Toplines

Iran has not changed its negotiating position and continues to seek formal control over transit through the Strait of Hormuz as Pakistan tries to revive US-Iran negotiations. Pakistani sources told Reuters on August 25 that there is “significant progress,” and some Iranian officials have expressed general willingness to reengage with the United States.[1] This Pakistani framing is unsurprising — a mediating party has a vested interest in ensuring mediation can occur — but the framing is at odds with reality. Iran’s negotiating team has, according to regime media, continued to emphasize to mediators that the United States must return to the original memorandum of understanding (MoU) and implement Clause 5, which Iran interprets as granting Iran the authority to determine transit arrangements in the strait.[2] That Iran communicated this to the mediators suggests that the mediators are only ferrying unchanged viewpoints between the two sides, not making progress towards a deal.[3]

Iran has continued talks with Oman over transit arrangements that would formalize an Iranian role in controlling commercial traffic through the strait, which also demonstrates the lack of progress in talks.[4] Omani Foreign Minister Badr al Busaidi said on August 25 that Iran and Oman could soon announce a temporary corridor through the strait and other arrangements to restore safe navigation.[5] The United States is continuing to take steps to undermine Iran’s efforts to control commercial traffic through the strait. The US Treasury Department warned on August 24 that companies could face sanctions or penalties if they comply with Iranian safe-passage requirements, including purchasing Iranian-linked insurance and services or complying with information requests.[6] The United States has also sought to keep commercial traffic moving without Iranian permission or fees, which creates a direct challenge to any Iranian influence or control over passage through the strait. US President Donald Trump stated on August 25 that the US Navy had cleared mines from international waters in the strait.[7] Two US officials confirmed that the US Navy cleared the traffic separation scheme between Iran and Oman.[8]

Iranian officials appear to be debating potential responses, including a more proactive military response, to sustained US economic pressure. Iranian Armed Forces General Staff-run outlet Defa Press argued on August 25 that Iran should move away from a reactive strategy in which it waits for an adversary to strike before responding and instead seizes the initiative by imposing costs during periods of pressure.[9] Defa Press argued that Supreme National Security Council Secretary (SNSC) Major General Mohsen Rezaei’s recent threats represent a shift from “reactive defense” toward “active deterrence and strategic initiative.”[10] Rezaei stated in an English-language post on X on August 23 that “if the economic war continues, not a single drop of oil will be exported — neither through the Strait of Hormuz nor from anywhere in the Persian Gulf.”[11] Rezaei added that Iran would regard any country’s participation in or support for the US economic campaign against Iran as an act of war.[12] Defa Press argued that Iran could impose costs beyond the economic domain in response to sanctions, the blockade, and restrictions on Iranian oil exports.[13]

Iran may target regional energy infrastructure as part of an effort to threaten the regional and global economy to impose political costs on the United States and its partners after the imposition of the US economic campaign. Iran would ultimately aim to compel the United States to stop its economic program before Washington accomplishes its objectives in this scenario. Iran has struggled to reliably strike moving vessels, but it can locate and target fixed infrastructure.[14] Axios reported on August 25 that more than 500 ships used the southern channel under US protection in the past 30 days, and Iranian drones or missiles hit only about 2 percent of them.[15] Iran may decide to strike or conduct cyberattacks against static regional energy infrastructure or US civilian infrastructure to impose costs on global energy markets and the US homeland.

The regime is likely debating whether it should target regional energy infrastructure, however. Defa Press did not identify specific targets or call for immediate military action.[16] Defa Press warned that action without an imminent threat could escalate the conflict, encourage coalition-building against Iran, and impose additional political and economic costs.[17] These warnings suggest that Iranian officials are still weighing the risks of this approach and that the approach remains under intra-regime debate. Former Vice President Mostafa Hashemitaba criticized proposals to target neighboring countries’ oil facilities on August 24 and warned that such attacks could have “serious consequences” for Iran, for example.[18] Iranian Supreme Leader’s website, the Voice of Iran, stated in an op-ed on August 23 that Iran could retaliate against states that participate in US economic restrictions and would target those countries’ interests.[19] The op-ed published an image of metal cages over reported Emirati fuel storage tanks, which is an implicit Iranian threat against Emirati energy infrastructure.[20]

Iran is implementing short-term economic measures to contain the effects of US pressure and reduce the risk of domestic instability, but these measures are unlikely to resolve Iran’s underlying economic problems. The regime appears to recognize that continued economic deterioration could threaten domestic stability. Some issues, like rising gas prices, could serve as serious flashpoints for discontent.[21] Iranian officials are relying on measures that can temporarily support liquidity, employment, and household purchasing power without requiring politically costly reforms.[22] It remains unclear how the regime will address the long-term economic challenges caused by the recent US economic campaign.[23] Iranian Economic Affairs and Finance Minister Ali Madani Zadeh stated on August 24 that Iran has prepared alternative financial and trade channels and that the government is prioritizing employment, production, and household livelihoods.[24] The Central Bank of Iran separately announced on August 25 an initial $500 million USD injection of foreign-currency banknotes into the banking system. Iranian authorities also imposed additional restrictions on individuals and entities involved in foreign-exchange and gold speculation.[25] These measures may temporarily improve liquidity and limit market pressure, but they do not address Iran’s broader foreign-currency, inflation, and energy problems.