Beyond Israel: The Challenges Ahead for Iran
A Conversation with Dina Esfandiary and Hadi Kahalzadeh
Organized and edited by Ramyar D. Rossoukh, Assistant Director for Research
September 17, 2024
On July 28, 2024, Masoud Pezeshkian took office as the ninth president of the Islamic Republic of Iran after winning a special election to replace former President Ebrahim Raisi, who died in a helicopter crash in May. Pezeshkian’s victory surprised many Iran observers, raising questions about the future of Iran after two decades of conservative rule. In this Crown Conversation, we spoke to Dina Esfandiary, Senior Advisor for the Middle East and North Africa at the International Crisis Group, and Hadi Kahalzadeh, junior research fellow at the Crown Center for Middle East Studies, about Pezeshkian’s first fifty days in office, potential shifts in Iran's domestic and foreign policies, and the challenges that lie ahead. They examine the forces shaping Pezeshkian’s new government and Iran's regional strategy, the prospects for a new nuclear deal with the U.S., and the impact of Iran’s economic crisis and ongoing political conflict over mandatory veiling and the succession of the Supreme Leader.
Pezeshkian's victory surprised many Iran observers. What is your take on the significance of the election?
Dina Esfandiary: There are a couple of points that I think are worth mentioning. The first is that his election comes at a significant time for the Islamic Republic. First, there's the increasing political apathy of the population as demonstrated by the low participation rates in the election. People are fed up and that discontent has been displayed through several rounds of nationwide protests in Iran, including a wave of protests in September 2022 after the death of Mahsa Amini while in police custody. There's an increasing gap between state and society, and that coincides with an increasing hold on power by the conservatives. On top of these different domestic dynamics, there is the regional context of tensions, escalations, and war. Iran is delicately balancing its support for proxies across what is known as the “axis of resistance” to contain and roll back Israeli advances, while making sure that its support does not lead to a regional war that it won't be able to win or handle. This is the context in which Pezeshkian was elected.
Now, I agree, his victory was somewhat surprising, given that the conservatives were pretty strong in Iran. They hold, or at least held, most of the levers of power. And so, it’s interesting that the Supreme Leader and his allies allowed a Pezeshkian victory. The election also serves as a symbol of where the people are. Pezeshkian campaigned on promises like fostering national unity, improving the economy through more efficient management and better relations with the West. This appealed to Iranians.
Hadi Kahalzadeh: This election was full of surprises that no one could have predicted just four months ago. A relatively unknown reformist candidate, Masoud Pezeshkian, defeated one of the icons of the hardline conservatives, Saeed Jalili, in an election that had historically low turnout. In fact, Pezeshkian was initially disqualified from running in the presidential election by the Guardian Council, but the decision was reversed at the last minute. It marked the first-time reformists were able to field a presidential candidate since 2009. Unlike other candidates, Pezeshkian didn’t make any serious promises during the presidential debates, making his victory even more surprising. In the first round, he received only 16 percent of the total eligible votes, and 27 percent in the second round, winning the election with the lowest voter turnout in the history of the Islamic Republic.
However, I don't believe this election was staged to ensure Pezeshkian's victory, nor do I think it represents a turning point for the Islamic Republic. In a recent speech, the Supreme Leader Ali Khamenei acknowledged the challenges ahead for Iran but stated they are not large enough to require a major shift or fundamental revision in the country’s policies. Iran’s economic growth of 4-5 percent over the past three years has helped the government cover its large public deficit. Additionally, the current domestic political situation and the country’s emergence as a regional power, able to resist pressure from the U.S. and Israel, are viewed as signs of stability.
That’s why I believe we should expect only small changes. Domestically, we might see a slight political shift toward the center, with an opening up of the political environment, and a slight relaxation of social restrictions, leading to a gradual decline in conservative dominance. For example, Pezeshkian recently mentioned that he will try to reinstate all the professors and students who were expelled from universities during the recent nationwide protests. The majority of people who voted for Pezeshkian did so out of desperation rather than hope for significant changes. They want small changes that will prevent the worsening of the country’s situation. I'm not optimistic, however, given the size of Iran’s problems.
