Overview
Today's Deep Dive is 2,415 words and a 15-minute read.
Long a regional and global disruptor, Iran’s threat level rose once again in early April when it staged a large-scale, direct attack against Israel – the first time Iran had directly attacked Israeli territory, and a dramatic escalation of regional tensions. In addition to fanning the flames of the ongoing regional conflict, the attack reflects Iran’s increasingly confrontational posture in recent years – signaling a new strategic environment for those hoping to counter Tehran. In a break from the past, the Iran of today is economically insulated by its relationship with China, strategically bolstered by its security cooperation with Russia, and increasingly unreachable by Western sanctions or deterrable by US military maneuvers in the Middle East. Today’s emboldened Iran is just one of many symptoms of our increasingly fractured the global economic system. As Iran grows more audacious regionally and entrenched with opposing powers globally, the US, Europe and Middle Eastern partners will face new risks from Iranian behavior, even as they face longstanding and novel hurdles to cooperation to counter the Islamic Republic.
An Emboldened, Insulated Iran
Iran’s April attack on Israel was a stunning – if not entirely unexpected – escalation of the long-running shadow war between the two countries. Retaliating for attacks on the Iranian embassy in Damascus that killed two Iranian Revolutionary Guard generals and others, Iran launched hundreds of drones, ballistic missiles and cruise missiles at Israeli targets in a bid to overwhelm the country’s sophisticated air defenses. The vast majority of these projectiles were shot down before doing any damage with the help of the US and coordination with Arab partners (who had been warned by Iran). Tehran is estimated to have expended some 4% of its arsenal of ballistic missiles, and a much larger share of the ones able to reach Israel – all to no great deterrent effect, given Israel’s retaliatory strike on facilities near the central city of Isfahan two weeks later. In months since, the two countries appear to be attempting to dial back tensions, Israel due to Western exhortations, the impression that its strike may have been successfully deterrent, and the demands of the war in Gaza, and Iran out of a likely desire to avoid regional war that could deplete its limited resources and endanger its crucial proxies.
Nonetheless, the April attacks reveal an Iran that feels emboldened, and relatively insulated by regional and global partners. Perhaps most importantly, the attacks come as Iran has bolstered its economic, diplomatic, and military relationships with both Russia and China, both of which feel increasingly isolated by the same Western powers attempting to counter Iran and influence its behavior in the ongoing conflict. In the last two years, Iran has supplied Russia with thousands of drones and missiles, and Russia has pledged to supply Iran with advanced fighter jets and air defense technology, which could help Iran harden its defenses against the US and Israel. Analysts told the Washington Post that Russian tech could make Iran much better at shooting down planes and missiles, making Iran a more formidable adversary and raising the risks of operating around the country.
China has been primarily an economic partner, albeit a crucial one. In April of 2024, the Financial Times reported that Iran was selling more oil than it has in six years (before President Trump withdrew from the Iran nuclear deal), almost all of it to China. The increased sales have boosted Iran’s economy by $35 billion a year (according to Iran), increasing revenues that it can direct to regional proxies and to protect itself from further Western economic isolation. In addition to bolstering the Iranian economy, China is also increasingly a strategic partner, aiding Iran’s military modernization through the transfer of military technology and assistance in nuclear enrichment. Immediately following the Iranian attack on Israel, China expressed alignment with Tehran, calling it “an act of self-defense.”
Crucially, the attack also comes as Iran has accelerated its nuclear weapons program, reversing its brief slowdown in enrichment in the second half of 2023 to once again race towards a nuclear weapon. In March 2024, the International Atomic Energy Agency (IAEA) said that Iran was “weeks away” from having enough enriched uranium to develop a nuclear bomb, and had been increasing its stockpile for months following a brief reversal in the second half of 2023. Per IAEA experts, Iran currently has enough uranium enriched to a 60% threshold to produce approximately three nuclear weapons - given just weeks to further enrich that uranium 90%, the threshold for weapons-grade uranium. More concerning, the IAEA recently said that “the agency has lost continuity of knowledge” about several pieces of key equipment as a result of the breakdown of negotiations between Iran and the IAEA. The Institute for Science and International Security (ISIS) determined in its most recent assessment on the state of Iran’s nuclear weapons program that its breakout time (or the time needed to produce enough sufficiently enriched uranium to produce a weapon) is now effectively zero. No longer constrained by even the pretenses of returning to a nuclear deal, and insulated from Western sanctions by its relationships with Russia and China, obstacles for Iran’s nuclear enrichment are much reduced from even a year ago.
