A version of this essay has been published by firstpost.com at https://www.firstpost.com/opinion/iran-war-no-winners-oil-de-dollarisation-global-impact-13992276.html
War is hell, we all know, and it’s bad for everybody, but there is – usually – a winner. After more than three weeks of the Iran war, I am beginning to believe that there are no winners here, only losers. The principals are overextending themselves, and will suffer as a consequence. Innocent or not-so-innocent bystanders are suffering significant collateral damage.
Some are getting hurt more than others, so it’s mostly a question of degree: but the bottom line is that this is war that is just not good for anybody. As usual, Henry Kissinger had a useful aphorism: “It’s a pity both sides can’t lose”, quoth he. (Hat tip to reader Sudarshan M). Well, Henry, both sides are losing this one, so take heart: your wish has come true.
Someone made the analogy of going to Family Court with a dispute: there are no winners, as the father, mother, and the children, will all suffer, whatever the outcome. It is best in that situation to listen to a counselor and solve your problems amicably. Similarly, it would be good to find a neutral intermediary to help iron out a ceasefire in this war, too.
In a way, this war is the classic idea of irresistible force meeting an immovable object, thus leading to a stalemate, as Walter Russel Mead suggested in the Wall Street Journal.
First, the toll on the belligerents, in alphabetical order:
* Iran. It is creditable that Iran has held out against the might of the US war machine for three weeks and more. My belief is that they can keep it up for a while longer, because they have been preparing for this eventuality for some decades, ever since the 1979 crisis in which they held Americans hostage for 444 days. They are taking, and will take, horrendous losses, but it will be difficult to completely overthrow the Islamist regime. Among other things, Iran is a large country, about half the size of peninsular India.
* The US attack on Kharg Island’s military targets (but not its oil terminals) has shown that Iran’s oil exports could be in jeopardy, pushing global prices up.
* Just like their proxy Hamas, it appears Iran has built extensive tunnel complexes, veritable underground labyrinths, where they are hiding all sorts of things, including fast patrol boats. Their military assets are doubtless ensconced in these tunnels which makes them hard to locate and possibly quite mobile.
* Israel. Iran’s consistent rhetoric that Israel doesn’t deserve to exist leads to fears that Iran’s nuclear arsenal (if and when built) will be primarily aimed at Israel. This, and troubles with Iranian proxies such as Hezbollah and Hamas, have led to massive Israeli human intelligence penetration of Iran (as seen in the Stuxnet incident as well as the effective strikes on the Ayatollahs and Hamas, including the pager incident). But Israel is also believed to be taking heavy losses, which it can ill afford, although information has been tightly censored. There were apparently missile attacks near Israel’s nuclear sites at Dimona as well.
* The US. The original idea of a decapitation strike that would lead to a rapid regime change as the Iranian public rose up and anointed a new leadership (one more acceptable to the US), was questionable, as I pointed out fairly early. It appears that the CIA and US intelligence have just one playbook, which they used more or less successfully in Iraq, Libya, etc. But that was never going to work in Iran, and now the US is stuck with a tar-baby and may be quietly seeking de-escalation and an off-ramp.
* Talk of a Marine Expeditionary Unit of 2500 American soldiers re-deployed from Japan means “boots on the ground” followed inevitably by that dreaded word, “body bags”. The troops will be meant to keep Hormuz open, or perhaps to capture Kharg Island. Whether they can achieve these is unclear right now.
* However, overall it appears that the US’ capacity to coerce other countries through economic means is declining, as suggested by the FT in “The era of US dominance in economic warfare is over” on March 17th.
Now for the others in the firing line and in the periphery:
* The GCC, consisting of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. They have taken the brunt of the Iranian drone and missile attacks, and their oil and gas exports, and economies, are affected by the closure of the Straits of Hormuz. But more alarmingly, their food and water supplies may also be affected, and they are, being desert nations, highly dependent on imported items via the blockaded Hormuz, and critically dependent on their desalination plants. Keeping the Straits of Hormuz open may be critical for them. They have been with human casualties, infrastructure damage, and reputational damage as well. In particular, Dubai, which has been a magnet for high-net-worth individuals, is affected.
* Lebanon and Jordan. Lebanon was hit by Israeli fire, and Jordan by Iranian fire, although they are mostly bystanders. Israel has been responding to increased activity by Iranian proxy Hezbollah, and Iran has sent drones and missiles towards Jordan as part of general horizontal escalation.
* Pakistan and Turkey. These are wild card nations in the conflict. So far they have not (yet) been affected badly, but they have to walk a tightrope. On the one hand, it is very likely that Pakistan has offered logistical and intelligence support to the US in its air attacks on Iran. On the other, as a fellow-Islamic nation, Iran has, under both the Shah and the mullahs, consistently supported Pakistan (especially against India).
* Furthermore, if there is a ground assault on Iran, it will probably involve Balochis from Pakistan and Kurds from Turkey, both attempting to capture land in, respectively, the Sistan and Baluchistan Province, and the heavily Kurdish regions of Iran bordering Turkey.