What does Pezeshkian's cabinet reveal about how his administration will differ from Ebrahim Raisi’s government?
Kahalzadeh: Ebrahim Raisi was arguably the least successful president in Iran’s history, despite having strong support within the regime, particularly from conservatives and the Islamic Revolutionary Guard Corps (IRGC), and being seen as the likely successor to Ayatollah Khamenei as Supreme Leader. But he failed to deliver on key campaign promises, such as creating a million jobs annually, constructing a million housing units each year for the poor, reducing poverty, corruption, and inflation, and improving living standards. He relied on hardliners who had no clear plan for Iran’s economy.
In contrast, Pezeshkian is trying to create an inclusive cabinet by involving both conservatives and reformists, aiming for high consensus with fewer disputes. This reflects his belief that Iran’s economic and social problems can only be addressed by engaging all political factions within the Islamic Republic, what Dina referred to as fostering national unity. He wants to build internal unity and enhance coordination and cooperation within the system. His cabinet picks also reflect his belief in the importance of employing competent bureaucrats to restore public trust in the government.
However, this inclusivity also limits his influence, particularly in key areas like foreign policy, the economy, and national security, as none of the ministers—except those in the ministries of welfare and health—are his close allies (Pezeshkian was minister of health from 2001 to 2005 in the cabinet of former president Mohammad Khatami). Additionally, Pezeshkian doesn’t possess the same level of charismatic leadership that former presidents like Khatami or Hassan Rouhani (2013-21) had, which will make it harder to fulfill his promises. At the same time, we cannot ignore the impact of U.S.—Iran policy and recent regional developments, particularly after October 7, on Pezeshkian’s chances of success. Then President Trump played a significant role in the failure of Rouhani and the moderates in Iran when in 2018 he pulled out of the Iran nuclear agreement, known as the Joint Comprehensive Plan of Action (JCPOA), which provided Iran with some sanctions relief in exchange for curtailing its nuclear program. Similar external pressures could impact Pezeshkian’s administration as well.
Esfandiary: I think Hadi has covered most of the important points. However, what I find notable is that, as a candidate, Pezeshkian kept repeating that he was not an expert. But as a result, he would make sure to surround himself with the right people to do the job. He was not only willing to admit his lack of political experience, but also stressing that his administration would rely on experts and technocrats, drawing a clear contrast with Raisi's administration before him. Clearly, this worked. He is now drawing on those experts, as well as experienced diplomats and foreign policy professionals.
He's bringing back some of the experienced diplomats who were in place before the Raisi administration. This is both good and bad news. The good news is that these are people who know how to talk to the West and have experience with international forums and foreign governments. The bad news is that these are the same people who were involved in discussions with the U.S. and Europeans during the JCPOA negotiations and the attempts to renegotiate it. These are people who have been burnt by the West multiple times, which means that they aren't going to blindly walk into another agreement. As a result, they are likely to be tougher negotiators, and the U.S. and its allies should prepare themselves for that.
Do you think his more inclusive approach and preference for technocrats in his cabinet suggests that the reformist/hardliner distinction has become outdated?
Esfandiary: I think Hadi will be able to go into this a lot more, but what I will say is that this way of characterizing Iranian politics was always outdated because Iranian politics has always been very fluid. It's shifted, it's been factional, there's been infighting, and there have been agreements. There have been people who were part of the reformist camp that ended up in the hardliner camp. Those labels “reformist” and “hardliner” capture such a wide range of views that are constantly changing. To be fair, these labels have never really been that accurate, and I say that as somebody who employs them to describe Iranian politics because often we don't have a choice: it's too complicated to go into the nitty gritty of it. So, I don't think that aspect is new.
What is interesting is this idea of building a national consensus or unity government. I think it reflects a couple of things. First, it reflects a desire to weed out or cut down on the dynamic factional fighting that has existed in Iran for as long as I can remember. Certainly, there may be some fatigue within parts of the political elite. I also think it reflects the context we mentioned earlier—being in a potential succession period. The Supreme Leader is getting older. It's not the time for internal infighting as we’re leading up to this decisive moment in the future of the Islamic Republic.
