WASHINGTON—“No one has given the Islamic Republic of Iran a greater opportunity to make a Deal than me,” US President Donald Trump posted on social media on Wednesday. But the regime’s failure to agree to a deal, he added, will now result in the United States inflicting “Economic Warfare and Isolation on an unprecedented scale.”
This decision could mark a shift in the administration’s approach to one more like the “maximum pressure” campaign against Iran during the first Trump administration. However, it is now combined with the real threat of the US resuming direct attacks, which Trump has proved willing to carry out in his second term.
Such an approach is likely to produce results, though it will take time. Iran is currently led by Islamic Revolutionary Guard Corps (IRGC) veterans of the Iran-Iraq War. They are hard men who will shoot back before they fold. Their strategy depends on inflicting sufficient pain on the United States in the short term to force a bad deal, and on scrambling regional alliances to prevent greater coordination against the Iranian regime. But their hand will eventually be forced by a collapsing economic situation.
Why hasn’t Iran caved yet?
Ever since the Islamic Republic’s first thaw under Mohammad Khatami, the country’s reformist president who took office in 1997, the West has grasped at an aspirational vision of another Iran. It is an Iran promised by the diaspora, an Iran that peeks out from compulsory, loosely worn hijabs, and an Iran that listens to rock music in the privacy of Tehran apartments. These Iranians exist, and at times of particularly intense desperation or hope, many of them have hurled rocks at security forces in the streets, first chanting for change, and then for an end to the regime.
But this is not the only Iran. Iran is also the guards in Evin Prison, the seminary students in Qom, and the morality police patrolling the street. Every nation has a multitude of faces. But their governments usually have fewer. Revolutionary regimes in general are resilient. They have a savvy sense of the moods of the body politic and where their support lies. Rising from the streets themselves, they tend to sense the population better than do those who were born to the throne. Mojtaba Khamenei, Iran’s new supreme leader and son of the previous one, certainly did not come from the street. But the men of his father’s generation who surround him did.
These are all hard men practiced in their determination not to give in.
Iran is often described as a religiously irrational, martyrdom-obsessed regime, and it is that in part. But for much of its governing leadership, the driving life experience is not millenarian religious precepts but the Iran-Iraq War of the 1980s. That nearly forgotten conflict lasted almost a decade and featured ghastly fighting, including human wave attacks and poison gas. And yet, much of the war was essentially a stalemate. By 1984, the front lines had basically sunk into the slop. Neither side could really advance, but the two sides bombed, gassed, and shot each other for years more.
One of Iran’s current top negotiators, Mohammad Ghalibaf, was a nineteen-year-old IRGC commander during the Iran-Iraq War. Iranian President Masoud Pezeshkian was an IRGC soldier and doctor during the war. Those are the aspirational moderates. The new commander of the IRGC, Ahmad Vahidi, helped lead the IRGC in a senior role during the war, despite being in his early twenties. The new secretary of Iran’s Supreme National Security Council, Mohsen Rezaei, was overall commander of the IRGC during the war and after. He is the most significant of the regime’s new promotions, but these are all hard men practiced in their determination not to give in.
Even before Operation Epic Fury, the IRGC had demonstrated that it will prioritize the Iranian regime’s survival and power over what’s best for the Iranian people. Many IRGC leaders appear to view Bashar al-Assad’s main fault during the Syrian civil war as not shooting more people sooner. This is clear from the protests in Iran in January of this year, when Iranian security forces mowed down as many protesters as they could as rapidly as possible, with some estimates of the death toll rising above ten thousand within days.
Will it ever cave?
Protest data is one of the best indicators available today to gauge the regime’s internal cohesion. The number and scale of demonstrations facing the regime are an important barometer of its strength. But perhaps more critical than size are the location and composition. The regime is well-postured to defend itself from what might be described as its class enemies—the upper-middle-class residents of North Tehran, students throughout the country, the extended families of the diaspora in the United States, and the remnants of the previous regime worldwide. After all, it has been doing so for almost a half-century. The plight of daring young women with avant-garde headscarf styles does not always motivate the miner in Sistan and Baluchestan, who might be friendlier to the Islamic Republic.
