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Security, Economic, and Islamic factors influencing Iranian Foreign Policy


This article looks at the historical, strategic, and economic factors as well as the role of Islam in the influencing of Iranian foreign policy in order to explain the thinking and motivation behind the actions of this most complex of countries on the world stage. The role of history cannot be emphasised enough for its impact on Iranian national character and identity. Iranians have a great deal of pride in Iran’s history and the role it has played in the world, starting from the time of the Achaemenid dynasty and its creation and expansion of the Persian empire, making Persia the most dominant power in the known world at the time. The invasion and toppling of the empire and the burning and sacking of the ancient capital Persepolis by Alexander the Great has scarred the national identity of Iranians as it represented humiliation and impotence at the hands of its enemies.


The revitalisation of ancient Persia and the successful resistance towards the eastwards expansion of the Roman Empire by the Parthian and Sassanid dynasties was all the more important as the Romans had succeeded the ancient Greeks as the foremost power in the ancient world. And despite the invasion of the Arabs in the 7th century AD which had introduced Islam into the country, Zoroastrianism was still very influential even within Islam, with its emphasis on heaven and hell, and the end-of-the-world judgment day.[1] Despite the invasion by the Arabs, there were certain unique characteristics about Persian society and culture that distinguished it from its Arab neighbours.


Rivalry with the Arabs was based on several factors that still affect relations between both groups. These were: their Aryan racial backgrounds; Farsi as opposed to Arabic which was and continues to be the main language; and Persian art, architecture, music, and poetry, which are all uniquely Persian and later Iranian. Another very important aspect is the mutual suspicion and rivalry between Persians and Arabs. Even after the Arab invasion and the introduction of a common religion, this rivalry didn’t go away and is still very much alive today, continuing to be one of the primary factors influencing Iranian foreign policy. Another factor is the fact that Iran is majority Shia Muslim whereas its Arab neighbours are mainly Sunni. Iranian belief in their cultural uniqueness and indeed superiority has meant that Iran’s Arab, Kurdish, Azeri and Baluchi minorities have been marginalised and discriminated against. It is noteworthy that these minorities are mainly Sunni Muslims and while the Persians are the most powerful they only make up 51% of the total population. Iran’s foreign policy is also influenced by its geographical position, surrounded by Arab states to the West, Central Asia and Russia to the north and south, and Pakistan to its east. Iran has huge oil and gas reserves, and this has also greatly influenced its foreign policy. With the falling of global energy prices and the increasingly crude and provocative statements and actions of the current Iranian leadership Iran’s ability to use oil as a weapon has been substantially weakened.


Under the rule of Shah Mohammad Reza Pahlavi, Iran followed a pro-Western, especially a pro-American, foreign policy. His aim was to make Iran the main power in West Asia and especially in the Persian Gulf, and to this end he used Iran’s huge oil and gas reserves to achieve his goals. Iran was the staunchest ally of America and even recognised Israel in the region and was the recipient of massive amounts of American military and economic aid. The Shah followed a dual policy of cooperation and at times confrontation towards Iran’s Arab neighbours. Iran seized key Islands in the Persian Gulf from the UAE while renouncing Iranian claims over Bahrain and supporting Sultan Qaboos of Oman against Communist rebels. While the Shah was a staunch ally of the Americans, he ensured that Iran’s relations with the Soviet Union never became too distant. However, the Shah’s pro-American policies, his zeal for Westernisation, along with corruption and economic mismanagement all served to bring about his downfall in 1979 during the Iranian revolution and the establishment of the Islamic republic led by Ayatollah Khomeini.


The rule of Khomeini was marked by great internal turmoil as well as the Iraqi invasion of Iran in 1979, leading to a bloody eight-year-long war which left a million dead and both countries gravely weakened in both economic and military terms.




Post-Khomeini Post-Cold War Iranian Foreign Policy

With the death of Khomeini in 1989 and the election of President Rafsanjani, Iran decided to give up the militant stance of its previous foreign policy and adopt a more pragmatic and friendly stance towards the region and the wider world. Rafsanjani realised that Iran was far too weak as a result of the war to afford a policy of confrontation with the outside world. To this end he worked hard to improve relations with the Arab states while stressing that Iran did not seek to export the revolution to its neighbours. It got the opportunity to win international goodwill during the Iraqi invasion of Kuwait in 1990, which was a godsend for, overnight, Iraq had replaced Iran as the main threat in the region. Iran opposed the invasion and did not try to interfere with the America-led coalition’s expulsion of Iraqi forces; this won a lot of international goodwill towards Iran.


