FAS: Launching full-scale invasion of Iran will cost global economy $1.7 trillion
The Federation of American Scientists estimated that the world economy would lose about $1.7 trillion if the United States launches a full-scale invasion of Iran.
The non-partisan organization on Monday released a report examining the global economic impacts of “sanctions, military strikes, and other potential actions against Iran”.
The FAS report focused on 6 possible scenarios of U.S.-led action against Iran and indicated that the economic costs for punitive actions against Tehran would range from about $64 billion to about $1.7 trillion within a three-month span. De-escalation would yield a worldwide economic benefit of $60 billion.
Under the first scenario, the FAS projected that tightening U.S. sanctions to “penalize any foreign banks – public and private – that conduct transactions with any business with the Central Bank of Iran” would cost the global economy $64 billion, largely due to the spike in the price of oil.
The second scenario would be a “total cutoff” approach to isolate Iran’s trade, particularly oil exports, even further. The U.S. would impose a military blockade in the Persian Gulf to prevent Iran from exporting oil, natural gas, and any other energy-related products and services. The FAS estimated that this approach would cost $325 billion, and most of the cost would be incurred in the financial markets as investors pull money away from Iran and the Middle East.
The third scenario would involve the U.S. launching “surgical” air strikes and special military operations to destroy nuclear and military facilities in Iran. The estimated global economic costs would be pushed up to $713 billion.
The fourth scenario would escalate to a “comprehensive bombing campaign” in which the U.S. would take out nuclear facilities as well as Iran’s “air defenses, radar, and aerial command and control facilities” so that Tehran won’t be able to retaliate. The FAS projected that this action would cost the world economy about $1.2 trillion.
The fifth and final punitive scenario would be a full-scale invasion of Iran by the United States. The report pegged the average global economic costs at $1.7 trillion within the first 3 months. The estimated costs would account for the significant losses in the financial market, oil price increases, higher military spending, and other damages incurred in the conflict.
Israel, the United States, and other Western allies have long suspected that Iran is developing nuclear weapons and have called for Tehran to cooperate with international weapons inspectors. Iran has maintained that its nuclear program is being developed for energy purposes but has blocked international inspectors from visiting certain nuclear facilities.
Concerns were amplified in late September when Israeli Prime Minister Benjamin Netanyahu told the U.N. General Assembly that Iran was months away from enriching enough uraniums to build a nuclear bomb and warned that a “red line” backed by military action must be drawn against Tehran. In his speech to the U.N., President Barack Obama also warned Iran that time for a diplomatic solution is running out.
“Policy makers in the United States wrestle continuously with difficult questions and trade-offs about how to address the Iranian nuclear issue,” the report noted. “This report does not contain specific policy advice. Rather, it provides a starting point for discussion about one category of potential outcomes – the global economic impact – associated with the policy choices before U.S. decision makers today.”
While the FAS report focuses on the costs of U.S.-led action against Iran, a recent study by the Bipartisan Policy Center indicated that the U.S. economy could contract by more than 1% (or $220 billion) due to instability in the Middle East and disruptions to the oil market if Iran successfully develops a nuclear weapon.
The Bipartisan Policy Center estimated that oil prices could increase by 10% to 25% or between $11 to $27 higher per barrel, and as a result, U.S. gas prices could grow by 30%.
“At that level of increase, both inflation and unemployment would be projected to rise by 1%, which equates to a loss of more than one million jobs. Meanwhile, GDP could drop by more than 1 percent, or almost $220 billion,” according to the BPC report, “The Price of Inaction: Analysis of Energy and Economic Effects of a Nuclear Iran.”
- Federation of American Scientists: The United States and Iran: Anticipating Possible Effects of Conflict on the Global Economy
- Bipartisan Policy Center: The Price of Inaction: An Analysis of Energy and Economic Effects of a Nuclear Iran
- WhatTheFolly.com: Israeli PM Benjamin Netanyahu draws a red line on Iran’s nuclear program
- WhatTheFolly.com: Obama warns Iran that time for diplomacy is running out
- WhatTheFolly.com: Transcript: Israeli Prime Minister Benjamin Netanyahu’s speech at the UN General Assembly
- WhatTheFolly.com: Obama administration denies report of one-on-one nuclear talks with Iran