After the JCPOA: Iran’s Strategic and Economic Dilemmas

Iran has suffered a “perfect storm” of setbacks over the past 18 months, undermining its economy, its ability to project power in the region, and its ability to deter future Israeli or U.S. attacks. The deconstruction of their strategic architecture is far from what Iranian leaders had envisioned as the nuclear restrictions of the 2015 Iran nuclear deal (JCPOA) expired in October. A decade earlier, Iranian leaders assumed that, by this point, U.N. sanctions would be lifted, U.S. secondary sanctions would be repealed, and that the economy would be growing at double-digit rates. Yet virtually all of Iran’s hopes for the agreement have been dashed, as ten years later the country remains at odds with the United States and its allies.

In June, the International Atomic Energy Agency’s (IAEA) Board of Governors declared Iran had openly breached its JCPOA commitments by amassing a 400-kilogram stockpile of 60 percent enriched uranium. If enriched to 90 percent purity, this stockpile would be enough to make up to ten nuclear weapons. Utilizing the IAEA declaration as justification, Israel, with support from the United States, conducted a campaign of airstrikes in June, destroying Iran’s main uranium enrichment facilities. To add to Tehran’s misery, the E3 (France, Germany, and the United Kingdom) triggered the “snapback” mechanism in September, calling for the reimposition of all U.N. sanctions that existed prior to the JCPOA. This move dealt an even heavier blow to Iran’s economy than President Donald Trump’s decision to unilaterally withdraw from the agreement and reimpose U.S. sanctions during his first term.

The Search for a Post-JCPOA Direction

Though the pact had, for all practical purposes, dissolved long ago, the JCPOA’s formal expiration on October 18 has forced Iranian leaders to confront key decisions about its nuclear program and the country’s broader geostrategy. After restarting talks with Iran in October, the IAEA declared that Iran’s uranium enrichment facilities at Natanz, Esfahan, and Fordow had been destroyed or rendered inoperable. Iranian leaders likely calculated that any effort to rebuild these sites or recover their stockpiles would be discovered by Israel or the United States and risk triggering immediate military action.

Faced with the loss of its primary means of deterrence—the weakening of all members of its “Axis of Resistance” coalition composed of armed non-state actors—Iran’s leaders, such as President Masoud Pezeshkian and Foreign Minister Abbas Araghchi, acknowledge that Tehran needs to forge a nuclear accord with the Trump administration. They argue doing so is necessary to remove the threat of further military action and relieve Iran from crippling U.S. and U.N. sanctions. Moderates seemed to have already prevailed on one key question—whether Iran should respond to the U.N. sanctions snapback by exiting the Nuclear Non-Proliferation Treaty (NPT) altogether. Iran reaffirmed its commitment to the treaty and, on September 9, signed an Egypt-brokered agreement to resume limited cooperation with the IAEA—a process suspended following the June onslaught of Israeli and U.S. strikes.

In October, Egypt’s Foreign Minister Badr Abdelatty sought to restart U.S.–Iran talks by contacting Araghchi, IAEA Director Rafael Grossi, and U.S. Special Envoy for the Middle East Steve Whitkoff. Abdelatty stressed the need for practical confidence-building measures and a political framework that would allow negotiations to resume, with the goal of moving toward an agreement to stabilize the wider region.

Hardline leaders like Supreme Leader Ayatollah Ali Khamenei, however, favor a more confrontational approach, arguing that projecting strength will advance Iran’s goals more effectively than early concessions. Reinforcing his opposition to new talks with Washington, Khamenei taunted President Trump in mid-October, accusing him of falsely claiming to have  “destroyed Iran’s nuclear industry.” Underscoring this stance, on October 18, Iran’s Foreign Ministry announced the official expiration of the JCPOA, formally ending all international oversight of the country’s nuclear program. Potentially even more challenging for the United States and its partners, Iranian officials reacted to a mid-November IAEA Board of Governors resolution critical of Iran’s lack of comprehensive cooperation by stating that withdrawal from the NPT is “on the table” for consideration.

Following strikes on Natanz, Fordow, and Esfahan, satellite imagery shows that Iran has accelerated construction on another possible nuclear site at Pickaxe Mountain, a deeply buried facility just one mile south of the Natanz uranium enrichment site. Iran has also claimed in recent weeks to have tested a newly designed intercontinental ballistic missile and may no longer be abiding by its self-imposed 2,000-kilometer range limit for missiles. I October, IRGC Commander Major General Mohammad Pakpour warned that any miscalculation by adversaries in the Persian Gulf, the Strait of Hormuz, or Iran’s islands would face a “decisive and crushing response.”  But, the blustering statements by hardline Iranian leaders appear calibrated to deter further action by the United States or Israel rather than provoke a new confrontation.

Bracing for Impact: The Threat of Expanded Sanctions

The debate within Iran over the fate of its nuclear program and its relations with the United States will likely hinge on how severely the renewed U.N. sanctions damage the country’s economic and strategic standing. Even before the snapback, U.S. secondary sanctions reimposed during Trump’s first term in 2018 had inflicted significant damage. Those consequences likely contributed to Tehran’s decision to resume nuclear talks shortly after Trump’s second term began, despite the Supreme Leader’s frequent warnings to his subordinates that Trump could not be trusted because he—not Iran’s government—abrogated the JCPOA.

Some of Tehran’s more “pragmatic” officials warn that Iran needs to negotiate with the Trump administration, as the consequences of the snapback sanctions are strategically and economically unsustainable. The snapback reinstates several major military and proliferation-related restrictions, including a ban on the sale of ballistic missile and drone technology to Iran by U.N. member states. Regarded as the country’s main strategic deterrent, Tehran’s arsenal of ballistic missiles cannot be easily expanded without access to foreign technology. The snapback also reimposes the conventional arms embargo that expired in 2020, complicating Tehran’s efforts to replace or repair its air defense systems and limiting its ability to acquire the latest-generation combat aircraft. The weapons-transactions embargo is also intended to hinder Iran’s ability to arm its Axis of Resistance partners, although Iran has routinely violated this provision and the sovereignty of its neighbors in the past. The U.N. action further restores member states’ authority to seize illicit weapons and other prohibited cargo being transferred to Iranian proxies.

Pragmatists warn that Iran cannot afford to become permanently separated from its key economic partners. China, which buys 90 percent of Iran’s oil exports, appears to recognize that the reimposed sanctions are binding on all U.N. member states. Since the sanctions took effect at the end of September, Beijing has reduced its purchases of Iranian oil by at least 15 percent.  China’s daily imports from Iran have fallen to about 1.2 million barrels per day, down from an average of nearly 1.5 million earlier in the year. To prevent further reductions, Iran has been  forced to discount its barrel price to China by about 20 percent. If this trend persists, the loss of revenue will severely constrain Iran’s ability to purchase essential imports.

Under these conditions, Iranian pragmatists argue that a new nuclear accord with the United States, even with distasteful compromises, could roll back U.N. and U.S. secondary sanctions, providing Tehran with an opportunity to stabilize its economy. Economic growth could enable Tehran to address pressing domestic issues, including water and electricity shortages that are fueling social unrest. Still, in Iran’s hierarchical system, decisions on key compromises will require the Supreme Leader’s backing—and his deep hatred of the United States, lust for regional domination, and determination to punish Israel remain the primary obstacle.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.