If the Islamic Republic of Iran has had one consistent goal since 1979, it's been survival; since the Islamic Revolution, Iran has essentially existed in crisis management mode, whether it's been fighting Saddam Hussein in the Iran-Iraq War or weathering the latest U.S. sanctions. Today, there are two interlinked issues that Iran views as essential to its long-term survival: Its economic health and its regional strategy in Iraq and the Levant.
Protecting both of these priorities has put Tehran in a bind, however: Iran could ameliorate its dire economic situation by caving in to U.S. demands and disengaging from the wider Middle East. But this would entail reducing support for its regional proxies and Bashar al Assad's government in Syria, thereby crippling Iran's strategy to project power across the region — the very thing that so irked U.S. President Donald Trump in the first place. Still, bind or not, Iran's limited response to the U.S. assassination of senior military figure Qassem Soleimani suggests that it is determined to maintain course on a strategy in which consistent pressure on Washington throughout the Middle East eventually frees its economy from the fetters placed on it by the United States.
All About the Economy
For Iran, the economic status quo is unsustainable. Sanctions have caused Iran's oil exports to collapse and cut off its access to international financial markets and a great deal of trade, including humanitarian goods like food and medicine. Those economic issues came to a head in November 2019 when another round of major protests erupted in response to Tehran's decision to eliminate fuel subsidies and introduce fuel rationing.
Nevertheless, many of Iran's economic problems run deeper than just U.S. sanctions. Indeed, ending Washington's punitive measures was just the first plank of Hassan Rouhani's economic platform when he ran for the presidency in 2013. At the time, Rouhani also had hoped to enact significant banking reforms, pass new legislation to bring Iran's regulatory framework for combating money laundering and terrorism financing in line with international standards to attract foreign investment, all while weakening the economic dominance of Iran's Islamic Revolutionary Guard Corps and military-backed conglomerates. For Tehran, the economic reforms are critical because it is dealing with widespread youth unemployment and underemployment, while lower and middle classes are also chafing at the reduction in job opportunities, increasing poverty and falling purchasing power. Essentially, the Islamic republic's leaders have failed to come up with a sustainable economic model over the past four decades, but they are well aware that they must do so if their theocratic government is to survive.
The collapse of oil prices in 2014 initially scuppered Rouhani's plans, although worse was to come two years later when Trump was elected president, vowing to "confront and contain" Iran. With Iranian leaders unable to address the teetering economy, the country's largest protests in a decade erupted late in 2017. For this reason, Iran has not completely shut the door on talks with the United States. Indeed, Tehran's response to Washington's decision to walk away from the Joint Comprehensive Plan of Action (JCPOA) limiting Iran's nuclear program has been incremental, even though the United States and Europe have lamented Iran's decisions. In announcing each of their five moves to reduce JCPOA commitments, Iranian officials have been adamant that Tehran can reverse every step if the United States were to suspend sanctions. Iran has also conducted closed-door talks with the United States, seeking partial sanctions relief in exchange for renewed talks and a suspension of escalations to its nuclear program. Ultimately, Iran knows that it must one day negotiate with the United States, although it would prefer to do so with a different U.S. president.
As Iran continues to try to normalize its relationship with the world, it will find its ability to behave in abnormal ways limited. Right now, Iran is dependent on China for continued oil exports, while it also does not wish to alienate European powers, lest they trigger the JCPOA dispute process, leading to the reinstatement of U.N. Security Council sanctions — which would then grant the United States a veto on their removal.
An Overarching Regional Strategy
But even if Iran wants to normalize its international relationships, the path forward is unclear. Tehran relies on proxies to carry out its asymmetric defense strategy as it lacks the conventional military strength that the United States and its allies possess. For the moment, Iran appears to have concluded its initial response to Soleimani's death, yet it will resort, once more, to using its regional allies to harry the United States. In so doing, Iran can maintain plausible deniability for any attacks that hurt U.S. interests as part of its bid to undermine the U.S. relationship with countries like Iraq.
What's more, Tehran would still harbor two major concerns even if it reached a deal with Washington to reduce sanctions. First, the level of distrust between Iran and the United States (not to mention Israel) will remain high — Soleimani's killing will certainly add to that. In truth, it will likely take decades for the countries to ever build a significant level of trust. In Tehran's eyes, Trump's quick reversal of predecessor Barack Obama's stance on Iran was a revelation: Iran cannot operate under the assumption that even a prospective rapprochement with the United States would continue for more more than a few years. Second, even if Iran does reach a deal with the United States, it would still have to worry about its own security with regard to regional rivals like Turkey and Saudi Arabia. In the end, Iran's challenge today is how to persuade the United States to stop linking economic sanctions with Tehran's defense strategy — something Iran succeeded in doing during Obama's term, when it obtained considerable sanctions relief in return for offering to limit its nuclear program.
Iran almost certainly does not want to provoke a war with the United States now or in the near future. But Iran's line has been pretty clear: The United States unjustly abandoned the nuclear deal, meaning that if it wants to open up a new round of negotiations, it must first provide significant economic sanctions relief. If not, Tehran and its allies have made it obvious that they will inflict a great cost on the United States, its allies and their joint interests in the Middle East.
Evidently, Iran has decided not to respond to Soleimani's death in a way that jeopardizes its attempts to reestablish its connections to the international community or closes the door to negotiations on sanctions relief. That means Iran won't look to provoke the United States by making a move that endangers its own survival, such as attempting to assassinate a high-profile American figure. Instead, Iran is more likely to try to keep the conflict contained to its current theaters, like Iraq. But given that Iranian-backed Iraqi militias have promised their own response to the Soleimani operation — which also killed deputy Kataib Hezbollah leader Abu Mahdi al-Muhandis — and Iranian-backed Iraqi politicians are dead set about driving U.S. forces from the country, that's likely to translate into more violence and escalation in Iraq and, potentially, elsewhere nearby.