That is why protests in the regions, rather than the capital, are more existential. Like those of 2017-2018, economics-based protests cut at the lower-middle-class and working-class Iranians who staff the regime’s security forces, are more religious, and could be expected to benefit from the Islamic Republic. They are the ones who join the Basij, Iran’s internal security militia, and perform their military service in the IRGC—as opposed to the Artesh, the conventional armed forces of Iran. When they start to demur, the risk of the security forces fracturing begins to rise significantly, which would be a grave warning sign for the regime.
Another important indicator of regime cohesion is Iran’s supply of hard-currency assets, which includes dollars, euros, yen, and gold. Iran uses hard currency to pay its proxies, pay for imports, and prop up its domestic currency, the rial. Oil sales are the main way that Iran earns hard currency. That is why the most effective sanctions on Iran have targeted its energy exports broadly, but most critically the banks that facilitate petroleum payments and transfers. In 2013, concerted international pressure on Iran’s oil industry brought its oil exports to an average of below 1 million barrels per day—down from about 2.2 million barrels per day in 2011, under the weight of international sanctions, which helped lead to the Joint Comprehensive Plan of Action (JCPOA). Under the first Trump administration, Iranian crude exports had risen back up to 1.85 million barrels per day, before falling to about 440,000 barrels per day. Iran’s foreign currency reserves subsequently crashed from a high of $120-$128 billion under the JCPOA to $15 billion in 2019, once Trump’s “maximum pressure” sanctions were applied. From 2019 to 2020, as the bulk of that pressure hit, its accessible foreign reserves declined further to $12.4 billion. Had there been a second consecutive Trump term, the Iranian regime would have almost certainly been forced to negotiate.
Time is working for the United States, in the medium and long run, as Iran is faced with shrinking funds and an inability to export its energy.
Today, it is not clear how much oil Iran is exporting. Certainly, it is shunting as much as possible over land routes, especially via Iraq, but these are presumably a pittance in comparison to its seaborne trade.
One additional challenge of negotiating a deal now has to do with the Strait of Hormuz. If a deal to reopen the strait allows Iran to collect fees or tolls, then it will likely require lifting many of the current and highly effective nuclear sanctions on Iran’s financial sector to process the fees. De-linking financial sanctions from Iran’s nuclear program could mean that critical US sanctions on Iran end even without a specific agreement on the nuclear issue. Instead of a deal that includes Iranian tolls on shipping, then, the United States should seek out other ways to keep oil flowing and global energy prices stable.
Staying the course
Where does this leave the Iranian regime? An optimistic reading would be that if three drivers converge, then the regime’s grip over the country could start to break. These drivers are: first, Iran is unable to export enough oil to support its reserves; second, the regime’s internal cohesion begins to crack and results in a weakening of Iranian military power regionally; and third, hyperinflation in the country produces widespread, sustained popular unrest.
Time is working for the United States, in the medium and long run, as Iran is faced with shrinking funds and an inability to export its energy. In the very short term, though, during the remaining, gasoline-intensive summer driving season in the United States, and with a restive American populace ahead of the midterm elections this fall, Iran is maximizing a perceived advantage.
For the United States, medium- and long-term success requires US sanctions to remain firmly in place on Iran and not be given away as part of a broader deal. That will be harder than it was a decade ago during the “maximum pressure” campaign, after a higher tempo of fighting in the war. Iran will escalate before it starves, and several Gulf states are already seeking to ensure their security around an unpredictable Iran. Saudi Arabia, for example, has just signed a security deal with Turkey and Pakistan, the implications of which are unclear but signal a regional scramble for security. Continuing threats from Iran’s leadership—like its recent promise to go on “fully offensive” operations—are helping drive this shift, though in the context of a pressure campaign probably means the status quo is untenable for Tehran.