Iran Update, July 5, 2023

 Iran Update, July 5, 2023

Andie Parry, Ashka Jhaveri, Johanna Moore, Amin Soltani, and Annika Ganzeveld

The Iran Update aims to inform national security policy by providing timely, relevant, and independent open-source analysis of developments pertaining to Iran and its Axis of Resistance. This update covers political, military, and economic events and trends that affect the stability and decision-making of the Iranian regime. It also provides insights into Iranian and Iranian-sponsored activities abroad that undermine regional stability and threaten US forces and interests. The Critical Threats Project (CTP) at the American Enterprise Institute with support from the Institute for the Study of War (ISW) provides these updates Monday through Friday. To receive Iran Updates via email, please subscribe here.

The Institute for the Study of War (ISW) with support from the Critical Threats Project (CTP) at the American Enterprise Institute launched a new interactive map of Iran and the Middle East. The map depicts events in Iran that affect the stability of the Iranian regime, namely anti-regime protests and reported poisoning incidents. It also shows developments in Syria that jeopardize regional stability and pose threats to US forces and interests, including Iranian and Iranian-backed militia positions.

Key Takeaways

1. Palestinian militants thanked Iran and the broader Axis of Resistance for their help during the recent Israel Defense Forces (IDF) raid in Jenin and likely will receive Iranian assistance to rebuild the military capabilities the IDF degraded.
2. Iranian officials inflated the amount of Iranian funds that a recent US sanctions waiver for Iraq will provide, possibly to inspire confidence in Iran’s economy and currency. News of similar waivers for Iraq has coincided with short-term improvements for the Iranian economy.
3. Iran became a member of the Shanghai Cooperation Organization on July 4, which may enable it to circumvent sanctions through non-US dollar financial transactions with other SCO countries. Iran could benefit militarily from its membership in the SCO through participation in counterterrorism and naval exercises.
4. Iran attempted to seize two US oil tankers in the Strait on July 5, likely to assert its control over the Strait of Hormuz given the recent US naval deployments to the Persian Gulf. Iran also likely sought to pressure the US to accede to Iran’s demands in the nuclear negotiations.

Palestinian militants thanked Iran and the broader Axis of Resistance for their help during the recent Israel Defense Forces (IDF) raid in Jenin and likely will receive Iranian assistance to rebuild the military capabilities the IDF degraded.[1] The IDF conducted airstrikes, drone strikes and a ground incursion with more than 1,000 soldiers in a two-day raid on Palestinian militant sites in Jenin, West Bank.[2] The IDF claimed the raid destroyed several Palestinian command-and-control centers, six explosives laboratories with more than 14 improvised explosive devices, and weapons caches with small arms and explosive materials.[3] Israeli fighter jets also hit a Hamas weapons manufacturing site in Gaza in response to rocket fire into Israel.[4] Israeli military officials framed the Jenin operation as a strategic and preventive measure to degrade Palestinian militant capabilities.[5] Islamic Revolutionary Guard Corps (IRGC) Commander Hossein Salami stated the IRGC intends to increasingly focus on directing ground operations against Israel from the West Bank during an August 2022 interview.[6] Supreme Leader Khamenei, President Ebrahim Raisi, and Supreme National Security Council Secretary Ali Akbar Ahmadian recently reiterated the West Bank is the key to defeating Israel during separate meetings with Palestinian militia leaders in Tehran from June 14 to 23.[7]

Iran and Palestinian militants are messaging a coordinated resistance to Israel and may expand their joint military operations. The Joint Operations Room of the Palestinian Factions issued a statement during the Jenin operation on July 3 promising a united response.[8] Hamas also released a statement on July 5 affirming the strength of joint field coordination in Jenin and celebrating the defeat of Israel in the Jenin raid.[9] The Palestinian Islamic Jihad militant wing Saraya al Quds Brigade also thanked Iran and the broader Axis of Resistance for its help during the Jenin clashes.[10] IRGC Quds Force Commander Esmail Ghaani also stated on July 5 that Palestinian militias have “never been stronger in their history” and are conducting roughly 30 operations per day in the West Bank.[11] Iran’s Nour News Agency published an interview with a spokesperson from Fatah, a Palestinian group independent of Iran, who stated Israel should expect unified and coherent action by Palestinian groups in Jenin. [12] This demonstrates Iran is messaging the importance of a coordinated Palestinian resistance. The Palestinian operations support Iran’s objectives to maintain persistent pressure on Israel through military encirclement and to facilitate attacks on Israel while maintaining strategic depth.

