A full-scale U.S. invasion of Iran could cost the global economy $1.7 trillion, according to the Federation of American Scientists, a nonpartisan think tank which released a report on Friday detailing the estimated costs of different approaches, including military strikes, to solving the Iranian nuclear issue. A “bombing campaign” could cost $1.2 trillion. If the U.S. decided to go about striking Iran’s nuclear sites “surgically,” it’d still cost the global economy more than $700 billion.
Not surprisingly, the group found that a diplomatic approach would be one of the least expensive ways to solve the issue. A continued, strengthened sanctions push could cost the global economy about $64 billion. If the U.S. decided to “isolate” and “blockade” the Iranian oil industry it could bring the cost $325 billion. The most frugal option, at an estimated $60 billion, would be to “de-escalate” with the U.S. uniltaterally taking “steps to show that the United States is willing to make concessions.”
The report bases its estimates on factors including: “(1) financial market losses, (2) oil price increases, (3) military costs and other expenditures to provide security, (4) damage to infrastructure resulting from conflict, and (5) other global economic costs.” The FAS created the report to “to provide a starting point for discussion about one category of potential outcomes” because it believes there has been “less discussion about the outcomes and consequences of any international actions that might be set in motion if and when Iran crosses that line.”
In the past, other organizations have attempted to estimate the potential financial costs of a military attack on Iran. The Truman National Security Project released an online game simulating an attack in October; while the game focused mostly on the potential diplomatic and military issues associated with an attack, it did include data on worldwide oil costs if Iran were attacked. Whether the military approach was surgical strikes or full-out invasion, the game resulted in near-disaster for the player.
Thus far, the Obama administration has advocated for a diplomatic approach toward the Iran nuclear issue: sanctions enforced by the administration and its European allies have resulted in enormous pressure on the Iranian economy. In recent weeks, Iranian officials have seemed more open to direct negotiations with the U.S. On Friday, Mark Fitzpatrick, an expert on the Iranian nuclear program at the International Institute for Strategic Studies, said that the latest IAEA report on Iran’s nuclear program “shows Iran continues to make incremental advances, but almost as if calibrating progress so as not to spark a crisis.” Fitzpatrick added that Iran “has 10% more enriched uranium and 10% more centrifuges than 3 months ago. The rial dropped 40%, so this time sanctions are winning.”