In March 2025, the Scowcroft Middle East Security Initiative at the Atlantic Council hosted a War Game to explore how Iran will shape the future of its proxy strategy, particularly its relationship with Hezbollah. Participants included representatives from various Washington, DC-based think tanks. 

The War Game included five groups: Iran, Hezbollah, the US, Israel, and the rest of the world, which comprised experts on Syria, Russia, China, and Turkey. The rest of the world group played a crucial role in the game, representing the global community’s interests and potential actions in response to recent developments in the Middle East.

Setting the stage for the War Game

The War Game began with an overview of the current situation in the region, setting the stage for the discussions. Iran is in its weakest position in years, following Israeli attacks on its territory and the damage inflicted on Hezbollah, which significantly diminished Iran’s capabilities, especially along its border with Israel. Years of investment in Hezbollah now appear to have been largely wasted.

Hezbollah remains operational and retains some of its capabilities, although it has suffered significant losses. After the collapse of the Assad regime, Iran’s ability to transfer military supplies and aid to Hezbollah through Syria, which was Iran’s largest logistical hub and the main way of supporting the organization, is now diminished.

It was equally important to consider that Iran is facing a financial crisis, which is likely to deepen under the Trump administration’s efforts to weaken both Iran and its allies. Additionally, during the broader Middle East conflict, Iran came to understand that while the Houthis and Shiite militias in Iraq are effective in frustrating Israel, they increasingly resist Tehran’s authority.

The central question guiding the war game was: Given these developments, is Iran’s proxy strategy still relevant and effective, or should it be reconsidered?

Approaches to rebuilding Hezbollah

The first dilemma that arose was whether Iran should invest money and resources in rebuilding Hezbollah, given the country’s financial crisis and US sanctions. The Iranian group, in a strategic move agreed upon by the Hezbollah group, quickly decided that Iran’s proxy strategy was not the top priority at this time. Instead, Iran’s primary focus was on internal stability and maintaining the regime. Iran’s financial constraints drove this decision, the need to allocate resources to domestic issues, Hezbollah’s failure during the war with Israel, and the realization that Hezbollah would not be a key player in any near-future conflict between Iran and the West. Consequently, the Hezbollah group sought alternative sources of funding beyond Iran, including Africa, the Gulf, drug trafficking, self-financing, and donations. Moreover, the Iran group decided not to provoke any actions, especially further significant Israeli strikes on Hezbollah, that could jeopardize Hezbollah’s long-term survival. Instead, it concluded that the best course of action for now was to lay low and quietly provide Hezbollah with financial support to rebuild gradually.

In this situation, the Hezbollah group faced a dilemma regarding whether it should participate in an Iranian response to a possible Western attack on Iran. However, the Iranian and Hezbollah groups agreed that such involvement was not feasible now. Alternatively, within both the Hezbollah and Iranian groups, there was consensus that Hezbollah needed first to rebuild its position in Lebanon’s domestic arena. 

To achieve this, the Hezbollah group decided to mobilize public opinion against the new leadership in Lebanon for failing to rebuild the country after the war. At the same time, Hezbollah positions itself as a provider of aid and services. It also decided to secure funding from Iran to regain public trust and strengthen Hezbollah’s position ahead of Lebanon’s upcoming elections and to use the ceasefire between Israel and Lebanon as an opportunity to rebuild. And lastly, it pursued the reestablishment of military deterrence against Israel to prevent further Israeli strikes on Hezbollah targets in Lebanon, while ensuring some stability and quiet for the Lebanese population.

On the Israeli side, the group decided that while it did not want to get directly involved in Lebanon, it also could not allow another security threat to emerge along its northern border. Therefore, it resolved to continue striking Hezbollah targets in response to ceasefire violations.

A major dilemma for both the Hezbollah and Iranian groups was how to transfer money and resources into Lebanon, given restrictions at airports and potential crackdowns on smuggling by the new Syrian government. The Hezbollah group considered fueling the insurgency in coastal Syria to create a corridor for the flow of weapons and resources into Lebanon. In response, the Syrian and Lebanese groups decided to form a joint border task force to curb Hezbollah’s cross-border activity, including material and weapons smuggling.

The approach to Iran’s nuclear program: Negotiation or attack?

Discussions quickly shifted away from Hezbollah’s future and toward Iran’s broader strategic position. While the Iranian group acknowledged that the country was in its weakest position in years, some positive aspects emerged, most notably, the possibility of Trump negotiating and signing a new agreement with Tehran.

The US and Israeli groups debated whether to pursue a negotiated nuclear deal with Iran or to conduct preemptive strikes to destroy Tehran’s nuclear capacity. They agreed to prioritize diplomacy as “Plan A”, but if Iran appeared unwilling to negotiate, the US would authorize “Plan B”, preemptive strikes. Additionally, the US group decided it would approve military action if Iran escalated its uranium enrichment to ninety percent. As a result, the US and Israeli groups collaborated on planning a potential attack.

The Iranian group signaled that a deal was possible, aiming to ease Western pressure, maintain stability, and improve its domestic economic and political situation. Given the tensions with the West, the Iranian group also sought to regain control over Hezbollah to ensure the group’s survival and prevent any unexpected actions that could destabilize Iran’s position.

The US group pushed for a broader agreement that extended beyond Iran’s nuclear program to include its missile program and proxy activities. However, while the Iranian group was unwilling to accept more restrictive terms than those in the JCPOA, it was open to starting with nuclear discussions, which were considered the most pressing issue, before broadening the scope of talks. The group also insisted that the United States demonstrate good faith—perhaps by easing sanctions or lifting other restrictions— to help restore some trust in the negotiation process. This demand stemmed from the US unilateral withdrawal from the JCPOA during the first Trump administration, despite Iran’s compliance with the agreement. Iran was hesitant to negotiate from a position of weakness or under coercive conditions, especially with a US administration it sees as historically untrustworthy, even beyond its general distrust of the United States. Alongside their cooperation on Iran’s nuclear issue, the US and Israeli groups also discussed the possibility of signing a security agreement.

Another key concern for the Iranian group was how to maintain the support of China and Russia amid its current challenges.

Conclusions regarding other key actors in the region

The Russian group faced a dilemma: Whether to strengthen ties with the US or to continue deepening its relationship with Iran, as the Iranian group desired. Ultimately, Russia concluded that it was satisfied with its existing position and relationships, particularly with the US, Saudi Arabia, the United Arab Emirates, and Israel. Therefore, it sought to avoid actions that could jeopardize these ties, especially with the Trump administration. 

The Syrian group opposed Iran’s presence in Syria, and the Syrian, Israeli, US, and even Iranian groups quickly agreed that it was not in their interest to maintain Iran’s military presence in Syrian territory.

The China group reaffirmed that China’s primary regional interest lies in strengthening ties with the Gulf rather than with Iran, and the Middle East as a whole is not a top priority for Beijing.

Maayan Dagan is a visiting research fellow at the Atlantic Council’s Middle East Programs.

Luke Wagner is a young global professional at the Atlantic Council’s Rafik Hariri Center and Middle East Programs.

Image: Islamic Revolutionary Guard Corps armed personnel wear masks and participate in a military rally in downtown Tehran, Iran, on January 10, 2025. The IRGC spokesperson says on Monday, January 6, that the military rally named Rahian-e-Quds (Passengers of Al-Aqsa) includes 110,000 IRGC members. (Photo by Morteza Nikoubazl/NurPhoto)NO USE FRANCE