Military Sites Methodology

ISW added a new layer to its interactive map with the Iranian, Russian, and Wagner Group military facilities in Syria that ISW assesses are active as of July 5, 2023. Each facility comprises one or more of the following types of infrastructure: air defense, airfield, barracks, headquarters, training center, and/or weapons storage. ISW assigned a confidence level to each assessed facility based on the available open-source reporting and information. ISW considered the credibility and quality of the reporting and referred to open-source satellite imagery to corroborate the locations and infrastructure types when possible.

The data layer does not represent an exhaustive list of all Iranian and Russian military facilities in Syria.

ISW included the facilities for which open-source information permits at least low confidence assessments. The data layer does not show locations that Iran and Russia have vacated, such as the facilities Russian forces occupied before Russia’s invasion of Ukraine in February 2022. 

Iranian Activities in Iraq

This section covers Iranian efforts to consolidate and expand Tehran’s economic, military, and political influence throughout Iraq. This section examines some of the many campaigns that Iran is pursuing to achieve this strategic objective. CTP will update and refine our assessments of these campaigns over time and in future updates.

Iranian officials inflated the amount of Iranian funds that a recent US sanctions waiver for Iraq will provide, possibly to inspire confidence in Iran’s economy and currency. US Department of State Spokesperson Mathew Miller acknowledged that the US had approved $2.7 billion of Iranian assets to be used for humanitarian and non-sanctioned goods during a press briefing on June 13.[13] The head of the Iran-Iraq Joint Chamber of Commerce, Yahya al-e Eshagh, mischaracterized the amount on July 3 in stating that the Trade Bank of Iraq (TBI) promised to release $10 billion in Iranian funds for purchasing non-sanctioned goods.[14] Eshagh made this claim during an interview with the Iranian state-news outlet Islamic Republic News Agency (IRNA).[15] IRNA separately quoted Economic and Financial Affairs Minister Ehsan Khandouzi on July 5 stating that the Central Bank of Iraq will release $10 billion to Iran as payment for Iraqi electricity and gas debts in addition to non-sanctioned goods.[16] IRNA published both articles in Persian but not English, which indicates its intended audience was in Iran. News of similar waivers for Iraq has coincided with short-term improvements for the Iranian economy. The Iranian rial appreciated approximately 4.6 percent on June 10 following an announcement from Eshagh that the US Secretary of State Anthony Blinken had approved a sanctions waiver for $2.7 billion to pay gas and electricity debts to Iran.[17] CTP recorded several spikes in protests in Iran between February and April 2023 that focused on worsening economic conditions, including high inflation and the rial’s depreciation.[18]

Eshagh announced on July 3 that Iran plans to invest $300 billion in Iraqi power plants and refineries through 2024.[19] The Iranian regime has awarded such contracts to its parastatal organization Khatam ol Anbia, the Iraqi Popular Mobilization front company Muhandis Company, and the Lebanese Hezbollah owned Jihad al Binaa on a preferential basis to fund its proxies and place profits directly into the regime. Some Iranian private companies, such as Parse Baydar, have competed for electrical infrastructure contracts in Syria.[20] Iran could award some contracts to such companies in Iraq. [21]

Iranian Domestic and Political Affairs

This section covers factors and trends affecting regime decision-making and stability. CTP will cover domestic politics, significant protest activity, and related issues here.

Iran became a member of the Shanghai Cooperation Organization (SCO) on July 4, which may enable it to circumvent sanctions through non-US dollar financial transactions with other SCO countries.[22] The SCO is a regional security, economic, and political organization comprised of China, India, Kazakhstan, Kyrgyzstan, Pakistan, Russia, Tajikistan, and Uzbekistan.[23] Iran has sought an alternative financial messaging to Belgium-based SWIFT ever since SWIFT disconnected Iran from their platform in 2018.[24] Iran and Russia connected their interbank communication and transfer systems on January 30, 2023 and Iranian regime-affiliated news outlets have supported linking Iran’s SEPAM financial messaging system with China, India, and Russia’s financial messaging systems in recent months.[25] Iranian officials view the SCO as a means of advancing Iran’ efforts to compensate for Iran’s dwindling foreign currency reserves by conducting economic exchanges in local currencies. Iranian President Ebrahim Raisi called on SCO members to abandon the US dollar in financial transactions during his speech at the 23^rd SCO Summit on July 4.[26] Raisi did not specify how Iran will promote de-dollarization as an SCO member, however. Foreign Affairs Ministry Economic Diplomacy Deputy Mehdi Safari previously proposed in June 2022 that the SCO should use a single currency, much like how the European Union uses the euro.[27] Regime-affiliated news outlets have additionally expressed support for linking Iran’s SEPAM financial messaging system with China, India, and Russia’s financial messaging systems in recent months.