The Iran Problem: US and EU Perspectives
The US strategy on Iran has been on a backburner since the Biden Administration stepped away from nuclear talks in 2022. While the White House has continued to condemn and impose sanctions against Iran for a variety of causes linked to human rights, missiles, proliferation transgressions, Iran – once a key talking point in Biden’s election campaign – has been moved to the bottom of the list in favor of more pressing concerns in Asia and the Middle East.
However, with the explosion of conflict in the Middle East with the Hamas-led October 7 attack on Israel and the ensuing regional conflict, Iran is back on the agenda. Iran retains its ability to project power throughout the region, threatening the stability of American partners, the safety of US troops, and the flow of international trade. Its accelerating nuclear weapons program poses credible risks that the country could possess a nuclear weapon sooner rather than later, upping the threat level of Iranian aggression, and raising risks for nuclear proliferation to allies and a regional nuclear arms race among enemies. Iran’s burgeoning relationships with China and Russia undermine US policy on a rhetorical and strategic level, bolstering opposing militaries and consolidating an anti-Western bloc that is increasingly self-sufficient and immune from Western pressure tactics.
For Europe, many of these risks are the same – despite the fact that the US and Europe have not historically put Iran in the same place on their list of geopolitical priorities. Iranian destabilization of the Middle East has long been thought of as an American foreign policy priority. Although concerned with Iranian nuclear development, Israeli security, and oil disruptions, Iran’s regional ambitions have mostly been on a back burner for Europe. Iran’s runaway nuclear enrichment and heightened cooperation with Russia, especially, pose new, closer-to-home risks to the continent. Most pressingly, Iran supplying Russia with additional drones poses an immediate risk to Ukraine, and potentially European infrastructure and NATO. Similarly, Europe stands to lose from the formation of an anti-Western bloc, as Russia becomes insulated from pressure tactics may become more aggressive and China ramps up economic warfare that could damage the recovering European economy.
While a need to pivot away from the region remains – Russia and China still present the most pressing dangers to the US, Europe and the vision of a rules-based world order – Iran is, once again, demanding the West’s attention. A continued lack of engagement risks ceding the region to an emboldened Iran and its proxies, given that Moscow and Beijing provide an economic, strategic, and diplomatic buffer for Tehran, and US regional partners, once its strongest partners against Iran, have fostered ties with the country to hedge their bets against a US withdrawal. While Arab Gulf partners still hope to neutralize Iran – all of them contributed intel to the US and Israel’s defense against Iran’s missile attack after Iran provided them with some details, for example – they have also sought closer ties with Tehran to de-risk their own bilateral relationships, and hopefully head off future conflicts. If the US moves forward with a hands-off Iran policy, in short, only Israel remains ready and willing to continue countering Tehran on a regional level.
Israeli Context
Since October 7, Israel has been facing at least five active fronts, including against Hamas in Gaza, Hezbollah in Southern Lebanon, Iran Revolutionary Guard Corp (IRGC) units together with Hezbollah in Syria, the Houthis in the Red Sea and now Iran itself. Israel’s immediate focus is on Hamas and Hezbollah, yet Iran’s subversive activities in the region and continued efforts to advance its nuclear program are posing great challenges to Israeli national security. The direct attack by Iran on Israel and Israel’s subsequent response attack in Iran have brought to light the potential of possible escalation between the two countries in the future, but have also led to the emergence of an informal US-led regional coalition (which includes Jordan, the UAE and Saudi Arabia) determined not to allow Iran to achieve regional hegemony.
Russian-Iranian security cooperation, especially on missiles and drones, is a major concern for Israel, as is Iran’s continued progress towards obtaining a nuclear weapon. Israel has welcomed US and European (mainly UK and France) support against Iran’s direct attack, as well as the Houthi attacks in the Red Sea. Israel has urged the US and Europe to increase the pressure on the Islamic Republic, through snapping back sanctions and imposing new sanctions and designations, over its nuclear program and security cooperation with Russia.
