Iran’s Kharg Island oil terminal idled by US blockade - FT

President Masoud Pezeshkian's government has sent the 2018 Convention on the Legal Status of the Caspian Sea to parliament for ratification, ending years in which the treaty sat untouched and reviving a charged argument over the country's historical rights, energy interests and position in the strategically vital basin.

The convention, signed by the leaders of Iran, Russia, Azerbaijan, Kazakhstan and Turkmenistan in the Kazakh port of Aktau in August 2018, takes effect only once all five littoral states ratify it. The other four completed the process long ago. Tehran, alone, held back.

The charge that shadows the bill is older than the bill itself: a belief, widely held in Iran and rooted in readings of its 1921 and 1940 treaties with Moscow, that the country was entitled to half the Caspian and stands to end up with barely a tenth.

The convention in fact allocates no national shares at all, but the ghost of the fifty percent has trailed every Iranian discussion of the sea since Aktau.

The timing sharpens the argument. The move lands in the middle of a war that has set Iran's southern coast under nightly strikes and closed the Strait of Hormuz, leaving the Caspian corridor to Russia carrying an outsized share of the country's commerce and its strategic weight.

What the treaty actually does is narrower than either its champions or its critics suggest.

It defines the Caspian as a "special and unique landlocked body of water," placing it outside the UN Convention on the Law of the Sea. Each coastal state receives 15 nautical miles of fully sovereign territorial waters and a further 10 nautical miles of exclusive fishing rights, with the remaining surface designated a shared navigation zone.

The wealth, however, is postponed. Article 8 leaves ownership and delimitation of the seabed and its oil and gas to "bilateral or multilateral agreements between the states concerned."

Russia, Kazakhstan and Azerbaijan have largely settled their boundaries in the sea's north; the lines involving Iran, Azerbaijan and Turkmenistan remain unresolved, tangled in the complexity of dividing energy-rich waters.

A century-old dispute over Iran's share

Before the Soviet collapse, the Caspian was governed by the 1921 and 1940 treaties between Tehran and Moscow, which recognized equal navigation and fishing rights but drew no maritime boundaries.

The Soviet breakup turned two littoral states into five, and Iran has argued since that the sea should be divided equally, 20 percent to each.

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Russia, Kazakhstan and Azerbaijan instead adopted a modified median-line method, a formula that, because of Iran's concave coastline, would shrink Tehran's share of the sea and its bed to roughly 11 to 13 percent. Iran has never accepted that division.

The government's case: a sealed northern flank

The government presents ratification as completing the Caspian's legal framework, deepening cooperation among the littoral states and, above all, keeping outside powers away.

Officials point to Article 3, which bars the armed forces of non-coastal countries from the Caspian, as the convention's central security prize, a provision long championed by both Tehran and Moscow.

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Defa Press, an outlet affiliated with Iran's armed forces, wrote that the clause would "turn Iran's northern borders into a secure region, far removed from scenarios of foreign military intervention," at a moment when the country faces pressure along its southern and western frontiers.

The critics' case: ratifying before the real negotiation

Opponents argue parliament is sequencing the deal backwards: locking in the framework before the seabed, where the money lies, has been divided.

They note that the northern states have already parceled out much of the seabed and pressed ahead with oil and gas development, while fields shared with Iran, including Alborz, remain in limbo.

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Dariush Safarnejad, an international affairs analyst, told the Revolutionary Guards-linked Javan newspaper that lawmakers should return the bill to the government, since supplementary agreements that were meant to be completed within six months of the 2018 signing have never been finalized.

Approving the convention without them, he warned, "could provide other Caspian states with legal grounds in the future and influence the security, political and geopolitical dynamics of the Caspian region."

Shoaib Bahman, an international relations analyst focused on Eurasia, told the same paper that ratifying before the seabed boundaries are set would "effectively reduce Iran's legal leverage in future negotiations and could undermine its claim to a 20% share of the Caspian Sea."