Iran also seeks to use its SCO membership to accelerate the construction of various regional transit corridors, which will likely confer economic benefits through new sources of revenue. President Ebrahim Raisi reiterated Iran’s support for the development of the International North-South Transit Corridor (INSTC), Chabahar Port, and China’s Belt and Road initiative during his June 4 speech. Raisi also stressed Iran’s ability to connect the landlocked Central Asian countries to open water. Completing these transportation infrastructure projects would increase Iran’s capital inflows by giving it access to new markets, as well as enabling it to charge foreign countries transit through Iranian territory.[28] State media previously reported that INSTC will generate $20 billion in annual revenue for Iran upon the completion of the project.[29] Iran faces numerous obstacles in completing the transportation projects, such as securing reliable sources of funding, however.[30] Regime officials also have signed numerous multilateral and bilateral agreements in recent years without making progress toward completing the INSTC, for example.[31]

Iran could benefit militarily from its membership in the SCO through participation in counterterrorism and naval exercises. The SCO regularly holds military exercises to increase SCO member states’ readiness to confront regional threats, such as extremist groups in Afghanistan. Iranian Defense Minister Brigadier General Mohammad Reza Ashtiani previously expressed Iran’s readiness to exchange intelligence with SCO member states to combat terrorism during a SCO defense ministers meeting in New Delhi, India on April 28.[32] Ashtiani also expressed support for participating in joint naval exercises with SCO member states. Iran has conducted three joint naval exercises with the SCO’s two most powerful members—China and Russia—since 2019.[33]

Iran attempted to seize two US oil tankers in the Strait of Hormuz on July 5, likely to assert its control over the Strait given the recent US naval deployments to the Persian Gulf. Two Artesh Navy vessels attempted to seize the Marshall Islands-flagged TRF Moss and Bahamian-flagged oil tanker Richmond Voyager.[34] Iranian naval personnel also fired small arms at the Richmond Voyager. The US Fifth Fleet deployed the USS McFaul destroyer, an MQ-9 Reaper drone, and a P-8 Poseidon patrol plane to prevent the seizures, at which point the Iranian naval vessels withdrew from the tankers. These types of Iranian reactions to US naval deployments are part of a trend in Iranian efforts to challenge the US presence in the Persian Gulf. The US Navy announced on April 8 that it deployed the USS Florida guided-missile submarine to the Middle East.[35] Artesh Navy Commander Rear Admiral Shahram Irani claimed that an Iranian Fateh-class submarine forced the USS Florida to surface as it attempted to traverse the Strait of Hormuz on April 20.[36] The US Fifth Fleet denied Irani’s claims, calling them “disinformation” in a tweet on April 20.[37] The US Department of Defense also announced on May 12 that it would bolster the Fifth Fleet’s defensive posture in the Persian Gulf after Iran seized three international vessels in the Strait of Hormuz between April 27 and May 12. [38] IRGC Commander Major General Hossein Salami threatened to expel US forces from the region and reiterated Iran’s commitment to protecting maritime trade on the same day.[39] The IRGC Navy conducted unprofessional and unsafe maneuvers near a US naval ship in the Persian Gulf on May 19.[40]

Iran also likely sought to pressure the US to accede to Iran’s demands in the nuclear negotiations. Recent media reports and statements by American, European, and Iranian officials suggest that the nuclear negotiations between the West and Iran have been unsuccessful due to Iranian defiance and certain Iranian demands.[41] Iran aimed to release frozen assets and secure modest sanctions relief for its struggling economy by negotiating with the US and EU.[42] Disrupting commercial traffic around the straits imposes economic costs on international actors, such as the US and Europe, which Tehran sees as leverage for pressuring the West into providing sanctions relief.[43] Iran has previously seized oil tankers and cargo ships transiting the Strait of Hormuz to extract concessions in nuclear negotiations. Iran seized the Marshall-Islands flagged Maersk Tigris cargo ship in 2015, for example, as diplomatic tensions grew over providing sanctions relief to Tehran through what would become the Joint Comprehensive Plan of Action (JCPOA).[44] The US was responsible for protecting Marshall Islands flagged vessels at that time. Iran also seized several Western tankers in 2019 to alarm European allies and pressure the US to return to the JCPOA and lift sanctions after the US withdrew from the accord.[45]