Iran Update, August 16, 2023

The Iran Update aims to inform national security policy by providing timely, relevant, and independent open-source analysis of developments pertaining to Iran and its Axis of Resistance. This update covers political, military, and economic events and trends that affect the stability and decision-making of the Iranian regime. It also provides insights into Iranian and Iranian-sponsored activities abroad that undermine regional stability and threaten US forces and interests. The Critical Threats Project (CTP) at the American Enterprise Institute with support from the Institute for the Study of War (ISW) provides these updates Monday through Friday. To receive Iran Updates via email, please subscribe here.

The Institute for the Study of War (ISW) with support from the Critical Threats Project (CTP) at the American Enterprise Institute launched an interactive map of Iran and the Middle East. The map depicts events in Iran that affect the stability of the Iranian regime, namely anti-regime protests and reported poisoning incidents. It also shows developments in Syria that jeopardize regional stability and pose threats to US forces and interests, including Iranian and Iranian-backed militia positions.

Key Takeaways

1. Qatar-based Al Araby reported that IRGC Quds Force Commander Brigadier General Esmail Ghaani ordered Iranian-backed militias in Iraq to suspend attacks against US targets. He specifically called for an end to an IED campaign that an Iranian-backed militia has waged against Iraqi-operated convoys supporting the US military presence in Iraq.
2. Iranian oil exports to China have increased by over 60 percent in August 2023. This growing energy cooperation is part of a broader deepening of Sino-Iranian ties, especially regarding economic relations and infrastructure development.
3. Iranian state media blamed the Afghan branch of the Islamic State—named Islamic State Khorasan Province (ISKP)--for a recent terror attack in central Iran. This reporting from Iranian state media is the most explicit connection it has drawn yet between the attack and ISKP.
4. Armed Forces General Staff spokesperson Brigadier General Abol Fazl Shekarchi described the purpose of a recent Iranian military exercise in the Persian Gulf, affirming CTP’s previous assessment of its intent.

Iranian Activities in Iraq

This section covers Iranian efforts to consolidate and expand Tehran’s economic, military, and political influence throughout Iraq. This section examines some of the many campaigns that Iran is pursuing to achieve this strategic objective. CTP will update and refine our assessments of these campaigns over time and in future updates.

Qatar-based Al Araby reported that IRGC Quds Force Commander Brigadier General Esmail Ghaani ordered Iranian-backed militias in Iraq to suspend attacks against US targets.[i] The article cited an unidentified source in the Shia Coordination Framework—the umbrella organization for Iranian-backed political parties in Iraq. This report comes after Ghaani traveled to Baghdad on August 15 to resolve differences between Iranian-backed parties and discuss the recent US-Iraq Joint Security Dialogue.[ii]  CTP cannot verify this report, but it is consistent with CTP’s previous assessment that Ghaani may have ordered Iranian-backed militias to refrain from attacking US targets in Iraq during his last visit to Baghdad in June 2023.[iii] It is also consistent with the reports that the US-Iran prisoner swap agreement is part of a broader understanding to reduce tensions between the United States and Iran and prevent Iranian-backed attacks against US positions.[iv]

Ghaani specifically called for an end to an IED campaign that Ashab al Kahf—and Iranian-backed militia—has waged against Iraqi-operated convoys supporting the US military presence in Iraq. Ashab al Kahf has claimed responsibility for four IED attacks against such convoys since July 2023. Ashab al Kahf has consistently been the most publicly aggressive of the Iranian-backed militias toward the United States. The group has also called for two separate protests at the US embassy in Baghdad.[v] The Iranian-backed proxies that have gained political influence under Iraq Prime Minister Mohammad Shia al Sudani have rejected Ashab al Kahf’s calls to protest and have instead emphasized diplomatic and political pressure against the United States.

Iranian Domestic and Political Affairs

This section covers factors and trends affecting regime decision-making and stability. CTP will cover domestic politics, significant protest activity, and related issues here.

Iranian oil exports to China have increased by over 60 percent in August 2023. These exports have risen from around 917,000 barrels per day (bpd) from January to July to around 1.5 million bpd thus far in August.[vi] These reports are consistent with CTP’s reporting on July 31 that Iran has sold approximately one million barrels of oil per day to China since January 2023.[vii] This spike in Iranian oil exports to China is consistent with similar increases during the summer months of previous years.[viii] Iran’s export of 1.5 million bpd is significant, however, given that previous spikes never reached this level. Iranian oil exports to China have steadily increased since 2020, when Iran was exporting approximately 400,000 bpd.[ix] This growing energy cooperation is part of a broader deepening of Sino-Iranian ties, especially regarding economic relations and infrastructure development.