Pipelines, corridors and the Turkic map

The critics' second front is Article 14, under which undersea pipelines require the consent only of the states whose sectors they cross, not all five. Bahman argued the clause could open the way for eastern Caspian producers to export oil and gas directly toward Europe, eroding Iran's transit position.

Mehdi Seif-Tabrizi, a Russia specialist, offered a more measured reading to the news website Fararu. Iran's 15 miles of territorial waters and 10 miles of fishing rights are guaranteed, he said, and "the real dispute concerns the seabed and subsoil," not the surface percentages that dominate the public argument.

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Yet he shares the strategic worry: that the long-discussed Trans-Caspian pipeline from Turkmenistan or Kazakhstan to Azerbaijan could finally be built.

"That could strengthen Azerbaijan's position and, in turn, reinforce the Zangezur corridor and the so-called Turkic World project," he said. "If Iran ratifies the convention, it would remove one of the most important legal obstacles to implementing those projects."

The opposition joins the attack

Criticism has come from beyond the establishment's factions. Exiled Prince Reza Pahlavi wrote on X that ratifying the agreement without the Iranian people's mandate and without "a clear and comprehensive guarantee of Iran's historic rights" is "deeply concerning and constitutes a serious threat to Iran's national interests."

Iran's rights in the Caspian, he added, "are not negotiable, nor can they be relinquished. Any action that undermines these rights will be recorded in the historical memory of the Iranian nation, and those responsible will ultimately be held accountable by the people of Iran."

Saeed Ghasseminejad, a senior Pahlavi adviser, went further, alleging that Hassan Rouhani's government had already "ceded Iran's share of the Caspian Sea" and that Pezeshkian and parliament speaker Mohammad-Bagher Ghalibaf now seek to "legalize and make that concession permanent."

He called the move "the biggest surrender of Iran's land and waters to foreign powers since the Qajar-era humiliations."

Judiciary spokesperson Asghar Jahangir said on Saturday that legal proceedings began immediately after Kharrazi's recent remarks and that he had now been summoned to the court, which handles cases involving members of the clergy.

“Immediately after his recent remarks, legal action was initiated to prosecute him,” Jahangir said, adding that Kharrazi's case was under criminal investigation and further details would be released after the proceedings.

‘Islamic Republic doesn't work anymore’

In a video released this week, Kharrazi said the Islamic Republic had “reached a stage where, in this form, it simply doesn't work anymore” and said his organization had already drawn up plans for replacing it with an “Islamic government.”

Kharrazi, who heads the Hezbollah of Iran organization, said his group had produced 60 volumes of plans covering state institutions and had maintained what he described as a “shadow government.”

He also outlined a recruitment drive intended to build a nationwide network of 250,000 supporters, saying it could “surround all the ministries” and converge on Tehran following a single announcement.

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“Mr. Khamenei and the government must understand that a 250,000-strong organization stands ready to move,” he said.

Kharrazi also attacked President Masoud Pezeshkian, calling him a “buffoon” who “understands nothing,” and said his government “will not reach its end.”

Claims about Khamenei

Kharrazi is tied by marriage to Iran's ruling family: his sister is married to Masoud Khamenei, a brother of Supreme Leader Mojtaba Khamenei.

He has also presented himself as a longtime confidant of the new supreme leader, saying he has known him for four decades and held numerous private meetings with him. In his latest remarks, Kharrazi said Mojtaba Khamenei's thinking was “far more radical than his father's.” His accounts of private conversations and the supreme leader's views cannot be independently verified.

The leader's office had already publicly rejected earlier remarks Kharrazi attributed to Mojtaba Khamenei, including that Pezeshkian's next resignation would be accepted, describing them as unauthenticated and false.

From a strictly economic perspective, former US Treasury official and sanctions strategist Miad Maleki says the greater danger to the regime may emerge once the fighting stops and it must govern a country burdened by soaring inflation, reconstruction costs and years of economic decline.

