26 August 2026

Why Iran has not folded yet

Atlantic Council | Andrew L. Peek and Jonathan Panikoff

US President Donald Trump announced an escalation toward unprecedented economic warfare and isolation against Tehran, raising the prospect of direct military strikes following Iran’s refusal to negotiate a new bilateral agreement. Iranian leadership under Supreme Leader Mojtaba Khamenei and senior IRGC veterans of the Iran-Iraq War continue resisting concessions, aiming to inflict short-term operational costs while disrupting regional opposition coalitions.

Decades of war-forged endurance define Tehran’s command posture, with security forces prioritizing regime survival over widespread popular economic relief. Shrinking accessible foreign currency reserves, previously collapsing from $120 billion to under $13 billion under past maximum-pressure campaigns, severely constrain domestic stabilization if petroleum exports via the Strait of Hormuz remain restricted. As Saudi Arabia signs a new defense pact with Turkey and Pakistan to hedge against escalating regional volatility, Washington’s strategy relies on sustained long-term enforcement of financial sanctions to exploit Tehran’s structural economic vulnerabilities.

Comment

Riyadh’s alignment with Ankara and Islamabad under the Saudi-Turkey-Pakistan defense agreement accelerates a structural shift in Gulf security architectures. The inclusion of Pakistan provides Saudi Arabia with direct access to a nuclear-armed military establishment, mitigating long-term operational vulnerabilities along the Persian Gulf. Meanwhile, Ankara’s participation integrates Turkish aerospace and defense industrial firms into Sunni defense coordination networks.

By establishing an autonomous military axis outside traditional GCC structures, Saudi Arabia decreases its reliance on US Central Command while broadening regional arms procurement options. Consequently, this collective framework forces the IRGC’s Quds Force to account for Turkish drone systems and Pakistani conventional deterrence in its regional operational planning.

Strategic Question for Discussion
Which factor poses a more immediate constraint on the IRGC’s regional strategy — the emergence of the Saudi-Turkey-Pakistan defense agreement or the accelerated depletion of Tehran's foreign currency reserves?
The trajectory indicates that financial depletion presents the far more immediate crisis for Tehran's operational sustainability. While the Saudi-Turkey-Pakistan defense agreement complicates long-term regional posture, the drop in accessible foreign reserves directly impairs the IRGC's ability to maintain proxy funding networks across Iraq and Syria.
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