I also think it reflects a bit of naivety. Frankly, what are the chances that someone in his position, no matter how good his intentions may be, can bring this system together at a time when it’s more divided than it has ever been? There's been a massive gap between the state and society, and this is a system that has always been characterized by what some might call infighting, but what others might call very virulent debate. So, I’m skeptical about his ability to actually achieve that.
Kahalzadeh: Under Raisi, the conservatives split into two factions: the hardliners and the moderates. The hardliners belong to the Front of Islamic Revolution Stability [Jebha-ye paydari-e enqelab-e eslami] party. They were led by Raisi and are closely associated with Jalili. The moderate faction of conservatives is led by Mohammad-Bagher Qalibaf, the Speaker of Parliament. I think there are elements within the moderate faction of the conservatives, particularly in the IRGC, that are willing to undermine the undisputed power of the hardliner conservatives within the system, like Jalili, who have a very extreme approach to Iran’s foreign policy. This sentiment exists throughout all branches of the government. That’s good news for Pezeshkian, who sees himself more as a coordinator rather than a leader. However, he doesn’t have any influence over the Minister of Foreign Affairs, Abbas Araghchi, or with the Supreme National Security Council. Instead, he’s trying to coordinate the agenda of the foreign ministry with other parts of Iran’s political system in order to make decisions on foreign policy issues and domestic national security matters, such as restoring the JCPOA or joining the Financial Action Task Force (FATF), an antiterrorism monitoring group.
I’m not an expert on Iran’s foreign policy, but as someone who follows it, I see that traditionally, there have been two main approaches: one advocating for more diplomatic engagement and the other favoring resistance to engagement. However, recent developments in the region, particularly Israel’s actions toward Iran—such as the assassination of Ismail Haniyeh, the Hamas political leader, in Tehran, which humiliated Iran and was fully supported by the U.S.—are pushing Iran’s foreign policy toward a more aggressive stance.
Moderates like Abbas Araghchi, who once advocated for diplomatic engagement, are now increasingly focused on mitigating the damage caused by sanctions and managing tensions, rather than supporting a solution. Since there is now a belief that the U.S. does not live up to its commitments, they have accepted that a sustainable deal with the U.S. is unlikely. Moderates who once supported the “Neither East, nor West” approach after the revolution are now more open to developing relations with China and Russia. For example, Araghchi recently argued that Iran should be more open to the East. They now believe that optimism toward the West was misplaced. On the other hand, hardline conservatives—not just Jalili, but the broader “resistance” camp—are increasingly incorporating nuclear deterrence into their "regional deterrence" foreign policy strategy. This reflects a shift in the discourse within foreign policy since the Rouhani era. I think the main reason for this shift is the Trump administration’s withdrawal from the JCPOA and “maximum pressure” campaign, which has pushed Iran to explore new opportunities to solve their international relationship challenges and the sanctions crisis.
Esfandiary: Regarding engagement with the West to get sanctions relief and improve Iran's economy, Pezeshkian did highlight this as something that he wanted to do. But he also indicated that he would aim to balance engagement with the West and relationships with Russia and China, and not just pivot from one side to the other. The idea is to open Iran to more trade, reduce its isolation, and get sanctions relief. This isn't too different from the Rouhani administration’s policy, but whether he can achieve it depends on several factors. First, it depends on the Supreme Leader. Does he want this, or is this something he’s allowing to be put forward but will ultimately prevent? That’s unclear. It also depends on the U.S. election results. It is arguably easier for Iran to engage with a Democratic administration than with another Trump administration, though there will be challenges with that because of the Gaza war. Indeed, Iran’s backing of the “axis of resistance” (and Hamas), which targeted Israel—a close U.S. ally—directly, and the U.S. and its allies in the region, makes it difficult for Washington to talk to Tehran.
