Iran’s Supreme Leader addresses an audience in Tehran, January 1, 2025

Iran’s leadership stands at a critical juncture as its hardline policies face unprecedented internal and external challenges.

Since September, its Lebanese ally Hezbollah has been decimated by Israel’s attacks, including the assassination of leader Hassan Nasrallah and senior commanders. Its ally Bashar al-Assad, propped up by more than a decade by Tehran, has been toppled in Syria. Militias in Iraq have been checked in their attacks on American positions by US retaliation.

Iran’s Supreme Leader, Ayatollah Ali Khamenei, has shifted his rhetoric, with a denial of reliance on proxy forces. This waning influence in the Middle East is accompanied by mounting economic crises, declining legitimacy at home, and strained relations with the West.

Long reliant on promoting itself through export of revolutionary ideals, the Islamic Republic is grappling with the consequences of decades of ideological governance. The question now is whether pragmatism can prevail over hardline dogma to salvage a fractured nation and redefine Iran’s role in a rapidly changing geopolitical landscape.

Iran and the “Great Satan”

The origins of Iran’s fraught relationship with the West are in the 1979 Islamic Revolution, which removed the Shah and established an Islamic Republic led by Ayatollah Ruhollah Khomeini.

A key aspect of this revolution was the depiction of the US as the “Great Satan”, representing imperialism and a threat to Iran’s independence. This narrative became a cornerstone of Iran’s revolutionary identity, with slogans like “Death to America” as lasting symbols of the regime’s ideological position.

Nevertheless, there have been instances when Iran’s leadership, especially its reformist elements, attempted to mend the rift. In the late 1990s, President Mohammad Khatami launched the “Dialogue Among Civilizations”, an initiative designed to promote understanding between Iran and the West. President Hassan Rouhani’s administration successfully negotiated the 2015 Joint Comprehensive Plan of Action with the 5+1 Powers (the US, France, Germany, the UK, China, and Russia), a deal hailed as a significant diplomatic success.

These initiatives encountered major obstacles. The US withdrawal from the JCPOA in 2018 under the Trump Administration reignited tensions, strengthened Iran’s hardliners, and led to the collapse of the agreement. Under the influence of Ayatollah Khamenei and hardline factions, Tehran adopted a more confrontational approach, further diminishing trust with the West.

Economic Realities: Is A Deal Possible?

Iran’s state-controlled economy, significantly shaped by organizations such as the Revolutionary Guards and dominated by hardline interests, is a crucial backdrop to its foreign policy.

Over the years, the privatization of industries has mainly benefited entities connected to the regime, while sanctions and mismanagement have left the wider economy in turmoil. With high inflation, energy shortages, and a place on the blacklist of the Financial Action Task Force, Iran has slipped into an opaque, unstable economy.

The shadow economy enables the regime to avoid accountability for corruption and embezzlement, enriching a small elite while the majority of Iranians face economic struggles. However, amid their anti-Western rhetoric, hardliners recognize the importance of economic stability to maintain their hold on power.

Ironically, those hardliners might be in a stronger position to negotiate with the West than reformists. Their control over Iran’s political institutions allows them to frame negotiations as a strategic necessity rather than a betrayal of revolutionary principles. This situation, often likened to “Nixon Goes To China” and the US détente with Beijing in the 1970s, could enable Iran’s leaders to pursue a deal without significant domestic opposition.

While hardliners have traditionally resisted Western engagement, they also understand that relief from sanctions is essential to ease domestic discontent. By portraying any agreement as a triumph for Iranian sovereignty and resistance, they can maintain ideological consistency while addressing pressing economic challenges.

Navigating the Ideological Divide

Despite the potential for progress, significant challenges persist. The hardliners’ ideological opposition to the West, deeply embedded in revolutionary principles, continues to influence Iran’s foreign policy. This perspective views the U.S. not merely as a geopolitical rival but as a fundamental threat to Iran’s Islamic identity.

Western nations remain wary of Tehran’s motives, especially concerning its nuclear ambitions and regional goals. Internal rifts within Iran further complicate matters. While hardliners may wield the political power necessary to negotiate, reformist groups are still advocating for greater engagement.

The relationship between Iran and the West is a complex mix of ideology, geopolitics, and economic necessity. Although reformists like Khatami and Rouhani have laid the foundation for diplomatic relations, it may ultimately be the hardliners who decide if Iran can secure a lasting agreement with the West.

For both Tehran and the international community, the challenge is to navigate the contradictions within Iran’s political landscape, where strict ideological beliefs co-exist with pragmatic survival strategies. Meeting Iran’s economic needs will demand patience, creativity, and a readiness to engage with the regime on its own terms.

It is only by grasping the complex role of Iran’s hardliners that the West can carve out a path toward meaningful engagement and a resolution to decades of tension.