On Tuesday, hours before the cease-fire between the United States and Iran was due to expire, U.S. President Donald Trump unilaterally extended the pact. But Tehran was quick to call an extended American blockade of Iranian ports “an act of war.” Regardless of what each side calls the status quo, it is a punishing economic reality for billions of people, especially in regions like Asia, which receive most of their oil from the Persian Gulf.
To understand where things stand and where they might be headed, I spoke with Iran expert Karim Sadjadpour on the latest episode of FP Live. Sadjadpour is a senior fellow at the Carnegie Endowment for International Peace. Subscribers can watch the full discussion on the video box atop this page or download the FP Live podcast. What follows here is a lightly edited and condensed transcript.
Ravi Agrawal: Let’s start with the status quo. What’s your understanding of where things stand between the United States and Iran right now?
Karim Sadjadpour: We’re in between a cold war and a hot war. Neither Trump nor the Iranians want to go back to a full-blown war. Trump has somewhat unrealistic expectations that this Iranian regime, whose senior leadership has been decapitated, is going to be able to come to a quick decision on such a monumental set of issues.
RA: We’ve all understood that Iran is holding the world hostage by blocking ships from the Strait of Hormuz, and our listeners know this, but a fifth of all crude and natural gas goes through there, in addition to many other important commodities. But Karim, what’s interesting over the last week or so is that Trump has now blockaded the blockade. In other words, he’s essentially telling the Iranians, “We can take the pain, but maybe you can’t take the pain.” Who has a higher threshold now for economic pain?
KS: On one hand, Iran is in a very difficult economic situation. This was a country which, even before this war, was teetering on insolvency. The protests last January were about the country’s dire financial straits, and the regime has probably incurred tens of billions, if not over $100 billion, in damages during this war.
For the United States, on the other hand, the economy has been better than expected in some ways. Iran pays close attention to U.S. public approval for President Trump and the war, in the hopes that limited popular support for this war will restrain President Trump’s ambitions to continue it. There was a perception in the first round of negotiations—having spoken to one of the American negotiators in Islamabad—that this is a regime which, despite its public bluster and confidence, is in desperate need of cash, sanctions relief, and of getting its assets unfrozen. That’s the advantage that authoritarian regimes always have when they’re fighting democracies: They don’t care about their public opinion in the same way.
RA: I’m curious how the nuclear issue is playing in negotiations right now and in the coming days and weeks. And I ask this question mostly keeping in mind that the regime now has this other weapon, the ability to disrupt the global economy. For the Iranian leaders, does that change its need for a nuclear deterrent? How do you expect them to approach the nuclear issue when it becomes a sticking point in talks?
KS: I don’t see Iran altering its nuclear ambitions.
You’re absolutely right about their discovery over the last five weeks that Hormuz enrichment is a far more potent tool than uranium enrichment. Countries like Israel, Iran’s neighbors, and the United States are certainly deeply concerned about Iran’s advancing nuclear weapons capabilities, but most citizens around the world are not really impacted by Iran’s nuclear program. When the Strait of Hormuz is blocked, and a fifth of the world’s oil, natural gas, and fertilizer are locked up, citizens all over the world feel that impact. That is what Iran wanted: something which would impact citizens the world over.
But given how much they’ve invested in the nuclear program over the last 25 years, when you consider both the sunk costs of the program and the opportunity costs and sanctions, the tally is perhaps north of a trillion dollars. That’s not something that they are willing to give up. They’ve gone to war twice now rather than compromise what they see as their right to enrich uranium.
One of the lessons that’s been plain for all to see is that countries that have given up their nuclear programs have made themselves vulnerable to external intervention, whereas countries who have nuclear weapons have given themselves a cloak of immunity. Even if a nuclear deal is ultimately signed with the Iranians, I’m not confident that that will be the end of the story. There’s almost a consensus view in Tehran that the regime needs nuclear weapons, and I don’t feel confident that they’re going to renounce those ambitions with one signature.
RA: The other potential sticking point was ballistic missiles, but Trump is now saying that ballistic missiles are a regional problem, and so in other words, it may not be a major issue in any talks in the next few weeks.
KS: Trump has significantly reduced his demands over the last six weeks. In his speech at the outset of the war, he had grand ambitions to destroy Iran’s nuclear program, its missiles and drones, and its regional proxies, and potentially even to bring down the regime. Six weeks later, the missiles and drones, proxies, and regime change, as far as we know, are not even part of the negotiations. We’re seeking their cooperation rather than their total surrender, so the negotiation has been more narrowly focused on just the nuclear issue.
That is something of deep concern in particular for our allies in the Persian Gulf, because they don’t worry about Iran nuking them, but they’ve been the target of Iran’s missiles and drones over the last six weeks. The United Arab Emirates has experienced upward of 3,000 attacks. When I speak to the leaders of those countries, they say, “Three months ago, we would have been content with only a nuclear deal, but now we need a deal that includes missiles and drones, because those are offensive, not defensive, weapons for Iran.” Missiles and drones are things that Iran has learned how to mass produce themselves, and in some cases, they have deep underground cities producing missiles, which are hard and difficult to reach. So even if the U.S. is able to reach a nuclear deal with Iran, the threats that the Islamic Republic poses to its regional neighbors and Israel are going to remain.
