In reality Blue would not do that because then they wouldn't have access to petroleum ever again. All the mideast oil would be burned. Mad Max, anyone?
Assuming a "like for like" attack I would assume that Blue would use a tactical nuke on a Red military base of roughly the same population as the number of casualties on the ships.
Only a lunatic would go straight to a city-busting attack with strategic weapons.
I am referring to Red's torpedoes, asymmetric attacks and possible multiple thermobaric strikes specifically targeted at the oil. Red doesn't have MAD, but Red does have a deterrent.