Interestingly, according to International Crisis Group research on this matter, people close to the Pezeshkian administration have indicated that if Trump becomes president, they might consider a North Korea-like approach. In other words, engaging in performative dialogue and exchanges with Trump, aimed not so much at coming to a final agreement with the U.S. but rather at limiting the harm he could inflict on Iran. This shows how much more nuanced the cabinet and technocrats in charge of Iranian policy are in terms of their thinking about foreign policy.
What do you see as Pezeshkian’s biggest challenges?
Kahalzadeh: Iran’s challenges can be categorized into four major crisis areas: economic, state-society relations, international relations and sanctions, and state capacity, or what I call the ungovernability crisis. These crises are not only growing but are also deeply intertwined and interconnected, intensifying each other like a cancer that has metastasized. And to fully grasp the significance of these crises, we must also consider them within the broader context of the Supreme Leader’s succession, which could occur at any time in the coming decade.
Dina has already mentioned the widening gap between state and society, demonstrated in the low voter turnout in the presidential elections. I’ll just add that a recent government survey revealed that 92 percent of Iranians expressed dissatisfaction with the current situation in the country. The same survey also revealed that only 43 percent of Iranians have confidence in the government, down from 82 percent in 2014. Iran’s status as one of the most sanctioned countries in the world is well documented. So, I’ll focus on the economic crisis and ungovernability crisis.
Since 2009, Iran’s economy has lost its ability to generate wealth, resulting in an average economic growth rate of just 0.5 percent. Excluding the JCPOA era (2015-2018) when international sanctions related to Iran’s nuclear program were lifted, the average growth rate has been negative, indicating economic contraction. This economic stagnation has led to a significant public budget deficit of 25 percent to 30 percent annually, forcing the government to raise taxes on the private sector and borrow from the central bank, which has fueled inflation. The inflation rate, which averaged 20 percent over nearly three decades, has doubled to an average of 40 percent since 2018. The poverty rate has also doubled since 2009, rising from 20 percent to 40 percent, with 37 percent of the working age population unemployed. Additionally, a lack of investment in the energy sector has led to a severe energy deficit in Iran, despite being one of the world’s largest holders of energy reserves. Iran’s economy basically shuts down every summer due to electricity shortages and every winter due to a lack of natural gas.
However, I believe the biggest challenge facing the country is the inefficiency of the state or the ungovernability crisis. There are many reasons for why the Iranian state is unable to manage problems effectively, including the duality of Iran’s political system with both theocratic and democratic elements coexisting, multiple decision-making centers, nepotism, and corruption, among others. This has created a situation where the state is unable to design and implement effective policies and interventions. This is why I’m not optimistic that Pezeshkian can bring about significant change in the country.
Dina Esfandiary: I think Hadi has captured most of the challenges, but let me add a couple more. Domestically, Pezeshkian faces some additional issues. He has little executive experience. So, this role is going to be new for him. He's also going to face opposition from hardliners to implement many of his goals: Since they still hold most of the levers of power, they will challenge his ability to implement his agenda. If he doesn't succeed, he will face criticism from his supporters. So, he’s essentially stuck, whether he succeeds or not.
Yes, he won, but it was a relatively narrow win, and as Hadi mentioned, it was a thin popular mandate. On top of that, the position of the President in Iran doesn’t carry significant power or a major mandate, like in some other countries. The question is, will he be able to achieve everything that he’s setting out to do?
After all, the Supreme Leader is the final decision maker, and the Revolutionary Guards call a lot of the shots both inside and outside of the country. The thing that the President can do is set the tone for the direction the Islamic Republic will take. So, as Hadi mentioned, we can anticipate his tone to be less belligerent than that of, for example, a Raisi administration. But, in terms of actual change, I completely agree, it will be minor, and incremental, particularly outside of Iran's borders.
He's also a novice in foreign policy. However, during his campaign, he did say that he would overcome this, both domestically and internationally, by relying on a team of experts and technocrats. But he also doesn't have many concrete plans for how to tackle the many challenges he faces in the region and internationally. The regional escalation, for example, has left Iran stuck between a rock and a hard place. How does Iran support the “axis of resistance” without starting a regional war? How can it control the proxies when the entire relationship has been built on ensuring that they have enough of a leash to do whatever they want without actually going too much against Iranian interests, which in this case involves avoiding regional war?