These oil sales to China could yield the Iranian regime several benefits, to include the following:

• Iranian leaders will likely use the revenue to revitalize their economy and mitigate the impact of Western sanctions. Iran is facing poor economic conditions, with the value of the Iranian rial hovering around 490,000 rials to one US dollar as of August 16.[x] The rial was comparatively valued at around 298,200 rials to the dollar before the eruption of the anti-regime Mahsa Amini protest movement in September 2022.[xi] The Iran Statistical Center reported in July 2023 that Iran’s inflation rate is approximately 47.5 percent.[xii] Increasing oil sales to China will generate greater capital inflows into Iran even though Iran is currently selling oil to China with an approximately $20 per barrel discount.[xiii] The oil sales will also help Iran implement its 2023 fiscal budget which is dependent on selling 1.3 million bpd, however current sales fall short of Iran’s desired $85 per barrel.[xiv]
• Iranian leaders may obtain Chinese support in developing domestic infrastructure in exchange for some oil sales. An Iranian transportation official announced in July 2023 that Iran is conducting preliminary negotiations involving China constructing roads connecting Tehran to the Caspian Sea in exchange for Iranian oil.[xv] Iran has also called for Chinese investment in developing an Iran-Afghanistan-China railway corridor.[xvi] Developing such infrastructure projects would support the larger Iranian effort to transform the country into a regional and international transit hub.[xvii]

Iranian state media blamed the Afghan branch of the Islamic State — named Islamic State Khorasan Province (ISKP) — for a recent terror attack in central Iran. A gunman opened fire at the Shah Cheragh Shrine in Shiraz, Fars Province on August 13.[xviii] IRGC-affiliated Tasnim News Agency reported on August 16 that the perpetrator joined the Islamic State in Turkey and then traveled to Afghanistan to receive three months of training.[xix] This reporting is consistent with CTP’s previous assessment that ISKP is likely directing cells in Turkey.[xx] It is also consistent with CTP’s previous observation that the perpetrator’s background and the historic pattern of ISKP activity in Iran indicates that ISKP was responsible for the attack.[xxi]

This reporting from Iranian state media is the most explicit connection the regime has drawn between the attack and ISKP. Iranian state media previously reported that the perpetrator was a Tajik national from northeastern Afghanistan.[xxii] However, that report did not claim he received training in Afghanistan with the Islamic State as the more recent reporting does. ISKP has expanded recruitment of Tajiks—who, along with Uzbeks, make up the majority of the population in northern Afghanistan—through its propaganda output in Tajik since early 2022.[xxiii]

This attack on the Shah Cheragh Shrine will likely exacerbate tensions between Iran and the Afghan Taliban, as CTP previously reported.[xxiv] Tehran has repeatedly pushed the Taliban to adopt stronger counterterrorism measures since the Taliban came to power in August 2021. ISKP previously conducted an attack on the Shah Cheragh Shrine in October 2022.[xxv] These attacks compound with additional Iranian grievances toward the Taliban, moreover. Tensions have risen between Iran and the Taliban over water resources in recent months. The confluence of issues related to Afghanistan places Tehran in a difficult position as it tries to balance its fragile relationship with the Taliban while also ensuring domestic stability.

Armed Forces General Staff spokesperson Brigadier General Abol Fazl Shekarchi described the purpose of a recent Iranian military exercise in the Persian Gulf, affirming CTP’s previous assessment of its intent.[xxvi] The IRGC Navy conducted a well-covered naval exercise around the island of Abu Musa on August 2.[xxvii] Shekarchi stated on August 16 that the exercise was meant to send messages to the Gulf states and to the United States.[xxviii] The IRGC firstly sought to assert Iranian control over the disputed islands of Abu Musa and Greater and Lesser Tunbs, which the UAE has also made similar territorial claims to.[xxix] The IRGC also meant to signal that the military presence of extra-regional states, such as the United States, should come to an end.[xxx] The IRGC was specifically responding to the recent buildup of US military forces around the Persian Gulf.[xxxi] CTP assessed these messages in our August 2 update.[xxxii]