Chapter 6 - Iran: Stuck under a low ceiling in Iraq, cutting its losses in Syria

According to many of its critics, the Islamic Republic of Iran has increased its influence in post-Saddam Hussein Iraq and in Syria since 2011. In a narrow sense, this is not inaccurate: Iran has made gains in both countries. Yet a comprehensive analysis of Iran’s choices leads to a more nuanced assessment: the ceiling for Iranian success in Iraq is low, while the best that Iran can hope for in Syria is to cut its losses, not make net gains.

This is because there is an inherent tension in Iran’s policies in Iraq and Syria: for Tehran to achieve influence in either country, it needs them to be weak. At the same time, instability and weak governments—especially in Iraq—negatively affect Iran’s security. Conversely, a strengthening Iraq and a stable post-conflict Syria would be positive for Iran’s security but less permeable to Iranian influence. The optimal policy for Iran is therefore one that pursues a difficult balance between these contradictory incentives and pressures. This, however, comes with significant costs; it is a lesser of two evils rather than an absolute ideal.

Iran in Iraq: A low ceiling for success

In a weak Iraq, Iran can build its influence by penetrating a fragmented political system in which local actors need and seek external support. At some point, the condition—state weakness—that allows Iran to maximise its influence brings diminishing and eventually negative returns as instability in its neighbour increasingly threatens Iran. At the extreme end of the range of scenarios, a collapsed Iraq—a distinct possibility in recent years—represents a nightmare scenario. This affects Iran through a variety of means: violence can spill over across the long border; it creates space for anti-Iran groups such as the Islamic State in Iraq and the Levant (ISIL); and it pushes the US to extend its military presence.

Conversely, the opposite outcome—rising Iraqi state strength—would gradually lessen Iran’s insecurity, but also its influence; at some point, the returns again become negative. A strong Iraq is unlikely to be an ally but would rather act as a check on Iranian power and as a competitor. A strong Iraq is bound to be led by nationalist leaders who, even if they are Shia, are unlikely to tolerate high levels of Iranian penetration; resentment of Iranian influence is already widespread. As long as Iraq is weak and its politics divided, this sentiment cannot be channelled; in a strengthening Iraq, however, it will likely translate into growing nationalist opposition to Iranian influence in Iraq, and eventually to Iranian regional ambitions.

Iran’s ideal is therefore to strike a balance between the costs and benefits of its choices. Researcher Mohammad Ali Shabani refers to this as “qualified stability”, while others use the label of “managed chaos”. Both cases express Iran’s interest in a weak and unstable but minimally functioning Iraq which it can penetrate and where it can shape outcomes, but not unstable to the point that it seriously threatens its own security.

Concretely, Iran translates these contradictory pressures into its preference for a democratic and decentralised Iraq, believing correctly that this is the optimal combination to prevent the emergence of an Iraq that is too strong or too weak, the two extremes it wants to avoid. These interests push Iran to use contradictory tools. It backs the central government and democratisation, but at the same time it supports non-state groups contesting the state’s monopoly on violence. It contributes to instability through its support for violent groups, while also positioning itself as the indispensable actor able to mediate disputes.

It is likely that Iraq will continue to lend itself to these objectives for the foreseeable future. The most likely scenario in the short to medium term is for the situation to remain more or less the same, with a Sunni insurgency contesting the central government in the west, de facto Kurdish autonomy in the north, and continued bickering among Shia factions. In this fragmented scene, Iran will continue to provide support to dependent clients.

...Iran is locked into this uncomfortable status quo.

Iran has been adept at calibrating the use of its many tools, but it cannot avoid the contradictions inherent to its Iraq policy. More influence in a weak Iraq means less security; more security as Iraq becomes stronger means less influence and raises the risk of the return of an ambitious Iraq. In this sense, muddling along is the optimal outcome. This is the low ceiling for Iran’s ability to achieve success in Iraq: gains inevitably come with important costs, and even the optimal outcome is far from ideal. In a way, Iran is locked into this uncomfortable status quo. Significant changes are unlikely to be positive: movement in either direction—more instability or more stability—would likely tilt the cost-benefit balance towards greater costs. There is, moreover, no indication that Iran has a plan, let alone the capability, to break out of this dilemma.

In Syria: Cutting its Losses

The relationship with Syria provides Iran with a platform to resupply Hizballah and, more broadly, to pressure Israel and project influence in the Levant. Hizballah, in turn, facilitates Iran’s ties with groups such as Palestinian Islamic Jihad and Yemen’s Houthis. These ties are essential pillars of Iran’s deterrence: they allow it to signal that an attack by Israel or the US could lead to retaliation through these groups. The onset of war in Syria therefore represents a major source of anxiety, as the fall of the Assad regime would be one of the most serious geopolitical blows to the Islamic Republic.

