The U.S.-Israeli campaign against Iran has been marked by a series of miscalculations, notably the erroneous belief that dismantling the leadership of the Islamic Republic would lead to the regime’s collapse or an unconditional surrender. Former President Donald Trump’s assumption that Iran was ready to turn the page on war and transition to a rebuilding phase proved equally flawed.
Context of Tension
Iran views its control over the Strait of Hormuz—a key maritime corridor—as one of the few remaining deterrents it possesses, making it essential for any future peace. After two military operations, preceded by diplomatic efforts, Iranian leaders are unwilling to relinquish this source of leverage without credible assurances against future U.S. and Israeli aggression. However, lasting peace demands more than military deterrence; it requires a political and economic settlement with widely shared benefits.
The aftermath of the Iran-Iraq War provides a vital lesson in this regard. The 1988 ceasefire that concluded the eight-year conflict left the regime grappling with the challenge of justifying the immense sacrifices made during the war without the consolation of victory. Consequently, the political focus shifted from the battlefield to addressing an unfinished revolutionary agenda.
Lessons from the Past
The ideological divisions exacerbated by the ceasefire gradually diminished during the presidency of Ali Akbar Hashemi Rafsanjani, whose administration launched one of the most ambitious development programs in modern Iranian history. Central to this initiative was substantial public investment in rural infrastructure, bringing paved roads, electricity, clean drinking water, schools, and clinics to long-neglected regions.
As a result, millions of Iranians were lifted out of poverty, and the middle class expanded from around 30% to 60% of the population (though it has since contracted). At the same time, the regime lifted previous restrictions on family planning, leveraging its newly established rural health network to improve maternal and child health, broaden access to contraception, and enhance educational attainment among women. By 2000, women had closed the educational gap with men.
By linking “reconstruction” to social justice and national development, Rafsanjani managed to reconcile his economic agenda with the revolutionary aspirations of those who perceived the ceasefire with Iraq as an ideological compromise. The task of rebuilding the nation became the new mission of the revolution, which helped sustain the broad coalition that supported the Islamic Republic during the war.
Current Challenges
Today’s peace efforts pose even steeper challenges, though their political logic bears a striking resemblance to that of the past. Reports indicate that Mohammad Baqer Qalibaf, the Iranian parliament speaker and chief negotiator in recent talks with the U.S., stated that those capable of rebuilding the country “must take charge from the missile launchers,” echoing Rafsanjani’s post-war rhetoric.
Yet, the notion of reconstruction is no longer seen as a continuation of the revolution’s promise of economic justice. For many Iranians, market-oriented reforms, trade, and foreign investment have become synonymous with the pursuit of profit rather than collective prosperity. Whereas public investment in roads, clinics, and schools aligned with the revolutionary ideals of social justice in 1988, today there appears to be no similar developmental initiative capable of unifying the nation’s competing political factions.
The Iraq War left behind millions of veterans and grieving families requiring sustained support, leading to what UCLA’s Kayvan Harris termed a “martyrs’ welfare state.” The reconstruction process afforded institutions that emerged during wartime significant roles in peacetime, with many Revolutionary Guard veterans finding fruitful roles through the Khatam al-Anbiya Construction Headquarters, an engineering organization promoted by Rafsanjani.
Future Implications
The central question remains whether the current leadership can craft an equally compelling political project. Over the past three decades, the revolutionary quest for social justice has gradually shifted from public investment to income support, with cash transfers emerging as the principal tool for redistribution. In 2011, these transfers were introduced to compensate for the removal of energy and bread subsidies, peaking at roughly 28% of average household income. However, fears of escalating inflation have curbed any nominal increases by the government, with purchasing power expected to diminish by 2025 to a fraction of its original level.
The severe pressures on living standards, exacerbated by tightened U.S. sanctions and ongoing conflicts, have compelled the government to expand these cash transfers. Although they now provide a safety net against hunger, they fall short of the transformative reconstruction programs witnessed after the Iraq War.
Establishing a safety net for ordinary families has become a political necessity as much as an economic one. In 2019, President Hassan Rouhani’s government raised gasoline prices without compensatory cash transfers, igniting nationwide protests. Following the implementation of the Joint Comprehensive Plan of Action (JCPOA), the government revealed plans to purchase 200 aircraft from Boeing and Airbus. For many low-income Iranians, these developments reinforced the perception that politicians pursuing diplomacy and market-directed reforms were more preoccupied with rewarding elites than enhancing living standards.
These experiences will inevitably shape how Iranians evaluate any peace agreement with the United States. If they perceive the agreement primarily benefits exporters, investors, and urban professionals, while lower-income families bear the costs, robust public support is unlikely.
So far, proposals to lift sanctions have focused on enabling Iran to export more oil and regain access to frozen foreign assets. While these measures could bolster government finances and help cover import costs, they would do little to create broad-based employment opportunities.
In contrast, lifting financial sanctions would significantly support job creation. By isolating small and medium-sized Iranian enterprises from global markets, these sanctions prevent millions of educated Iranians from capitalizing on the devaluation of the rial to sell goods and services abroad. With domestic demand weakened by years of sanctions and recession, access to external markets has become essential for expanding production.
Facilitating Iranian companies’ return to global markets would increase demand for Iranian labor and enhance household incomes through employment rather than financial transfers. More importantly, it would instill millions of Iranians with a direct interest in maintaining peace.
While Trump may face political challenges in lifting these sanctions, any agreement that does not allow Iranian companies to regain access to international finance and trade will struggle to provide the jobs required for sustainable peace. Ultimately, any agreement that replicates the errors of the JCPOA may prove no more durable than its predecessor.