In strategic terms, in the post-Cold War and post-Gulf War period, Iran was seen as a country that could play a stabilising role in the region. Though certain outstanding issues such as Iran’s opposition to Israel and the fatwa against Salman Rushdie continued, Iran nonetheless moderated the tone of its opposition, allowing it to be seen in a friendlier light than was the case earlier under Khomeini. Relations with America continued to be tense; the election in 1992 of President Bill Clinton initially raised hopes of a thawing of relations but Clinton continued the American policy of trying to isolate Iran. This was manifested in the Iran-Libya Sanctions Act which forbade American companies from doing business with Iran, since Washington still designated Iran as a state sponsor of terrorism. Furthermore, American policy aimed at the dual containment of both Iran and Iraq. America was not convinced by Rafsanjani’s new policy, seeing it as nothing more than a public relations move with no substantial change in Iranian policy, noting its continued opposition to Israel, its opposition to the Arab-Israeli peace process, as well as its nuclear and missile programs.


With the election of President Khatami in 1997, both sides made overtures to the other. Khatami rejected the “clash of civilisations” theory and championed a “dialogue of civilisations”. President Clinton praised Iranian culture while the then secretary of state Madeleine Albright apologised for America’s role in overthrowing Mossadeq. Yet despite this there was no substantial change in relations. President George W Bush continued the existing American policy and, despite Iran’s help during the American assault on the Taliban in Afghanistan in retaliation for the September 11 terrorist attacks, Iran was named as a member of the “Axis of Evil” along with Iraq and North Korea. Iran also aided the American-led invasion of Iraq in 2003, but cooperation quickly soured when Iran was accused of supporting Shia militias in attacking Allied forces in Iraq. The Bush administration rejected a “grand bargain” from Khatami that would have improved ties. Relations got progressively worse with the election of President Ahmadinejad, with his calling for wiping out of Israel and his denial of the Holocaust. Furthermore, during the 2006 Israel invasion of Lebanon, Iran was the foremost opponent of Israel, even going to the extent of supporting Hezbollah. Ahmadinejad has also rejected overtures from the current administration of President Barack Obama, due to his refusal and that of other hardliners in Iran to compromise on its nuclear program and its support for terrorist groups.


However, Iran’s relations with its neighbours and indeed other major foreign powers had improved since President Rafsanjani’s shift in policy. Relations with Iraq since the overthrow of Saddam Hussein have improved and, as a result of the 2003 invasion, Iran enjoys considerable influence in the country, especially due to its links with Shia religious parties and their militias, which are supported by Iran. However, recent events such as the operation to clear Basra of militia control, the underlying tension between Arabs and Persians, and Iraqi nationalism which is a very powerful force in Iraqi life have meant that there are clear limits to the influence Iran enjoys. Iraq has also emerged as a new battleground between the Sunni Arab states and Shia Iran, with Arab fears of Iran trying to create a Shia crescent stretching from Iraq to Lebanon.


Iran’s relations with Saudi Arabia, which is predominantly Sunni and which is the home of Wahabism, and where the Shia minority is discriminated against, and Iran which is mainly Shia, had also greatly improved since the pragmatic policy of President Rafsanjani. There was certainly a lot more amiability between both countries despite terrorist attacks on American military bases which were blamed on Iranian hardliners, Saudi concern about Iran trying to create discord amongst the Saudi Shia as a means to destabilise the Saudi monarchy, and Saudi Arabia’s role in financing and recognising the Taliban in Afghanistan as a means of trying to curb Iranian influence in Central Asia. However, since the election of Ahmadinejad, relations have deteriorated with both countries backing rival factions in Iraq, and Iran’s nuclear and missile programs, which Saudi Arabia fears is aimed at making Iran the dominant power in the region.  Ahmadinejad’s rhetoric which has become increasingly more belligerent since the 2009 Iranian presidential election has severely  damaged the progress that was made by both Presidents Rafsanjani and Khatami in improving ties with the Arab countries of the region. It can be said confidently that Saudi Arabia will not meekly accept Iranian supremacy in one of the worlds most important trading routes and will both overtly and covertly oppose Iran.