Israel feels the US and Europe have not done enough on this issue, especially as countries in Europe still maintain close commercial ties with Iran, and are not imposing stricter measures on European companies doing business with the country. One such area is Iran’s drone industry, which uses Western technologies in developing its systems. The US Congress has identified this problem as requiring tighter scrutiny and monitoring and has urged the Biden Administration to engage with the E3 (the UK, Germany and France, in the context of Iran negotiations and later general Middle East engagements) on ways of limiting Iran’s ability to use such technologies.
Risk Outlook
In the coming weeks and months, the US and Europe will struggle to establish more consequences for Iran. The US’s long-awaited foreign aid package, passed into law at the end of April, included a raft of new sanctions intended to target the Iranian oil and gas trade, including sanctions against foreign ports, vessels and refineries knowingly processing or shipping Iranian oil. Further, the language would expand secondary sanctions to cover all transactions between Chinese financial institutions and sanctioned Iranian banks involved in oil-related transactions. However, analysts judge that Biden may be unlikely to fully enforce the sanctions – which could add as much as $8.40 to a price of a barrel of crude – in an election year. Further, the majority of Iranian oil sales in China are flowing through independent Chinese refineries unconnected to the international finance system – and thus out of reach of US sanctions. State-owned refineries CNPC and Sinopec ceased importing Iranian crude in 2019 amid an earlier round of US sanctions.
Nonetheless, the US will likely still seek to impose costs on Iran for its heightened destabilization efforts in the region and brazen attack on Israel, already introducing new sanctions on Iran’s drone program alongside the UK and Canada. The EU has agreed to follow in its footsteps, expanding Europe’s typical scope of Iran sanctions beyond nuclear concerns to include broadened sanctions on Iran’s missile and drone programs. Still, the EU has declined to take some steps that have long been called for by the US and Iran hawks in Brussels, such as designating the IRGC as a terrorist entity. The US may also seek cooperation with the EU on oil and gas sanctions tailored more closely to avoid price disruptions, perhaps including an oil price cap akin to the one imposed on Russia (an even more imperfect measure for Iran than Russia’s has been, given Iran’s oil sales are mostly insulated in the Chinese economy).
Joint transatlantic Iran strategies have been in place before – most recently centered around the now-defunct nuclear deal. With a now entirely noncooperative Iran, hedging Gulf partners who feel burned by a lack of US commitment, and a solidifying anti-Western bloc, the US and Europe face a novel set of challenges in containing Iran. Add to that Europe’s desire to prove its sovereignty and its ability to project power globally, as well as a US foreign policy that could take a 180 depending on the results of the presidential election in November, and coordination becomes especially difficult.
On the other hand, the election of moderate reformer Masoud Pezeshkian as the President of Iran could result in upside risks as the tone of US-Iran and EU-Iran relations softens. Elected in snap elections with record low turnout following the death of the former, hardliner President Ebrahim Raisi in a helicopter accident in May, Pezeshkian is a moderate former legislator and cardiac surgeon. The influence of the Iranian President is limited – ultimate authority rests with the ayatollah, and the president typically has little influence on foreign policy or defense. Nonetheless, a friendlier face at the helm could herald more cooperative relations, as Pezeshkian has pledged to seek “balance in relations with all countries.” However, opportunity for change remains limited as Iran’s existing relationships largely remain in place (Pezeshkian hailed Russia as a “valued strategic ally,” advocated for “collaborating more extensively” with China, and ties with), and virtually nonexistent opportunity for new US-driven diplomatic efforts ahead of the November election.
The US and EU’s new Iran problem is, in many ways, simply a symptom of the increasingly fractured world. Spurred by heightened Western-Chinese economic competition and accelerated by Russia’s invasion of Ukraine, the economic and diplomatic world is essentially splintered as the opposing blocs develop separate norms, economic systems, security agreements, and diplomatic venues. Countries, like Iran, that would once have been hobbled by Western sanctions are now thriving in an economic system on the other side of the globe. Contending with today’s Iran is an important first test of how the US and the EU can impose costs on or influence the behavior of their rivals who have disengaged from the Western system – if they even can.
