Over the past few weeks, President Trump’s 14-point memorandum of understanding (MoU) between the U.S. and Iran has fallen apart. The MoU was designed to de-escalate hostilities, open the Strait of Hormuz, restart Iran’s economy, and stop its nuclear weapons program, but failed as differing interpretations among its parties resulted in re-escalation. Iran argues that Israel continuing to fight against Hezbollah in Lebanon violated the agreement’s requirement of a cessation of hostilities “on all fronts.” Following repeated violations by Iran, including renewed attacks on commercial vessels, President Trump eventually declared the ceasefire and MoU to be over. In the last few days, Iran has launched drone and missile attacks against the U.S. and its allies in the Middle East while the U.S. in turn has reimposed a naval blockade and revoked waivers which permitted Iranian oil sales.
Many commentators readily perceived that the MoU would cost America precious leverage against Iran, and still others recognized an even more fundamental problem: it did not address the root ideology of the Iranian regime. The ill-conceived structure of the MoU reveals essential flaws in the U.S. strategic approach to Iran. The U.S. and Iran approach deterrence, negotiation, leverage, and regional security from fundamentally different perspectives, and until America can learn this lesson, future attempts at negotiation may result in similar failure.
A cycle of conflicts with Israel and the West since its founding in 1979 has steadily served to further isolate Iran. In turn, Iran increasingly relies on proxy organizations to strike back at its enemies militarily while also spreading militant Shia Islam. One major factor in the MoU’s failure was the lack of clear expectations and agreements regarding Iran’s proxy groups and the future of the Axis of Resistance (Hezbollah, the Houthis, and Hamas) and their continued terror across the Middle East. In the mind of the Iranian government, a weakening of its proxies signifies a weakening of its defense and power projection, while negotiation and compromise are regarded as the result of defeat. With Hezbollah, Iran supports its version of Islamic ideology in Lebanon and keeps out the Israel Defense Forces (IDF) and Western interference. The Houthis provide them with economic and regional leverage, and Hamas serves as a constant threat against Israel. This emphasis on maintaining proxies has grown with the shifting landscape of the Iranian government.
The Iranian regime relies upon fear and coercion in order to survive. The lack of economic stability and meaningful democratic participation causes any changes in the chain of command or shifts in power to threaten the control of the government. In order to maintain power over the Iranian people and keep foreign influence at bay, the Islamic Republic has relied on a regional model that operates on ongoing tension and crisis. By aggressively expanding via proxies and controlling economic avenues in the region, they use leverage to force other nations to make concessions. While the Trump administration has relied on threats of force and direct action, Iran relies on proxy groups, attacks on U.S. military bases, missiles and drones, hostage-taking, and coercive diplomacy to form active, constant panic and subsequently undermine U.S. presence and credibility while establishing themselves as the dominant power in the region. The IRGC, which operates under the direction of the Supreme Leader, has played a key role in these efforts and threatens any recovery of domestic economic growth or independence.
The Islamic Revolutionary Guard Corps (IRGC) was established to prevent internal coups and balance the power of the traditional military. Their role has expanded significantly over time, taking on a much larger presence in Iran’s defense, politics, national security, intelligence, and economy. They support the Axis of Resistance across the Middle East, maintain influence in key decisions through corps veterans who move on to senior government roles, and control $30 to $50 billion in IRGC-linked economic activity networks like energy, oil and gas, construction, ports, telecommunications, and national infrastructure. The survival of Iran is increasingly associated with a greater reliance on the IRGC. After the death of Ayatollah Ali Khamenei, the IRGC pushed through the rise of his son, Mojtaba Khamenei, despite the widespread controversy over political succession. This shift in power shows an increasing reliance on Iran’s security establishment rather than clerical authority. Iran, in the name of national security and consolidation of power, has now embraced what the revolution defined itself against. While religious leadership may still be valued in the Iranian government, it is no longer the main priority as Iran narrows its pool of decision-making around security figures.
As the Iranian government shifts to a heavier prioritization of national security and consolidation of power, the current diplomatic approach to Iran may further strengthen the IRGC’s power, establishing them as the dominant force in Iran. Allowing the IRGC to extort any ships passing through Hormuz will give them huge leverage over the global economy. Many people were surprised by President Trump’s support of the MoU, considering his longstanding aggressive rhetoric towards Iran. When asked about the Iranian hostage crisis in an interview 40 years ago, he stated: “that this country sits back and allows a country, such as Iran, to hold our hostages, to my way of thinking, is a horror, and I don’t think they do it with other countries.” He heavily favored obtaining the respect of other nations, like Iran, to create “the right attitudes” towards America. These attitudes have persisted throughout his time in office. During his first presidential campaign, Trump focused heavily on terminating the 2015 Iran Nuclear Deal (JCPOA) for being insufficient to stop Iran’s nuclear program and development of ballistic missiles, while simultaneously providing extensive sanctions relief. In 2018, he unilaterally withdrew the U.S. from the deal, ending much of the International Atomic Energy Agency (IAEA) oversight over Iran and freeing Iran to ramp up its program. When the U.S. joined Israel in strikes against nuclear and military sites in Operation Midnight Hammer last June, the main stated purpose was to eliminate Iran’s nuclear potential. Despite this longstanding goal, the MoU still permitted some level of stockpiled enriched uranium. While better than a full-fledged nuclear weapons program, leaving Iran with any enriched uranium was not going to work in the long term.
Many people blame the U.S.’s loss of control on the instability in the Strait of Hormuz. In 2025, 20 million barrels of oil per day passed through the Strait of Hormuz, totaling about 25% of the world’s crude oil trade. To put pressure on the Trump administration and the global economy, Iran effectively blocked the Strait following U.S. and Israeli strikes on Iran’s nuclear and military sites in March. This severely curtailed exports by major Gulf producers while allowing Iran to continue exporting its own oil through the Strait, which makes up for 80% of its total exports. This changed when the U.S. began its own naval blockade of Iranian ports in April, and Iran’s 2 million barrels per day (bpd) in exports fell to around 300,000 bpd in May, cutting its revenue by around 84% and wiping out $5.8 billion between April and May. At the beginning of June, the question was who could hold out longer, and whether America could sustain its hold long enough for its pressure to have its intended effect. With the signing of the MoU, the pressure was loosened, and Iran had a moment to stabilize itself and its proxies. The search for an off-ramp by all parties led to a flawed agreement, and now, the U.S. and Iran have returned to restricting traffic in the Strait, creating yet another standoff. The Iran-aligned Houthi rebels in Yemen are attempting to enforce a naval embargo against Saudi Arabia, which had rerouted more than 70% of its normal daily crude exports through the Red Sea. If the Houthis target Saudi oil exports through the Bab el-Mandeb Strait, it will close the alternative route away from Hormuz.
In future diplomatic efforts, America will have to restructure its approach to Iran. Iran’s proxy network must be dealt with and the rise of the IRGC as Iran’s premier institution cannot be ignored. Ultimately, Iran must arrive at an understanding of its national security that does not overtly threaten its neighbors or require absolute, centralized power. Only non-violent, consistent pressure can force the Iranian power structure to crumble and incentivize the Iranian people to reform its society from within. The collapse of the memorandum does not necessarily demonstrate that diplomacy with Iran is impossible; rather, it demonstrates that diplomacy premised on mistaken assumptions about Iranian strategic incentives is unlikely to succeed.