Russia is arguably Iran’s staunchest ally both in terms of diplomatic support as well as military aid. Iran and Russia are both in favour of a more multi-polar world where American power is more constrained. Russia is a permanent member of the UN Security Council and as such can use, and indeed frequently has used, its veto power to block any attempts to pressure Iran on its nuclear program of which it is a major contributor, witness the Busherh nuclear facility which was built by Russia. Both nations were also staunch opponents of the Taliban. Friendly ties between the two nations predate President Rafsanjani. Russia is also Iran’s major supplier of sophisticated weapons like tanks, planes and submarines. Russia is opposed to any military action against Iran, stressing that such an outcome would be dangerous to the whole region and a diplomatic solution is the only way forward. Iran for its part has not come out strongly against Russian actions in Chechnya and has agreed to jointly develop the oil and gas resources in the Caspian Sea. Iran has also remained neutral in the conflict in Armenia which is backed by Russia and Azerbaijan which is Muslim.


Economic Factors


Economic factors are another major influence on Iranian foreign policy. Iran’s main trading partners are the European Union, Russia, China, India and the Arab Gulf states. The EU is Iran’s largest trading partner, with EU exports to Iran being worth €14.1 billion and Iranian exports to the EU being worth €11.3 billion. The EU has always favoured a policy of engagement with Iran, arguing that engaging rather than isolating Iran was more effective and was the best way to influence political change in Iran. This policy of engagement was strongly opposed by America which saw it as little more than commercial opportunism at the cost of regional security and stability and that engaging Iran would only strengthen the regime. America then penalised European companies, which infuriated the EU. Since the election of President Ahmadinejad, relations have become strained over his refusal to compromise over Iran’s nuclear program as well as his bellicose rhetoric against Israel. The EU has placed sanctions on Iranian banks due to concern that these banks finance Iran’s nuclear and missile programs.


Iran’s economic ties with Russia are far more stable due to mutual interests between the two countries on human rights and non-proliferation, as well as its energy policy; both countries are rich in oil and gas reserves and are major producers. Initially, trade was only worth $450 million, rising to $3.33 billion in 2008. Both countries are also cooperating on the north-south transport corridor, with cooperation rather confrontation with regard to the Caspian Sea, with a view to increasing trade between both countries. Another major plus for Iran is Russia’s permanent seat on the UN Security Council which protects Iran from western pressure.


Iran’s economic ties with China are also very strong despite China being a Communist state and Iran being an Islamic republic, since both countries have mutual interests such as developing their economies and countering western - namely American - influence. China, with its booming economy and its need for energy resources to meet its voracious demand, has been a natural ally of Iran which desperately desires to get all the influential friends it can on the world stage. Chinese companies are deeply involved in developing Iran’s infrastructure and Iran is a major exporter of oil to China. Indeed, as western participation decreases due to straining of ties over non proliferation, human rights and terrorism, Asian countries like China are stepping in to fill the void. Trade in 2008 was worth $27 billion, while in 2009 it was worth $29 billion. Like Russia, China is also a permanent member of the UN Security Council.


Iran and India have shared historical ties, and economic ties are very strong as well. Iran places great value on its ties with India since it needs Indian expertise to upgrade its infrastructure, such as the port of Chah Bahar, as well as gain more markets, noting India’s massive population and its economic growth. There is also a great deal of sympathy for Iran amongst the Indian left wing as well as India’s Muslim population which see Iran as a victim of American imperialism. Economic relations are very strong and are getting stronger despite disagreements over Iran’s nuclear program. Iran exports oil and other goods to India while India exports such items as medicines, machinery and transport equipment. Iran also wants to use Indian expertise in information technology and engineering and there are an increasing number of Iranian students studying in Indian universities. India has managed to balance its ties with Iran on the one hand and America and Israel on the other. Another factor was the opposition of both countries to the Taliban in Afghanistan which was supported by Pakistan.


Economic relations between Iran and the Arab Gulf states did begin to improve as a result of President Rafsanjani’s pragmatic policy but have become strained again. Ties have always been strained due to Iran’s past attempts to export its revolution, the Arab countries’ close ties with America, mutual suspicion, and Arab concern over its nuclear program. The UAE is Iran’s largest trading partner within the GCC with trade worth nearly $12 billion and 10,000 Iranian companies doing business in the UAE.[2] Oman, Saudi Arabia and Kuwait are next. However, trade is nowhere near the scale of that between Iran and Russia, China, India and the EU. Political and ideological problems still continue to hinder progress and as such economic ties are a work in progress.

