By Eric Vandenbroeck and co-workers

Why the Cease-Fire with Iran Will Hold

In the wake of agreeing to a two-week cease-fire on April 7, both the United States and Iran are claiming victory in their war. Each says the same thing: We held out, and the other guy blinked first. In fact, both decided to call it a draw. And some sort of outcome like this was always likely, because the structure of the game constrained the decision-making of the players - even players as idiosyncratic as U.S. President Donald Trump and the leaders of the Islamic Republic.

Wars have three phases: an opening, a middle game, and an endgame. As in chess, the opening involves deploying forces and engaging the enemy. If that doesn’t produce a quick victory, the contest moves into a middle game in which the two sides fight it out and try to get one another to surrender. As the trends in battle become clear, eventually the rough shape of a logical outcome emerges, and the war enters its endgame, during which the details of the final settlement are hammered out.

In Iran, the endgame began with Trump’s threat of massive destruction if Iran did not open the Strait of Hormuz, and it will continue until the belligerents come to a stable agreement ending hostilities. The cease-fire is likely to hold for the same reason it was agreed to in the first place: both sides were hurting and would hurt even more if the war escalated instead of ending.

The Trump administration launched the war confident that the conflict would be relatively quick and cheap and that Iran wouldn’t be able or willing to hit back. Neither assumption proved true, and as the fighting continued, the war started looking not like chess but a deadly game called “the dollar auction,” which traps the players in unprofitable escalation.

The concept is straightforward: Two players bid for a prize of one dollar, with both agreeing to pay their last bid, whatever happens. At first, the players bid eagerly in hopes of making a profit. As the price rises, the trap springs shut. The first player to bid $1 would come away even. But the other player would be out almost a dollar (his last bid) and so has an incentive to bet a little more - say, $1.05 - in hopes of at least losing less (only five cents). Unfortunately, the same logic applies to the first player, who now has an incentive to raise as well. From here on in, the game has no internal stopping point; seemingly fruitless costs pile up as the players bet more and more until they walk away or bleed out.

Wars often become dollar auctions because the costs mount inexorably for both sides alike as the fighting continues. The belligerents pay incrementally along the way, often far more in total than what they initially thought the objective was worth. By late March, when it was clear neither side would give in easily, the Iran war reached the inflection point and slipped into the red for everybody.

The dollar auction has no set, predictable outcome. As the economist Martin Shubik notes, “The game’s play appears to depend upon virtually only the social-psychology of the players, or other unstated factors of the environment in which it is played.” In this case, the “unstated factor” was each side’s ability to inflict extraordinary damage on the other: the United States through airpower and Iran through attacks on economic infrastructure around the Gulf. This created a situation of intra-war deterrence, with both sides reluctant to exercise their ultimate weapons for fear the other might do the same.

Trump’s ultimatum - threatening that “a whole civilization will die” if Iran did not capitulate - was almost certainly a bluff, because carrying out such an extraordinary threat would have been incredibly costly for the United States and risky for its allies in the Gulf, which remained vulnerable to Iranian counterattack. But since everyone knows Trump’s “madman” act isn’t entirely an act, the Iranians could not be sure Trump would cave. With neither side wanting to make the war total, both stepped back from the brink. And at that point, the war’s endgame began in earnest.

 

Playing The Endgame

By agreeing to the cease-fire, both the United States and Iran acknowledged, at least tacitly, that they were not going to be able to get everything they wanted from the war. But the category of “a draw” covers a lot of ground between victory and defeat, and so how the endgame plays out is important. During the negotiations in Pakistan, the two sides will need to find compromise solutions to several problems, including Iran’s nuclear and missile programs, U.S. sanctions, arrangements for shipping through the Strait of Hormuz, Iran’s regional subversion, and Israel’s operations in Lebanon. The gaps between the demands of each side are so great that some think the negotiations will break down and the cease-fire will fall apart. Yet both sides know that returning to war would put them into the same hellish position they just escaped - paying ever-greater costs for diminishing returns with only worse options ahead.

Skillful diplomacy might conceivably use the talks to lay the foundations for a durable regional security structure. This is the kind of thing Henry Kissinger excelled at. Yet with few Kissinger s in evidence these days, it would be a mistake to raise expectations so high. Instead, the most plausible outcome is a mix of compromise and can-kicking, producing enough practical results to restart something resembling normal economic activity around the Gulf, even as the most contentious issues are left unresolved.

When the dust clears, Iran is likely to retain the potential for some sort of nuclear program, but the United States should be able to gain some restrictions on it. (Whether those restrictions will be more or less than the ones contained in the nuclear deal from which the United States withdrew in 2018 remains to be seen.) Some sanctions on Iran will be lifted; others may continue. The passage of ships through the Strait of Hormuz is likely to be restored, but on new terms that will probably advantage Iran.

The Israel angle will complicate matters significantly, because the Israelis and the Americans do not have identical interests. Iran will seek to have Israel constrained by the settlement, while Israel will seek freedom of action to continue its operations in Lebanon and elsewhere. The United States will be caught in the middle, forced to negotiate with both its enemy and its ally. (This is not unusual; the same thing happened during endgame negotiations in the Korean War and the Vietnam War, when Seoul and Saigon favored harder lines than Washington.) Whatever happens on the Israeli front, however, the United States and Iran will not allow it to disrupt their main dealings with each other, because the stakes are too high.

In the end, the war will have achieved Washington’s minimal military goals but not its larger strategic ones. The fundamental issues dividing the belligerents will remain largely unresolved, and all will go back to pursuing them through means short of open war, including covert operations. The Iranian regime will survive, but with its leadership echelons thinned and its capabilities battered. Regional tensions will fester, as all sides wonder whether and when future conflicts will erupt.

Americans may wonder whether it will have been worth it. The Israelis call such operations “mowing the grass,” and have relied on them for generations to handle threats from Lebanon and  Gaza. Judgments about their wisdom and value ultimately depend on how much one fears what lurks in tall grass and how much one is prepared to pay for a trim lawn. American strategists, seeing the Iranian threat as one concern among many and shouldering broader responsibilities than their Israeli counterparts for regional and global order, have generally eschewed the approach. Unless the negotiations in Pakistan yield extraordinary results, the high costs and low returns of what Trump has called “a little excursion” will confirm their skepticism.

 

 

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