* Turkey, as a NATO member, is obligated to support the US, despite its Islamist leadership which is duty-bound to side with the fellow-Islamic Iranian regime. The traditional Sunni-Shia split, which has been exacerbated by Shia Iran attacking Sunni Gulf nations, sharpens the dilemma for both nations. (Meanwhile, Pakistanis slaughtered 400 Afghans by bombing a hospital, but they get a free pass from, e.g. the BBC.)
* The United Nations. It has been rendered superfluous. Nobody even called for a Security Council meeting condemning the war. This is the latest in a long process wherein whatever the UN, or many other multilateral organizations do or say has become immaterial. The UN, hit by a budget crunch, might as well be shut down.
* Europe and Britain. The EU and NATO have been noticeably absent in the discussions about the war. Of course, they are likely to be affected by the increase in hydrocarbon prices. In fact, their folly in shuttering their nuclear power plants in pursuit of vague ‘green’ goals has put them at the mercy of Russian oil and gas. In particular, the virtual shutting out of Britain from the entire war is notable, considering that their Whitehall has long managed to treat the US Deep State as their vassals, ‘master-blaster’ style.
* Russia. Even though Russia has long been friendly with Iran, it has desisted from doing anything that could bring it into direct conflict with the US. Russia is probably supplying satellite and other reconnaissance data as well as spares for existing systems (such as the S-300 air defense batteries, Su-35 fighters) and possibly Iranian-designed Shahed drones as well. Interestingly enough, Russia may be the one possible winner in the war, considering its oil is now a coveted commodity, prices have soared, and there is less attention being paid to its Ukraine war. Europe, China and India are ever-more dependent on Russian oil, and the windfall profits may be sustainable. The US may even lift its sanctions and bring Russia back into the Western fold.
* China. There are wins and losses for China, but in sum it may also be a bit of a winner.
* The loss is in energy security: China has lost Venezuelan oil as well as access to Iranian oil, but they have overland pipelines from Russia, as well as access to Russian tankers at sea. Besides, they have a massive strategic petroleum reserve (1 billion barrels), so it should be manageable, for a while at least. Cuba, their reliable ally in the US’ backyard, is now back to the wall with the US enforcing a blockade.
* On the other hand, they have acquired a significant military edge: US munitions inventory has been getting depleted at a furious rate, so much so that if China were to attack Taiwan now, the US would be hard pressed to intervene. Even US THAAD (Theater High Altitude Air Defense) systems are being cannibalized: after four of their radars in the GCC were damaged, the US is forced to scavenge for them from their South Korean bases. Now comes news that China is massing both civilian ships and military aircraft near Taiwan, quite possibly a precursor to an actual invasion.
* Unfortunately for China, their weapons systems don’t seem to have performed very well in Iran, just as they didn’t in Operation Sindoor. There are sarcastic posts on X, especially about their radar that looks like a big grille and is supposed to detect stealth aircraft, but didn’t quite work.
* China has also been on the horns of a dilemma, as it were: what would Xi do when Trump visits in April while in the midst of a war with one of China’s principal allies? It would be “damned if you do, damned if you don’t”. If China were to greet him warmly, it would send a negative message to Iran, as well as its other Belt and Road Initiative partners. If China were to treat Trump coldly, then trade wars will continue. Fortunately for Xi, Trump decided to delay his visit; perhaps he intends to continue the war well into April, or maybe he thought he’d be too much at physical risk. It’s interesting to speculate on why Trump did this, but of course it may have been just whimsy.
* India. This war is pretty much a disaster for India from every perspective. Being dependent on Persian Gulf oil and gas for everything from transportation to household cooking fuel to raw material for plastics to APIs for pharmaceuticals leaves India particularly exposed. There are other big vulnerabilities:
* The $50 billion in remittances sent back yearly by 10 million Indians toiling away (often in very difficult circumstances) in that area, in addition to the personal hardships these migrants will face, including life and death situations.
* Despite large increases in renewable energy, the major energy input, especially in transportation, continues to be imported oil and gas. Households have largely switched from wood-burning stoves to (admittedly much less polluting) bottled or piped gas. At the very time that electricity demand is peaking (e.g. AI data centers and railways), this disruption may have severe consequences.
* The feedstock for agriculture is increasingly petroleum-based, and disruptions in fertilizer availability may cause production costs to skyrocket. Increased transportation costs will make vegetables and grains more expensive for those states (such as Kerala) that depend on internal transfers from producing states. In the short run, some agricultural commodity prices have collapsed as their primary markets in the Persian Gulf are inaccessible due to the Hormuz blockade. Basmati rice prices are down by Rs 5-10/kg according to LiveMint.
* Trade through Chabahar Port (where India’s $120 million investment is at risk) to Central Asia bypassing Pakistan, will likely grind to a halt
* The dramatic increase in the price of oil (from around $60 per barrel to $100-$120, and threatening to go higher) is a huge ‘tax’ on India, and a transfer of wealth out of India, which may reduce GDP growth by as much as 1-2%, and push inflation up to 4-5% (according to the Economic Times).
* The ‘Goldilocks moment’ of low inflation and high growth is possibly over.
