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Illustration: Aïda Amer/Axios

Iran’s alleged attack on Saudi oil facilities was a dramatic escalation in its shadow war with the U.S. and a clear sign that Tehran’s previous strategy was not working.

The big picture: Since May, Iran has tried to counter U.S. sanctions by tormenting the oil market with small-scale attacks, such as placing mines on ships in the Persian Gulf. Its goal has been to drive oil prices higher and thus raise the costs of the U.S. “maximum pressure” strategy.

Where it stands: Iran's tactics left the oil market largely unfazed, for 2 main reasons:

  1. Oil supply is abundant, thanks especially to the rise of U.S. shale production. Saudi Arabia and Russia, two of the world’s largest oil producers, have curtailed their output precisely because there is too much oil on the market.
  2. Oil demand growth is slowing, with crude demand weighed down by fears of a global economic slowdown — driven in part by the U.S.–China trade war.

Between the lines: To get the world’s attention, Iran needed to make a bigger splash. That’s where the Saudi attacks came in: With a handful of drones and cruise missiles, Iran knocked more than 5% of global crude production offline in a matter of minutes.

What’s next: Iran will be closely watching next week’s meetings at the United Nations to see if its message has gotten through — specifically, whether any sanctions relief is in the cards.

  • Iran does not want to go to war, but it may need to continue demonstrating its ability to disrupt oil supply — a recipe for more instability in the months to come.

Henry Rome is an Iran analyst at Eurasia Group. Robert Johnston is managing director for global energy and natural resources at Eurasia Group and a senior fellow at the Atlantic Council Global Energy Center.

Go deeper: Read more at the Atlantic Council’s New Atlanticist blog.

Go deeper

Dems race to address, preempt stimulus fraud claims

Illustration: Aïda Amer/Axios

Biden officials are working to root out the systematic fraud in unemployment and Paycheck Protection Program claims that plagued the Trump administration’s efforts to boost the economy with coronavirus relief money, Gene Sperling told House committee chairmen privately this week.

Why it matters: President Biden just signed another $1.9 trillion of aid into law, with Sperling tapped to oversee its implementation. And the administration is asking Congress to approve another $2.2 trillion for the first phase of an infrastructure package.

7 hours ago - Politics & Policy

Scoop: Biden close to picking Nick Burns as China ambassador

Nicholas Burns. Photo: Alex Wong/Getty Images

Nicholas Burns, a career diplomat, is in the final stages of vetting to serve as President Biden’s ambassador to China, people familiar with the matter tell Axios.

Why it matters: Across the administration, there's a consensus the U.S. relationship with China will be the most critical — and consequential — of Biden's presidency. From trade to Taiwan, the stakes are high. Burns could be among the first batch of diplomatic nominees announced in the coming weeks.

Biden's Russian sanctions likely to achieve little

President Biden announces new sanctions against Russia. Photo: Chip Somodevilla/Getty Images

Despite bold talk from top administration officials, there's little reason to think the Russia sanctions package President Biden announced Thursday will do anything to alter Russian President Vladimir Putin's behavior or calculus.

Why it matters: While it's true some elements of the package — namely, the targeting of Russia's sovereign debt — represent significant punitive measures against Moscow, it leaves plenty of wiggle room for the Russian president.

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