Islamabad Memorandum

The Memorandum of Understanding did not constitute a comprehensive or definitive settlement of the nuclear issue. Rather, it served as a temporary truce to freeze military strikes and maritime and nuclear threats, buying time to negotiate a comprehensive agreement that would address the enrichment crisis at its roots. These developments come in the wake of the collapse of the 2015 nuclear agreement following the United States' withdrawal in 2018, which gave Tehran considerable room to expand uranium enrichment, restrict international inspections and accumulate large quantities of uranium enriched to levels approaching those required for the production of a nuclear weapon.   Against this backdrop, the nuclear programme stands out as the Iranian leadership's principal bargaining chip. Although Tehran does not currently possess a nuclear weapon, it has accumulated the technical expertise, established the necessary infrastructure and secured the enriched uranium needed to produce one within a relatively short period should the political decision be taken to do so. This reality underscores that Iran's leverage at the negotiating table is no longer merely theoretical. It is tangible leverage, rooted in Tehran's ability to move rapidly towards weaponisation.   On the operational front, despite US and Israeli strikes targeting nuclear facilities inside Iran, assessments have confirmed only limited damage. Tehran is still strongly believed to retain substantial capacity to continue uranium enrichment. However, experts remain divided over the true extent to which the attacks have set back its nuclear programme. These assessments indicate that military action alone has failed to resolve the nuclear issue, naturally increasing the likelihood of an eventual resumption of negotiations and a return to the diplomatic track.   Against this complex backdrop, a fundamental question remains: will the terms governing the nuclear issue be revised in any future memorandum, or will they remain unchanged from those set out in the "Islamabad Memorandum"? If the parties move towards introducing new amendments, how far can each side go in making concessions to negotiate an end to this chapter?

The expiry of the 60-day timeframe stipulated in the Memorandum of Understanding has left the Middle East facing an exceptionally complex geopolitical vacuum, following the failure to forge a strategic agreement that would either defuse tensions or secure the full reopening of the Strait of Hormuz. This does not necessarily signal a sudden or dramatic collapse in negotiations. Rather, it raises a fundamental strategic question about what comes next. The region appears to be entering a calculated tactical transition from conventional diplomacy to a bitter phase of brinkmanship and mutual attrition between Washington and Tehran. As a result, maritime security in one of the world’s most vital waterways, through which approximately 21 million barrels of oil pass each day, equivalent to 20% of global oil consumption, together with around 20% of global liquefied natural gas trade, is increasingly subject to volatile political calculations.   Understanding US conduct in this crisis requires a careful examination of two seemingly contradictory, yet ultimately complementary, perspectives. President Trump’s insistence that there is no pressing timetable for resolving the crisis can be understood as part of a broader doctrine of tactical manoeuvre. Washington is effectively weaponising time to exert systematic economic pressure, sustained by the continuing naval blockade of Iranian ports and an intensification of sanctions. The strategic objective is to drive the Iranian economy towards breaking point and compel Tehran to make substantive concessions, while sparing the US the costs and risks of an open military confrontation. A parallel and more probing assessment, however, suggests that this tactical calm conceals a classic dilemma that sharply constrains US options. Full-scale military escalation would carry prohibitive security and financial costs, potentially driving maritime insurance premiums and energy futures into double-digit surges and placing global supply chains at risk. Yet acquiescing to Tehran’s terms would effectively subordinate international navigation to Iranian will. The current stalemate therefore amounts to little more than an enforced freeze, reflecting institutional frustration at the absence of effective surgical solutions.   On the other side of the strategic equation, Tehran has been far from a passive recipient of pressure. Instead, it has devised a counter-strategy that seeks to redefine the rules of engagement and weaponise geography as a potent source of negotiating leverage. In a particularly consequential move, Iran has succeeded, at least temporarily, in shifting international attention away from the complexities of its nuclear ambitions and uranium enrichment programme, while exploiting maritime chokepoints as an instrument of immediate coercive pressure. Tehran has transformed control over the flow of global trade through the Strait of Hormuz into a decisive bargaining instrument, demonstrating its ability to disrupt global geoeconomic calculations. Iran’s brinkmanship is clearest in the far-reaching conditions it has set for reopening the strait. Rather than limiting its demands to lifting the blockade, Tehran has raised the stakes by calling for the withdrawal of US forces and payment of financial compensation, while insisting on exclusive security control over the waterway and threatening to impose sovereign transit fees. Such maximalist escalation does not necessarily indicate an expectation that all these gains can be secured immediately and in a single settlement. Instead, it is intended to engineer a new geopolitical reality that affords Iranian negotiators greater room for trade-offs and forces the US administration onto the defensive.