Then there are other challenges on the foreign policy front. How do we get to a new nuclear deal? The current limits in the deal don't make sense anymore: Iran has made significant progress on the nuclear front. Why would negotiators that have been burned several times by the U.S. agree to roll back the progress they made? So, what might they do? They might perhaps agree to freeze nuclear progress. But the question is: will that be enough for the West? My gut feeling says, no. Then there’s the issue of the Gaza war and the “axis of resistance.” From the West’s perspective, it's really hard to come to an agreement with a country that's backing attacks against Israel, which is a key U.S. ally in the region. Optics-wise, it doesn't look good. So, it seems difficult to imagine that they would pursue such an agreement.
Briefly on the regional front, as I mentioned, Iran is currently stuck between a rock and a hard place, which, interestingly, mirrors U.S. politics in some ways. The current government in Iran is reformist, and you could draw a parallel with the Democrats in the U.S. For example, in the aftermath of the Ismail Haniyeh assassination in Tehran, they fear appearing weak in their response. Like the Democrats, they feel they have to do more to appear strong and may be compelled to act because they were embarrassed and believe that they have to reply. But this administration, and arguably the entire system, doesn’t want a significant escalation. They don’t want a war they can’t win. They won’t be able to handle a war that would drag the U.S. further into the region. On top of that, I don’t think this administration wants to derail ceasefire talks on Gaza, and any significant Iranian response to the assassination risks doing just that. So again, they are stuck between a rock and a hard place. Their room to maneuver is quite tight.
You’ve both already mentioned the JCPOA multiple times. Does Pezeshkian’s presidency change the prospects for a new nuclear deal between the U.S. and Iran?
Esfandiary: If you think about the way the 2015 nuclear deal was agreed to, it did exactly what it was supposed to do. It addressed Iran's nuclear program and was incredibly narrow in scope. It ignored a range of other problems that Western countries had with Iran, and the entire reason for that was because if they had opened it up to things like missiles or Iran's activities in the region—which many in the Republican administration were pushing for at the time—it would have made reaching an agreement impossible. There were too many things being thrown in. The nuclear deal itself took years to negotiate, and it blew through both U.S. and Iranian red lines, such as the U.S initially not wanting any enrichment in Iran. In many ways, it was a remarkable achievement because everyone walked away disappointed, which meant that, had Trump not pulled out of it, I think everyone would have stuck to it.
In addition to the reasons already mentioned, the problem with negotiating a new nuclear deal is that, due to the context of the Gaza war, it becomes really difficult to focus only on the nuclear issue with Iran. You can no longer ignore Iran's support for “axis of resistance” members. You simply cannot come to a nuclear agreement without addressing that, even putting aside the other challenges that I mentioned. Even if those challenges were overcome, you still can’t ignore what's happening in the region anymore. If you're sitting in Washington, Paris, London, or Berlin, the cost is too high. You can't sweep everything aside to address the nuclear issue while ignoring the progress Iran has made with its missile program and the fact that it is now firing projectiles directly into Israel. We've crossed that barrier and moving on as if nothing has happened is no longer an option.
The other issue is the reversibility of sanctions relief that Iran might obtain from negotiations. One of the key problems that Iran faced in the aftermath of the nuclear deal was that when Trump ripped up the deal and walked away from it during his first term, he reimposed sanctions on Iran, effectively cancelling any relief that Iran had obtained. To Iranians, this demonstrates that the U.S. is not a reliable negotiating partner. How can they trust what the U.S. says? How can they ensure that if they get sanctions relief, another administration in four years won't do exactly what Trump did?
All this makes reaching a new agreement—whether purely focused on the nuclear issue or as part of a wider agreement, which a lot of people are now talking about—almost impossible. Despite the fact that I'm an optimist, I find it really hard to believe that we can actually do it, given the difficult experience of the original nuclear deal.