However due to the current depletion of global oil supplies   as well as the increasing emphasis on renewable sources of energy such as wind, water, and solar energy Iran’s use of oil as a tool to realise its foreign policy ambitions will become increasingly difficult. Nuclear energy will also weaken Iran’s hand as more countries embrace it as a more preferable option to oil. Furthermore, international sanctions and the lack  of Iranian technical expertise to refine oil and gas has meant dependency on foreign imports of gas for domestic consumption.[3]


Role of Islam

Islam also plays a key role in the shaping of Iranian foreign policy since Ayatollah Khomeini came to power, and Islam would be the primary factor influencing foreign policy, with Iran constantly seeking to export its revolution. This has led to Iran’s isolation and earned it the enmity of its neighbours. With Khomeini’s death, President Rafsanjani decided to tone down the shrill militant tone of Iranian foreign policy and pursue a pragmatic policy that would ease the isolation that Iran found itself in as a result of Khomeini’s militancy. The Iraqi invasion of Kuwait certainly helped in changing perceptions about Iran and helped it improve its image. On issues like Chechnya and Azerbaijan, even though fellow Muslims were suffering, Iran was careful not to intervene for fear of offending Russia with whom it has a close relationship. Even on Afghanistan, Iran called for a just solution that protected the interests of the Afghan Shia population. Thus, while Iran would speak up for Muslims worldwide, it would not compromise its national interests by alienating or angering other powers; but it has opposed the Arab-Israeli peace process and kept in place the fatwa on author Salman Rushdie, thus appeasing the hardliners.


With the election of President Khatami, Iranian foreign policy underwent a further facelift with Khatami rejecting the “clash of civilisations” theory and promoting a dialogue of civilisations” between east and west. Conservatives or Osoulgarayan[4] consider western, especially American, forms of music and dance to be degenerate and un-Islamic and accuse the west of imposing moral degeneracy and cultural imperialism. They also see any kind of reconciliation with America or Israel as betrayal of Islam. But interestingly they do not oppose attempts to improve ties with Iran’s Arab neighbours or countries like Russia and China, recognising that Iran needs all the friends it can get in order to break out of its isolation. The reformists,  known as Ehslaah Talabaan, want to pursue economic, social and constitutional reforms, but within the current Islamic system. They see the hardliners as being reckless and isolating Iran by using Islam purely for narrow and opportunistic reasons and as a way of crushing dissent; likewise the hardliners see the reformers as being naïve and accuse them of selling out to the west. With the election of President Ahmadinejad in 2005, relations between both camps became even more strained. Hardliners have justified issues like the Israeli-Palestinian dispute and Iran’s nuclear program in the name of Islam as a means of further isolating the reformists and gaining more support for Iran among Muslims worldwide by portraying Iran as the main champion of Muslims. Iran’s use of religion to realise its regional ambitions has run into opposition from its Sunni Arab neighbours who see Islam as just another excuse to promote Shi’ism, as in the case of its supporting militias in Iraq which are Shia and which were supported by Iran even when Saddam Hussein was in power. One of the main consequences  of Saddam Hussein’s  overthrow by the U.S. has been the rivalry between Iran which is majority Shia and Saudi Arabia which is majority Sunni has intensified. Indeed with Saddam’s overthrow Saudi Arabia has emerged as Iran’s main Sunni rival  and the rivalry between both countries is evident from Iraq to Lebanon as Iran seks to spread its influence and Saudi Arabia seeks to counter it.


During the 2006 Israeli invasion of Lebanon and Israel’s 2008 attack on the Gaza strip, Iran was the most vocal critic of Israel and saw it as an opportunity to embarrass the Arab states that were allied to America. Arab nations have accused Iran of trying to destabilise the region by creating a Shia crescent from Iraq to Lebanon[5]. With the controversial re-election of President Ahmadinejad in the disputed 2009 presidential election, it would appear that Islam will be used even more to promote Iranian foreign policy and at the same time crush dissent within Iran through the use of the Iranian Revolutionary Guards.[6]


Iran’s foreign policy in the post-Cold War era has been influenced by its history, cultural identity and its pride in both, as well as by its strategic location, economic factors such as its large oil and gas reserves, and by Islam. This is a country that feels that it occupies a unique place in the region and the world and this is reflected in its foreign policy. Iran’s foreign policy has successfully managed to a large extent to break out of the isolation following the 1979 Islamic revolution and the policies of Ayatollah Khomeini; the moderate and pragmatic policies of Presidents Rafsanjani and Khatami succeeded in resisting American efforts to isolate it. It has used its strategic location and economic resources to make itself one of the most influential and important players in both West Asia and Central Asia, and has successfully taken advantage of regional developments in Afghanistan after the overthrow of the Taliban in 2001, and in Iraq after the American invasion of 2003. However, since the election of President Ahmadinejad, Iran’s relations with its neighbours and the wider international community have become more tense  and the progress it made has since been reversed. So the challenge for Iran now is to maintain its influence and standing in both West Asia and Central Asia, and pursue its legitimate interests in the region, while making itself more acceptable to the wider international community by following a moderate and mature foreign policy. Current Iranian foreign policy has proved to be counterproductive and has had the effect of even close allies of Iran like Russia  have to a certain extent distanced themselves  from Iran[7]. Both Russia and China have not vetoed latest UN sanctions imposed on Iran bears this out. While Iran’s relations with the EU  have anyway been strained to the point where the EU sees Iran not too differently from the Americans[8]. Iran’s tendency to embrace such regressive and barbaric measures as public stoning of women for adultery has gravely damaged its international image[9].