Iran also opposes post-conflict Syria becoming dominated by a Sunni nationalist or Islamist regime that would adopt an anti-Iran stance. Most fundamentally, as Mohsen Milani has argued, Iran’s objective is to preserve “Assadism”, a regime maintaining the partnership with Iran, ideally but not necessarily with Bashar al-Assad at its head. In the meantime, the extension of the war, with Assad in control of “useful Syria”—airstrips around Damascus and roads into Lebanon, main cities along the coast, and the Alawite heartland—serves Iran’s interests better than a transition eliminating part or all of Assadism. Iran will not admit to this, at least not before serious negotiations on post-conflict Syria, as Assad’s fate is a valuable bargaining chip. At the same time, this is easier said than done: Assad will resist any deal calling for his departure, while no clear alternative to Assad has emerged.

Iran’s approach to the war in Syria differs in some respects from its approach to Iraq. The fall of Assad would be a major blow, reduce Iran’s influence in the Levant and weaken its deterrent. Nevertheless, the impact on Iran’s security would be less negative than worst-case scenarios in Iraq: instability in Syria cannot directly spill over into Iran, while an aggressive Syria would be a competitor but not a direct threat. That is why Iran’s actions in Syria are driven more by opportunity than threat, the opposite of its approach to Iraq.

What is the balance sheet of Iran’s policy in Syria since 2011? In terms of gains, most notable is its increased influence: Iran has deeply penetrated Syria. Its officers are embedded at every level in the Syrian military, while it has also deeply penetrated the Syrian war economy. How much leverage does this buy Iran? Assad needs support, but he has been deft at preventing this dependence from making him a puppet of Iran or Russia. He recognises that Tehran and Moscow need him and he appears convinced that they will not reduce more than marginally their support when he does not heed their requests. Second, Hizballah is gaining tremendous fighting experience in Syria and has received advanced weaponry from Iran and Syria since 2011. Third, the consolidation of the National Defence Forces (NDF, a pro-Assad militia trained and equipped by Iran) also brings long-term gains. Whatever the outcome of the war, the NDF is most likely to remain a vehicle for Tehran to protect some of its interests. To institutionalise its long-term influence, Iran could replicate the Hizballah model and encourage the NDF to provide social services and form a political party.

...Iran's actions in Syria are driven more by opportunity than threat, the opposite of its approach to Iraq.

Despite these gains, Iran is suffering mounting losses. Most basically, Assad will not regain all of Syria militarily; even if he survives, he will be significantly weakened and will have to deal with a government of national unity and continuing insurgencies by ISIL, Al‑Qaeda, as well as the Kurds. As such, the war weakens Iran’s ability to project influence in the Levant and weakens its deterrent.

Iran has also suffered damage to one of its most valuable partnerships. When Syria spiralled into civil war, Hamas sided with the opposition and therefore against its Iranian and Syrian patrons, prompting Iran to cut its support. Iran’s remaining partner in the Palestinian Territories is Islamic Jihad, a smaller group mostly focused on violent militancy and less on socio-political activities. As a result, its ability to pressure Israel is shallower and narrower.

The war has also been costly for Hizballah. It has suffered hundreds of deaths in Syria, including senior figures. In the worst-case scenarios featuring the end of Assadism, moreover, resupplying Hizballah would become very difficult. Using the maritime route would be risky: Israel has a strong naval presence in the eastern Mediterranean, while the US-led coalition has a strong presence along the path from Iran’s ports to Lebanon.

Growing Russian influence in Syria benefits Iran, but Russian gains also partly come at the expense of Iranian influence in Damascus. Down the road, there is scope for tension as both Moscow and Tehran seek to position themselves as the dominant external player in Syria. Iran’s vision of a fragmented Syria in which pro-Iranian actors maintain autonomous power centres, is likely to clash with Russia’s preference for a strong central government.

The Islamic Republic has tried since 1979 to position itself as the vanguard of resistance against US and Israeli policies. Its ability to transcend its Persian and Shia identity has always been more rhetorical than real. Nevertheless, Iran does enjoy support among Arabs and Muslims abroad, especially in times of crisis. Yet Iran’s ability to leverage its soft power is being damaged by its propping up of a regime trying to crush a mostly Sunni opposition. This also damages its narrative of resistance, since Iran and Hizballah are now mostly focused on assuring the survival of the Assad regime and not on opposing Israel.

Finally, Iran’s support for Assad carried heavy financial costs. Numbers vary according to the source, but amount to many billions of dollars per year. For an economy under strain, this is a major commitment. It is true that Iran’s population has not poured into the streets to decry this. Yet as popular frustration mounts because of unfulfilled expectations of economic growth following the nuclear deal, this could become an additional, albeit secondary, concern for Tehran.

The best scenario for Iran is for the Assad regime to survive. But even if it does, it would be weakened. It would protect core Iranian interests, but would not return to the ally it was before 2011. This is, de facto, the scenario that Iran faces for the foreseeable future, as the war is unlikely to end for many years. The second best scenario is “Assadism without Assad”. But this scenario would be more negative than the first. Such a post-war Syrian regime would protect some core Iranian interests, but it would be weaker and more divided and would face ongoing insurgencies. The third scenario is the worst case, the fall of Assad and Assadism, which would lead to major losses. In sum, the best that Iran can aim for in Syria is to cut its losses, to try to protect what it has and to limit future costs.