* The one positive for India will be the increasing importance of the India-Middle East-Europe Economic Corridor (IMEC), which is basically the old Spice Route,, e.g. containers from Mundra and Vizhinjam to Dammam in Saudi Arabia or Jebel Ali in the UAE, then by rail to Haifa in Israel, and onwards to Piraeus in Greece by sea.
* There is really no obvious benefit to India if the war continues, and therefore it is in India’s interest to try to be an ‘honest broker’ intermediary which has reasonably good relations with all the belligerents as well as the frontline GCC states. India could use its diplomatic goodwill to try to bring the war to a quick close, thus pursuing its own interests as well as something in the larger good of the global economy.
There are a couple of other notable points in this war. One is from systems theory, and the other is from 18th century colonial British machinations in India; and finally a speculation about the future of the US economy and even the US nation.
Distributed Systems
Systems theory suggests that distributed systems are far more resilient than centralized systems, because they may have redundant mechanisms that come into play when the primary mechanism is knocked out. Iran has anticipated decapitation strikes on its leadership, and the danger that signals intelligence from their foes may tap into all communications. Therefore, it appears they have created a system where 31 independent IRGC military commands have the autonomy to take local decisions without a go-ahead from a central authority.
This means it will be relatively hard to quell all resistance, as some commands may fight on even if large parts of the country are conquered. It makes their actions also more unpredictable and potentially more dangerous.
It is interesting to compare this to the sudden collapse of the Persian Sasanian Empire to invading Arab Muslim armies in the 7th century, when they were conquered in a space of no more than twenty years. Even though there were other factors like imperial exhaustion from constant wars and long supply chains for the Arab armies, the contrast with the Hindu resistance (of several hundred years in Sindh) suggests that the decentralized nature of the Hindu kingdoms played a significant role in their ability to fend off the Muslims for centuries.
The Tipu Syndrome
In the late 18th century, imperial Brits pulled off a particularly clever ploy in southern India. Tipu Sultan, Muslim king of Mysore, invaded Malabar in a combination of religious jihad and economic loot. He was intent on both forced conversion and on the loot of Hindu temples in Malabar, which had grown rich from millennia of the trade in spices, especially black pepper. As Sanjeev Sanyal suggests, temples were banks and venture capitalists to trading guilds.
Britain did conduct some desultory campaigns against Tipu, who was allied with the French, but did not accomplish much. In the end it was the desperate breaching of a natural dam on the Periyar by Travancore forces in 1790 that forced Tipu to retreat, as his artillery, munitions and supplies were flooded and swept away. Of course, then the British charged the entire cost of the 3rd Anglo-Mysore War to ‘ally’ Travancore, bankrupting it.
Next, the British attacked Tipu’s headquarters, Srirangapatnam, killed him, and took all the loot. In other words, Tipu did all the dirty work in collecting the booty from the temples, and the British got it all in one stroke. And looked good, at least in their own propaganda, for killing a tyrant.
A very similar thing happened in 1973. Arab oil states quadrupled oil prices (from $3/barrel to $12), imposing a massive strain on hapless developing countries such as India, leading to severe distress. Under the 1974 US-Saudi agreement, oil sales were to be only denominated in US dollars, thus leading to the ‘petrodollar’ accumulation with OPEC. They recycled this money via buying US Treasury bonds, and especially via buying US arms, to the delight of the Military-Industrial Complex.
Thus the net effect of the 1973 oil crisis was a large transfer of wealth from the developing countries to OPEC. The US economy did not suffer greatly (despite long lines at gas stations) and in fact US deficits were funded by petrodollars for the last several decades. This is why any move to de-dollarize oil sales is strongly resisted by the US.
Summary: Oil and the petrodollar
At the end of the day, American wars always seem to go back to simple ideas: control of oil, and the prevention of de-dollarization. It makes sense: why not use economic and military heft in pursuit of the national interest? Those who go against this learn a big lesson, to their discomfiture: Saddam Hussein in Iraq wanted to trade oil in Euros, Muammar Gaddafi in Libya wanted to create a new pan-African currency in which to trade oil, Nicolas Maduro was trading in yuan and stablecoin, Ayatollah Ali Khameini has been selling in yuan mostly, and not at all in dollars. That meant they all had a Damocles’ sword hanging over their heads.
Putin and Xi are undesirables too, but then they have nuclear arsenals, which everybody has to respect.
The dollar has been hegemonistic ever since Bretton Woods. Even allies learn to respect American sensitivity over the currency. The Japanese economy, once growing at a blistering pace, was ruined after the Plaza Accord of 1984, which set the yen-dollar exchange rate artificially high. Japan lost its mojo and is yet to recover, forty years later.
Tailpiece: The end of many eras?
Balaji Srinivasan, formerly a Silicon Valley VC, a thought leader and a supporter of ‘Network States’ and crypto, posted this intriguing tweet on March 17th. I don’t necessarily agree with his framework of (US) ups and downs (see diagram) or his assertions: he surely paints a grim picture for the US, including de-dollarization. He openly wonders if the US itself will survive in its present form.
The AI-generated podcast courtesy notebookLM.google.com is at
3000 words, 18 March 2026
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