RA: Let’s talk about Iran’s leadership, which isn’t a monolith. There are reports that Iranian state media has been critical of [Parliament] Speaker [Mohammad Bagher] Ghalibaf for choosing to negotiate with the United States when he was in Islamabad last week. And that tells me that there’s a group within the army that is even more hard-line than what we were imagining of the top leadership right now.
KS: The political faction of Ayatollah [Ali] Khamenei, the late supreme leader who ruled for 37 years, refers to themselves as “principalists,” meaning they are loyal to the principles of the 1979 revolution—which for me means resistance against America and Israel. Khamenei long believed that abandoning your principles will hasten your demise as a government. The most vivid example for him was when [former Soviet leader Mikhail] Gorbachev attempted to reform the Soviet Union. That principalist line of thinking is still dominant in Iran.
You also have other folks who are equally committed to the revolution and the Islamic Republic but believe that in order to preserve the system, they can’t be in constant war with America and Israel. It’s just not a way to run the country, to be the most sanctioned country in the world, totally isolated, and at constant conflict with neighbors. The word that we use for these folks is “pragmatists.” They tend to put economic and national interests before revolutionary ideology. Mohammad Bagher Ghalibaf, the speaker of Parliament, is perhaps the best example of someone who is thought to be a pragmatist now in Tehran.
It’s not a profound difference in endgame, in that each of these groups are committed to the maintenance of the Islamic Republic. One shorthand way of thinking of the principals is they fear that if Iran reforms, it could end up like the Soviet Union. The pragmatists’ model is China, after Chairman Mao [Zedong] died and Deng Xiaoping came and prioritized economic interests before the Cultural Revolution. At the moment, given the profound mistrust between the United States and Iran, the cynicism of the principalists is difficult for anyone to disregard because they will say, “Listen, twice while we were negotiating with the United States, they attacked us, and these negotiations could just be another ruse for us to let our guard down and have them attack again.”
What’s not clear to anyone at the moment is where the new supreme leader, Mojtaba Khamenei, falls in this debate between the principalists and pragmatists, because Ghalibaf has an old relationship with Mojtaba. They go back a couple decades at least and are from the same city of Mashhad. Ghalibaf has said publicly that what he’s doing is with the blessing of Mojtaba Khamenei; other more hard-line figures argue the opposite. That’s one reason why it’s been difficult for the regime to come to a consensus.
But as I said, that isn’t necessarily a new phenomenon. If you look at the Obama nuclear deal, the JCPOA [Joint Comprehensive Plan of Action], that process took about two years of negotiations. That’s just the political culture of the Islamic Republic. Resistance is lionized. And the word for “compromiser” in Persian, sazeshkar, is almost a slur. That has been the political culture of the Islamic Republic since 1979.
RA: I’m curious if there are any scenarios now in which you see the collapse of the regime, or is that just not going to happen?
KS: We know from history that when early-stage revolutionary governments experience an external military attack, it often serves to consolidate their power. A good example is when Saddam Hussein invaded [Ruhollah] Khomeini’s Iran in 1980, helping the nascent revolutionary government in Tehran consolidate power. The Bay of Pigs and Fidel Castro is a similar example. But you see the opposite example when late-stage dictatorships suffer an external military humiliation. We often look back in retrospect and say that actually accelerated their demise. The Soviet humiliation in Afghanistan is a good example; [Slobodan] Milosevic’s defeat by NATO is another.
We’re two months into this war, and at the moment, there are no visible cracks within the system. There haven’t been any popular protests since this war began, because people have been living under aerial bombardment. But once the conflict concludes, this regime will inherit a terrible situation, not only a country in enormous economic distress. It’s now, profoundly, even more disliked and distrusted by its neighbors, and those political and social grievances haven’t gone away. So it is plausible we will look back six months, a year, or two years from now, and say the war amplified the regime’s existing challenges and forced them to either change or implode. But at the moment, there are no signs of that.
RA: Where does Israel now fit into all of this? It seems like the Iranian regime will still be intact. It will still have a ballistic missile program and its proxies. Hezbollah is severely weakened, but that arena is still in play, and the Houthi rebels are still at large. If you were Israel, how do you now game out what happens next? Was this worth it?
KS: In my view, if you’re looking around the world at which countries are better off now than they were before the war two months ago, the only one I would say with confidence is Russia. Russia is just a lot wealthier than it was a few months ago because of the spike in oil prices and the risk premium to energy. With the United States bogged down in Iran, it has less time to think about Ukraine.
Some have also made the argument that Israel is better off. I think that remains to be seen. Obviously, Iran is a weaker country militarily than it was two months ago. Its ability to project power is less than before. But by all accounts, these capabilities are things that Iran can rebuild. We have mixed reporting about the extent to which we have managed to destroy Iran’s missiles and missile launchers. Early in the war, there was a view that we were far more successful. Now the reporting says they have at least 50 percent still of their missile arsenal. They’ve figured out how to manufacture missiles and drones like they have automobiles. It’s something they can do pretty quickly. So if you’re Israel and your mortal enemy has just been badly damaged but has survived and is now going to double down on all of the policies that were threatening to you, that’s not an ideal outcome.