Another factor that has hurt Iran’s international image is the brutal and oppressive Iranian justice system which actively persecutes religious minorities, liberals, and women in  order to ensure the grip of the hardliners on power. This oppression has become especially acute since Ahmadinejad became President. Both the revolutionary Guard as well as the Basij militia have brutally trampled over the rights of ordinary Iranians. This was especially true during the protests that followed the Presidential elections of June 2009.


In conclusion Iran’s behaviour both internationally and internally can only be described as dangerous and counterproductive. Iran’s behaviour in Iraq and Lebanon has had the effect of destabalising those states even further and led to great alarm among its Sunni Arab neighbours. President Ahmadinejad’s  threats against Israel and refusal to recognise Israel’s existence as well as Iranian backing for terrorist groups like Hamas and Hezbollah are reckless and irresponsible and have had the effect of  further undermining the Arab-Israeli peace process  as well as strain ties with Iran’s Arab neighbours as well as the European Union. And in doing so has destroyed the efforts of previous reform minded governments. To matters worse President Ahmadinejad   and the hardliners are deliberately engineering external crises over Iran’s nuclear program in order to deflect attention from the woeful state of Iran’s economy as well as justify an increasingly brutal and savage crackdown on   the reform minded elements within the country  ,thus creating a siege mentality where anyone who opposes the regime are deemed traitors to Iran and Islam.


President Ahmadinejad  is also using past Western interference in Iran as an excuse to justify a policy of meddling in the internal affairs of its neighbours as well using Islam as a tool to expand Iranian influence thus making itself the pre-eminent  power in the region. This has had the effect of further galvanising opposition towards Iran among the Arab states as well exacerbating the Shia-Sunni divide by its treatment of its Sunni minority, thus giving away the lie that it is the   guardian of Islam and Muslims worldwide. The international community must continue to put pressure on Iran to improve its behaviour both internally and externally as well as support the reformist minded elements within Iran itself.


India has historical ties with Iran which values its ties with India because of India’s economic growth and the fact that it is a rising power, good relations with India  allows Iran to show that it  can resist Western attempts to isolate it and it still has important friends in the world. India for its part  and should in concert with the rest of the international community make it clear to Iran that its sabre rattling over its nuclear program, its threats against Israel as well as its support to terrorist groups are unacceptable and counter to peace in the region and globally. Furthermore, India should also make it clear to Iran that it is opposed to Iran’s crackdown on reformers and its actions in general are damaging to ties between both countries as Indian also has ties with Israel, the United States and the Arab states to consider and will not sacrifice its ties with those nations.


Iranian foreign policy as it currently is   a threat to regional and global peace and stability and is self defeating. Iran must moderate its behaviour if it wants the respect and acceptance it wants.


End Notes

[1] Safavi , Dr Seyed G. “Iranian Identity”, Iranian identity seminar at SOAS - London, January 2004.

[2] Ibid.


[3]Webb, Simon Analysis: Sanctions tighten pressure on Iranian Oil Industry. Reuters, July 14 2010.



[4] Samii,Bill. Rivalries heat up Among Iran’s Conservatives.Iran Press Service. April 28,2006.



[5]Bose,Srinjoy. Shia and Iranian Ascendance: Sunni and American Preceptions. IPCS research papers, August 2007.



[6] Surviving Dissent: Assessing Recent  Demonstrations in Iran. Iran December 19,2009.



[7] Mogen,Zvi. Russia-Iran Relations: Is there a Change? INSS, Canada Free Press, June 11,2010.



[8]Iranian Foreign Minister to Address EU Parlimentarians  in Brussls. News Blaze. May 31.2010.




[9] Aslan,Reza. The Gory Truth About Stoning. The Daily Beast, July 8,2010.