Does the rise of ISIL change this assessment?

The emergence of ISIL has been a double-edged sword: it has created additional opportunities for Iran, but it has also increased its insecurity. It has thus reinforced existing dynamics: gains are inevitably accompanied by current or future costs.

The rise of ISIL in 2014 generated opportunities for Iran. In Iraq, it rapidly increased its support for Shia militias, the Iraqi military and Kurdish groups. Tehran, for example, reportedly sent drones and started delivering military equipment only days after the fall of Mosul. It also started delivering weapons to Iraqi Kurdish militias long before the US-led coalition launched its own train and equip program for the Peshmerga.

ISIL does not pose a direct threat to Iran. Even though it came to within a few dozen kilometres of the Iranian border in 2014, it is not strong enough to mount sustained incursions inside Iran, nor has it developed important smuggling routes through Iranian territory. Iran has also avoided the refugee flows that affect other countries in the region. Tehran itself reportedly assesses that the risk of a threatening ISIL presence within Iran is limited. The potential for ISIL penetration exists in theory: Baluch areas in the southeast share a border with Pakistan, while Kurdish areas in the northwest share a border with Iraq. Both regions include a disenchanted Sunni minority, existing criminal and insurgent groups well connected in Iraq and Pakistan, and access to weapons.

Despite this limited internal threat, the rise of ISIL comes at significant cost to Iran. It has raised, again, the risk of the collapse of Iraq. A de facto or de jure Sunni state in a broken Iraq would likely hold a hostile relationship with Iran; if it were not ruled by extremists, it would likely be allied to Saudi Arabia. Even if worst-case scenarios are avoided, the emergence of ISIL highlights how weak Iran’s Iraqi allies are. It has also led to the return of the US military in Iraq.

...the emergence of ISIL highlights how weak Iran’s Iraqi allies are. It has also led to the return of the US military in Iraq.

Iran’s main response has been to increase its support for Shia militias. Though this allows it to gain influence, it comes at a growing cost. It feeds ISIL’s sectarian narrative, giving it a powerful recruitment tool. Iran’s support for Shia militias (and for Assad) also increases resentment among Iraqi and other Arab Sunnis, damaging the Islamic Republic’s soft power.

Does the nuclear deal change this assessment?

According to critics of the nuclear deal, one of its flaws is that the post-sanctions windfall allows Iran to behave more assertively by increasing its support for Assad, Hizballah, pro-Assad militias in Syria, as well as Shia militias in Iraq. This is exaggerated. 

The windfall, first, has been limited and is unlikely to grow rapidly. Many unilateral US sanctions remain in place, creating obstacles for European and other banks and making them reluctant to deal with Iranian banks. Sustainable economic growth, moreover, also requires economic reform, which has not materialised so far. As long as corruption, a harsh climate for foreign investment, a bloated bureaucracy, and the concentration of wealth with regime‑friendly entities remain, prospects for growth stay far below their potential. As a result, even though estimates of pre-deal frozen Iranian assets ranged between USD 50 billion and USD 150 billion, by mid-2016 Iran had only recovered an amount in the low billions.

Second, the primary motivation behind the regime’s decision to pursue the nuclear agreement was the mounting economic difficulties the country faced. It is therefore likely that most economic benefits (limited though they are) will go towards domestic economic needs.

Third, there is no clear pattern between the state of Iran’s finances and its support for militant groups. Iran was flush with cash when oil prices were high from 2005 to 2010; though these years were marked by active Iranian involvement throughout the region, access to cash was at most a small driving factor behind this assertiveness. Similarly, there is no indication that as Iran became increasingly strangulated by sanctions after 2010, it reduced its support for partner groups as a result.

Fourth, Sunni Arab states are increasingly balancing against Iran. They have accepted that the nuclear deal is now a reality but want more assertively to oppose Iran regionally. In this context, Saudi Arabia has encouraged other Arab states to join it in opposing Iran in Syria, Yemen and elsewhere. Riyadh has notably succeeded in breaking the long‑standing partnership between Iran and Sudan, convincing (or rather, bribing) Sudan to join the campaign against the Houthis in Yemen.

The bottom line is that post-deal Iran is unlikely to increase significantly its investments in Iraq and Syria, certainly not enough to tilt the balance of forces in either country more than marginally. It is not benefiting from a massive post-sanctions windfall, and to the extent it receives additional resources, it is likely to invest most of them in the Iranian economy.

Conclusion

Iran is most influential in failed or failing states; yet even in those, it faces major constraints. Its gains are costly; its security is precarious. This shows the limits of Iran’s influence: Iraq and Syria are crucial cases, as these are the countries (with Lebanon) where Tehran invests the most and where the environment is most permeable—and yet even there it achieves only limited success.