Kahalzadeh: Let me just add that Ayatollah Khamenei recently stated that he is not opposed to negotiations with the West over sanctions but to not forget that they cannot be trusted. In other words, engage with them to manage the current situation and avoid any new shocks to the economy such as the activation of UN Security Council Resolution 1929, which would impose further sanctions on Iran over its nuclear program, or other snapback sanctions.
We know that the impact of sanctions is most severe in the first two years, but after that, their effectiveness tends to diminish. So, Iran is content to leave things as they are. Neither Iran nor the U.S. has a clear policy toward the other. However, this approach is not sustainable, and we don’t know what could happen in the future. No one, for example, could have predicted, before October 7, that Iran and Israel would be in direct conflict. After Iran launched a missile attack on Israel in response to Israel’s assassination of IRGC generals in Damascus, Israel said they would destroy Iran’s nuclear facilities but didn’t do it when they had the opportunity, opting instead to attack a S-300 missile battery in Isfahan. So, I believe both sides are trying to slow down and manage the tension, rather than focusing on finding a solution. Pezeshkian’s selection of Araghchi as foreign minister reflects this foreign policy approach as he can represent both sides—those aligned with Khamenei and also the reformists and moderates.
The second anniversary of the Women, Life, Freedom movement is upon us. These were unprecedented protests against mandatory veiling or hijab in Iran. How do you see Iran’s hijab policy moving forward under Pezeshkian, including the future of the controversial hijab bill that imposes steep fines and prison terms for women and men who violate Iran’s dress code?
Kahalzadeh: Pezeshkian has criticized the bill and the way the police enforce the mandatory hijab policy. But hijab is a red line for the regime—a central element of the social order established after the revolution. So, it’s not something that can be easily changed and he doesn’t have enough power to fully shape the enforcement of federal policy. I don’t think he will recall the bill but he will likely try to postpone its final review and passing in parliament, particularly because no one wants to take responsibility for the bill, even though many were involved in drafting it.
As we’ve discussed, this election had the lowest turnout in the history of the Islamic Republic, with 60 percent of Iranians not voting in the first round and 50 percent in the second. The participation rates of women and young people were particularly low, indicating significant dissatisfaction within these groups. Pezeshkian could potentially use this discontent to argue that the current policy is creating problems for the Islamic Republic. He might propose a more lenient approach to the hijab policy without completely overturning it.
Is there anything else we haven’t covered that could help us better understand the challenges ahead for the Islamic Republic?
Esfandiary: We’ve briefly touched on succession but haven’t gone into much depth. The Supreme Leader is old and his passing will be a key moment for the Islamic Republic. The last succession, when Ayatollah Khomeini died in 1989, happened in a very different context—the Islamic Republic was still relatively new and had just emerged from a long war, while some institutions of power, such as the Guards, were not as strong as they are today—and even then, it came as quite a surprise. So, imagine what might happen in this context, where the legitimacy of the Islamic Republic is being questioned. We're oscillating between conservative and reformist administrations. The Supreme Leader is trying to keep a lid on the internal dynamics and the infighting and yet not really succeeding. Meanwhile, the IRGC is much stronger than it was during the last succession.
Whoever replaces the Supreme Leader will need to work well with the IRGC. The clerics’ influence is, to put it mildly, declining. These dynamics weren’t really in play during the last succession. It will be interesting to see in which direction things go. Remember, the Supreme Leader, aside from being the head of state and the final decision maker, also sets the tone for the Islamic Republic for the foreseeable future. Will this be an Islamic Republic that becomes more closed off, isolated, and reinvigorated with ideological fervor that goes back to its roots? Or will it become less clerical, slightly more open, more willing to engage and compromise? Honestly, I think the only person who can really determine that is the next Supreme Leader.
For more Crown Center publications on topics covered in this Crown Conversation, see: “Iran’s Eastward Turn to Russia and China”, “Iran After Trump: Can Biden Revive the Nuclear Deal and Does Iran Even Want to?”, “Iran Under Raisi: Four Months In.”
The opinions and findings expressed in this Conversation belong to the authors exclusively and do not reflect those of the Crown Center or Brandeis University.