I agree with you, and the rest.
I just think the article was implying that this Iranian hostage crisis is because of cutbacks of the Royal Navy or because it has the 28th largest Army.
These are not linked. Britain could turn Iran into the biggest glass museum in the world if it wanted. Even if Britain had the US Navy it would not attack without the US.
And why should they with the US providing the security umbrella for the free world. Europe has been living on US security welfare for so long, it has shaped its world view. Europe places its faith in international organizations like the UN to resolve conflicts and believes that negotiation and diplomacy can replace the ability to project military power. The US spends more on defense than the rest of NATO combined. Our technology and level of sophistication in weaponry has reduced our interoperability with most of NATO to almost zero.
The US cannot continue to bear this level of defense spending as our social entitlement systems are threatening to gobble up most of our budget. Tony Blair called the US the indispensable nation, but we won't have the resources much longer to continue to provide the rest of the world with security.
I don't consider the current UK hostage crisis with Iran as being a product of declining military expenditures, but it does reduce the UK's options and typifies the kinds of problems that may arise in the future as Europe declines as a military power and lacks the ability to project its influence globally.