In my view, when it comes to both Israel and the United States, you’re never going to rest well at night until you have a government in Iran whose organizing principle is its own national interests, rather than revolutionary ideology. An Iran that is either representative of its own people or at a minimum representative of its own national interests will behave very differently toward Israel and the United States. It would be more of a complimentary relationship than an adversarial relationship. It seems to me that the last two months have made us further away from that goal rather than closer to it.
RA: If we broaden this out, months or years from now, I’m curious how the region will see Iran differently. If you are Qatar or Saudi Arabia or the UAE, you’re now thinking about your security very, very differently than you did before. You see Iran in a very different perspective than you did before. To zoom out still further, a country like Pakistan, which has been in the news as the mediator between the United States and Iran, is also suffering immensely. It gets 80 percent of its crude from the Gulf. It has limited fiscal room to subsidize energy. It has basically shut down its universities. Government officials are on a four-day work week. This is serious pain for a country that maybe could not withstand more pain than it already had—and that’s basically mirrored across Asia. A lot of countries are essentially passing on severe costs to their people in the form of cooking gas being rationed, for example. For all of these countries, one has to imagine that their relationship with Iran will change, even though they may have been ideologically friendly. How might Tehran be thinking about this very changed landscape? Six months from now, two years from now.
KS: You’re absolutely right, Ravi. This is the framework I think about for the Gulf countries and Iran. You have countries which I call “falcons.” Their goal is to build world-class cities and economies and to be hubs of international transportation, finance, and technology. And then you have Iran and its proxies, which I describe as “vultures.” They benefit from instability and chaos. If you look at the countries that Iran was dominating prior to Oct. 7, 2023, it was essentially five failing states: Lebanon, Syria, Yemen, Iraq, and Gaza. Their business models are very, very different. The Gulf requires stability. If you want to be an international hub, it can’t be a war zone. In a place like UAE, perhaps as many as 90 percent of its residents are non-local, so if it looks like a war zone, you risk a mass exodus of your residents. Iran, in contrast, thrives when there’s chaos and instability. It can fill power vacuums with its militias or engage in asymmetric warfare.
I don’t see that basic dynamic changing so long as the Islamic Republic is in power. I did a Fulbright many years ago in Beirut, and my big takeaway from that year was that it takes decades to build things and it takes weeks to destroy things. Those who are in the business of destruction have a huge advantage because that can be quick and cheap. Building things takes a lot of capital and many decades. Those Gulf countries, contrary to some of the reporting, actually didn’t welcome this war. I think they tried to dissuade the United States from launching it. But now that we’ve taken this baseball bat to the hornet’s nest, they want the United States to stick around and continue to defend them. You will hear them say that the United States needs to finish the job. I don’t think it’s clear to them what exactly that means, but at a minimum, what it means is that you can’t allow Iran to continue to control the Strait of Hormuz.
On Pakistan, one of the interesting developments in the months before the war was the mutual defense treaty it signed with Saudi Arabia. For the Saudis, if you ask them, it has proven to be quite consequential. There are many reasons why Pakistan has emerged in this mediation role. You highlighted some very important ones. Their economy is deeply impacted by this conflict. They want to see the strait open. But also, if Iran continued to launch strikes on Saudi Arabia—I think there was even a statement reminding Iran that they have a mutual defense treaty with Saudi Arabia—they would be forced to enter the conflict.
RA: Last question. For many months now, you and I have been back channeling on the question of what Iran looks like in the future. What is a model for it? It could be North Korea, complete isolation but with a bomb. It can be Pakistan, military control and the fig leaf of democracy, but you have a bomb. You could also have a Cuba model, a Turkey model. Given everything that’s happened in the last two months, what are the likeliest scenarios for what Iran is going to look like in the coming years?
KS: The essay I wrote last fall laid out five plausible scenarios for a post-[Ali] Khamenei Iran. I’ll just briefly mention them in order of what I thought were the most to least likely. Iran as Russia—the system being unable to reform and eventually implodes like the Soviet Union, but then looks like post-Soviet Russia. Iran as China. Iran as Pakistan—morphing into a more overt military dictatorship. Iran as Turkey—somewhat more representative but a more populist government perhaps. The last model is Iran as North Korea.
Back then, I thought Iran as North Korea was the least likely outcome. Unfortunately, right now, at least in the immediate term, that may be the most likely outcome of this war. Again, it depends somewhat on the health of Mojtaba Khamenei. But as of right now, Iran looks like another hereditary, ideological dictatorship with nuclear ambitions. They’ve proven themselves willing—as they did last January—to kill potentially tens of thousands of people to stay in power. They will continue to need to rule with an iron fist, given their lack of legitimacy. Unfortunately, that looks like a plausible near-term outcome. A year or two from now, it’s going to be a little bit more difficult to tell. The big difference between Iran and North Korea is that Iranian society is very different from North Korean society, as we’ve talked about before. It’s a society that aspires to be like South Korea.
