Impacts of Israel-Hamas Conflict on Tehran-Washington Relations

The prolongation of the Israel-Hamas conflict is intensifying Iran’s economic woes, sparking discussions on the necessity of engaging with the U.S. and fundamentally altering foreign policy strategies. The disruption of an unwritten accord with the United States has resulted in the ongoing freezing of essential Iranian assets. Moreover, the engagement of certain resistance groups, which not only failed to support the Palestinians but also adversely affected Iran, seems to be catalyzing these conversations. Amidst criticisms of the Ra’isi administration for overlooking the sanctions-induced suffering of its citizens, the conversation is increasingly zeroing in on the hardliners’ contribution to stalling the JCPoA’s revival and the removal of sanctions, especially with elections on the horizon.

Four months after hardliners in Iran celebrated Hamas’s launch of Operation al-Aqsa Storm and its perceived blow to the prestige of Israel, reformist observers are questioning the cost of that operation for Gazans and its consequences for Iran and Iranians. For instance, in response to growing economic concerns, the Ra’isi administration insists it has been actively seeking a resolution whereby sanctions are either eliminated or effectively suspended. Acknowledging the benefits of sanctions relief for the administration, Economy Minister Ehsan Khanduzi has pointed the finger at the “other party”—presumably the U.S.—for not ensuring that an agreement, once reached, is upheld. However, among reformist and moderate circles, there is an increasing concern that the Ra’isi administration has squandered the opportunity for engagement with the Biden administration, thereby imposing unnecessary hardships on the Iranian people. While the possibility of reviving the JCPoA seems increasingly remote, there is a consensus that effective diplomacy and engagement for sanctions relief remain critical for economic relief and development. Ahmad Dastmalchian, a conservative former ambassador to Jordan and Lebanon, for instance, suggests that if regional countries, along with Iran and the U.S., can persuade Benjamin Netanyahu to help de-escalate the Gaza conflict, the issues between Tehran and Washington could then be approached through negotiations, similar to the JCPoA format. Among reformists, the fact that Iran and the United States have so far managed to avoid escalating tensions is viewed as a positive development and potentially a foundation for resuming engagement. At the same time, there is a growing call within this group for reforms in Iran’s foreign policy approach, an end to hostilities with the U.S., and a shift from a military and politically oriented policy to one that is more focused on national security and economic considerations.

Among other apprehensions, reformist economists particularly warn that the potential victory of a Republican candidate in the U.S. presidential election could lead to intensified sanctions. They point out that in the meantime, cautious foreign companies are hesitant to commit to long-term trade agreements or investment in Iran. The ongoing conflict in Gaza and its potential to escalate tensions between Tehran and Washington remains a concern for some, despite assertions from both sides that they wish to avoid such an outcome. Meanwhile, in light of recent comments by IAEA Chief Rafael Grossi regarding Iran’s lack of cooperation and transparency, especially concerning Iran’s nuclear bomb production capabilities, reformist analysts are worried that the UN nuclear watchdog might be revisiting its approach to Iran ahead of the next Board of Governors meeting in 2024, amid ongoing regional tensions and diminishing Iran-IAEA engagement.

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