"If the conflict ends today, then you're going to see the economic effect of the war doing its work," Maleki told Eye for Iran.

"That would be very scary if I was an Iranian regime official, having to face the reality of a post-war economy."

Maleki argues Iran is already inside what he describes as a "tipping zone," where years of inflation, currency depreciation and economic mismanagement have steadily eroded purchasing power.

The question, he says, is no longer simply whether the government can continue paying salaries, but whether those salaries still buy enough to sustain loyalty.

"The salary might keep coming," he said. "You just won't be able to afford very basic needs."

The scale of that pressure is reflected in official consumer-price data.

In June, food and non-alcoholic beverage prices were nearly 134% higher than a year earlier, while prices for oils and fats rose about 278% and meat about 172%, according to data from the Statistical Center of Iran.

Those increases squeeze not only ordinary households, counterterrorism and security specialist Roger Macmillan argues, but also lower-ranking members of the Basij, IRGC conscripts and their families—people drawn from the same society on which the state relies to maintain internal security and suppress dissent.

"The real question isn't how much damage a bomb can do," he said. "It's what happens when the money stops moving."

Iran's financial center of gravity

Military pressure has dominated discussion of Iran for months, with much of the debate centered on missile stockpiles, drone production and how long it might take Tehran to rebuild its military capabilities.

Macmillan argues that focus overlooks something more fundamental.

"They are built to absorb military pressure," he said. "But are they able to absorb payroll pressure?"

His argument is not that economic pressure alone will weaken the regime. Rather, he says policymakers should focus on disrupting the broader financial ecosystem that allows the Islamic Republic to function, from government payrolls to military-linked economic networks.

"We need to be looking at the financial center of gravity, which is not just the payroll but also the military bonyads," he said.

Bonyads are powerful quasi-official foundations that expanded after the 1979 Islamic Revolution, with some of the largest developing extensive holdings in sectors including banking, construction, manufacturing, agriculture and energy.

Major foundations enjoy significant economic privileges and limited public oversight, and several are overseen by or closely connected to institutions under the Supreme Leader.

Some have also served as important patronage networks and maintained extensive economic links with Iran's political and security establishment.

For Macmillan, the question is not simply how much revenue those networks generate. It is whether they can continue supporting rank-and-file security forces if inflation keeps eroding wages while the government takes on the additional burden of rebuilding a post-war economy.

"What we need to look at is how we can remove the will, shatter the cohesion and the will of the foot soldiers from the Basij and from the IRGC, and separate them from the state," he said.

The argument represents a different way of thinking about pressure on Iran.

Rather than asking only how much military capability can be destroyed, Macmillan and Maleki argue policymakers should also consider how much financial strain the Islamic Republic can absorb before maintaining the institutions that enforce its rule becomes increasingly difficult.

Peace itself could reduce some war-related economic pressures, particularly if it improves trade conditions or is accompanied by sanctions relief. But Maleki argues it would also force Tehran to confront accumulated economic problems while meeting the costs of reconstruction.

For him, that may be precisely where the regime is most vulnerable.

"The most punishing thing they can do to this regime is send it back to govern Iran in a state of peace and face the reality they had to kill their way out of," Maleki said.

The US Treasury targeted currency exchange houses, shell companies and financial facilitators that Washington said helped Iran move hundreds of millions of dollars through the international financial system.

The State Department said the measures targeted networks Iran used to access oil revenue, evade sanctions and move funds through front companies.

It added that the new sanctions were intended “to cut the financial lifelines that sustain Iran’s ruling elite.”

The statement said Washington would continue targeting banks, exchange houses and other facilitators it says Iran uses to move funds and evade sanctions.

Despite the new sanctions, US officials insist that progress has been made in talks over the Strait of Hormuz.

There has been progress between Oman and Iran over the strait and a deal is expected soon, Reuters reported Friday, citing a US official.

The official said the US would lift its blockade of Iranian ports once an agreement was announced to restore commercial shipping through the strait without impediments.

