renewable energy assets. Mazdar in UAE operates solar projects throughout Central Asia and East Africa.
If this conflict intensifies and damages Gulf energy infrastructure, the knock-on effects for global markets would be severe. Shipping routes through the Persian Gulf would face disruptions. Oil prices would spike further. Fertilizer supplies worldwide would tighten. The entire global economy would absorb these costs.
If you undermine the prosperity of the Gulf States, you're actually undermining the prosperity of all of the countries in which they have emerged as a significant player providing financing and expertise necessary to build critical infrastructure.
Bottom Line
The strongest argument here is that Iran's economy is far more resilient than Washington understands—diversified beyond oil exports, with minimal military spending that still suffices for their current operations. The vulnerability lies in escalation: targeting civilian infrastructure might shorten the war but would trigger retaliatory attacks on global energy capacity, potentially knocking out 17% of world LNG production at once. Ordinary people in Europe, Asia, and North America will feel these ripple effects through spiking energy prices and supply chain disruptions if this conflict continues escalating.