Bessent says ceasefire could come soon

US Treasury Secretary Scott Bessent separately said a 30- to 60-day ceasefire agreement with Iran could come “shortly, maybe even today, tomorrow,” adding that a deal could reopen the Strait of Hormuz and bring energy prices down.

Bessent also said the strait would “never” return to the way it was, saying Iran had used or tried to use it as a choke point.

“What we are going to see over the next two years, the strait is going to become irrelevant. It is going to become just another body of water,” Bessent said.

He added that “more than 50 or 70%” of the energy currently moving through the strait would instead go through underground pipelines.

Earlier Oman proposal

The latest progress follows weeks of talks between Iran and Oman over a new arrangement for commercial shipping through the Strait of Hormuz.

Iran had earlier rejected an Omani proposal for a 50-50 arrangement dividing the inbound and outbound routes between the two sides, saying it did not sufficiently address Tehran’s security concerns.

Tehran instead proposed that one shipping lane run entirely through Iranian territorial waters and part of the other also pass through Iranian waters, allowing Iran to maintain oversight over traffic in both directions.

US actions would remain performance-based and tied to Iran’s implementation of its commitments, the US official told Reuters.

The United States appeared to believe that military force would quickly weaken the Iranian government and compel Tehran to accept an agreement closer to US terms, Paul Saunders, president and CEO of the Center for the National Interest, said in an interview in Washington DC.

“I think the administration probably … overestimated how easy it would be to use force to bring about a successful agreement,” Saunders said.

Washington and Tehran remain divided over efforts to end the conflict, with the Strait of Hormuz at the center of competing military and diplomatic calculations. Recent reports have offered conflicting accounts of whether an agreement to reopen the waterway is imminent.

Strikes complicated diplomacy

“Targeting Iran’s leadership did more than escalate the military campaign,” Saunders said. “It also posed a direct threat to the survival of the Islamic Republic, making it harder for Washington to persuade Tehran to compromise.”

“I think that, from my point of view, it would have been better not to execute the strike on the Iranian leadership,” Saunders said, adding that the decision increased mistrust and left Washington in a weaker position to negotiate after the initial military action.

The US-Iran Memorandum of Understanding, signed in June, was a 14-point interim framework to end hostilities, restore commercial passage through the Strait of Hormuz, remove the US naval blockade and negotiate a final agreement within 60 days.

In July, Iran suspended implementation of its commitments under the MoU, accusing Washington of effectively abandoning its own obligations.

“In order to get a deal, we needed to have a government to negotiate with,” Saunders said. “When that government is really damaged and destabilized … will that new regime be sufficiently powerful that it will be able to make concessions to the United States?”

Trump has described Iran as being under a “third regime,” arguing that successive layers of the country’s leadership were killed in US and Israeli strikes and that the officials now in charge were different and more reasonable than their predecessors.

Iran’s internal response

Saunders said the political effects of the war extended beyond negotiations to Iran’s domestic response. He said it was predictable that Iranian society would rally behind the state when facing an external attack, even if many people remained unhappy with their government.

“Regardless of how angry or frustrated people might be with their own government, the only thing that they actually want less than their own government interfering in their lives … is someone else’s government doing it,” Saunders said.

“The Iranian government is responding to a threat to its survival, while Iranian society is reacting to an external attack. At the same time, the US president and the American public are weighing how much risk and cost the conflict justifies,” he added.

The conflict is important to Washington but not existential for the United States, Saunders said. He added that the administration had shown sensitivity to growing public concern over the costs of continuing the campaign.

Hormuz remains central

The Strait of Hormuz remains central to Iran’s leverage and to efforts to end the conflict. Commercial traffic through the waterway has fallen sharply, while Iran is also bearing substantial economic costs from the disruption.

Saunders said traders had so far expected the strait to reopen, limiting the immediate impact on global oil prices. But he warned that the economic consequences could become far more serious if the disruption persisted and refiners were forced to adapt to reduced supplies.