Negotiations between Washington and Tehran are entering an increasingly complex strategic juncture, with most of the 60-day timeframe established under the "Islamabad Truce" having elapsed without a decisive agreement. This has been accompanied by renewed hostilities and the Strait of Hormuz once again closing to international shipping.   These developments on the ground coincide with intensive international diplomatic efforts to contain the repercussions of an open military conflict that has clearly weighed on regional and global economic growth.   At the heart of this negotiating landscape is the conspicuous absence of the regional proxy issue from both the draft preliminary agreement and the current talks. Rather than signalling that the issue has been sidelined, this absence raises fundamental questions about the future of the complex network that has for decades formed a central pillar of Iran's deterrence doctrine.   Current political dynamics suggest the proxy issue is no longer a secondary matter that can be deferred or ignored. Instead, it has become a structural fault line that cuts across each side's conception of security and stability, as well as the limits of any viable settlement.   Its exclusion from the initial formulations reflects a clear recognition of how difficult it would be to incorporate the issue without directly confronting red lines at the intersection of Iran's deterrence doctrine, the US vision of regional security, and Israel's efforts to translate military pressure into irreversible negotiating gains.   The dilemma takes on even greater significance in light of recent macroeconomic analyses indicating that the costs of proxy involvement have extended well beyond direct military losses, striking at the heart of the global economy. Proxy-related operations along critical maritime corridors, particularly in the Red Sea, have severely disrupted supply chains and inflicted tens of billions of dollars in losses on international trade through unprecedented surges in shipping and insurance costs. They have also created unconventional threats to the security of digital infrastructure, most notably subsea fibre-optic cable networks.   Security experts emphasise that the structural attrition the Axis of Resistance suffered during the intense confrontations of 2024 and 2025 prompted Tehran's leadership to reassess its tactics and instruments, but not to abandon them.   The crisis stems from a fundamental divergence in the actors' perspectives. Iran regards its network of proxies as a forward line of defence and an integral component of its national security, integrating these groups with its missile and drone capabilities. Washington and Tel Aviv, backed by regional powers, by contrast, view dismantling and disarming these groups as a mandatory precondition for any new regional security architecture.   This reality places the proxy issue at a critical intersection between three complex levels: Iran's pursuit of strategic depth for its defence; US efforts to neutralise sources of asymmetric threat; and regional and international concerns that link market stability and freedom of navigation to ending the activities of these groups around maritime chokepoints and in the Eastern Mediterranean. Any settlement that fails to define the place and functions of these proxies would therefore amount to little more than a fragile truce vulnerable to rapid erosion.   This section examines the divergent perspectives of the key actors on the regional proxy crisis. It assesses how these competing positions may clash or converge behind closed doors at the negotiating table. The paper asks a central question: will these discussions translate into strategic trade-offs that underpin a comprehensive and sustainable settlement, or will divergence between the parties' red lines reduce the anticipated agreement to little more than a temporary tactical freeze before an even more violent round of conflict?   This issue was written on August 2, 2026

Iran's missile programme and drone arsenal constitute one of the Middle East's principal security determinants. Before the outbreak of military hostilities in February 2026, Iran possessed the region's largest stockpile of ballistic missiles. Estimates varied, placing its inventory at between 2,500 and 6,000 long-range missiles capable of striking deep inside Israel at speeds approaching 17,000 kilometres per hour. This coincided with Tehran consolidating its position as a leading developer of drones, particularly the various Shahed models, the Karrar series, and the latest Kaman variant unveiled in January 2026.   The strategic significance of these capabilities became evident during the war, when they became a top priority for U.S. and Israeli strikes. Production facilities, storage sites, and launch platforms were targeted in an effort to degrade Iran's deterrent capabilities and neutralise the threat they posed to Israel. This military escalation was consistent with the pre-war U.S. position, which had signalled its intention to prevent Tehran from acquiring ballistic missiles and stressed the need to incorporate this issue into the nuclear negotiations. In practice, this was reflected in the simultaneous targeting of the infrastructure underpinning both the missile and nuclear programmes.   However, the launch of the negotiation process introduced a new strategic dimension to the issue through the Islamabad Memorandum. Contrary to expectations that Iran's military capabilities would be incorporated into the initial agreement, both the missile and drone programmes were excluded from the preliminary understanding.   The Trump administration subsequently announced a departure from its previous position, stating that it was not seeking to prevent Tehran from rebuilding its missile capabilities, citing Iran's sovereign right to self-defence. This shift reflects a strategic trade-off based on temporarily overlooking the missile programme in exchange for containing the nuclear programme and restricting the funding of armed groups across the region.   This exclusion is not merely a procedural feature of the negotiations. Rather, it raises fundamental questions about the trajectory of the sixty-day transitional period and the strategy each party is likely to pursue thereafter. This situation requires an assessment that goes beyond measuring battlefield losses to understand how these capabilities have evolved from mere weapons systems into a fundamental pillar of the regional balance of power, imposing themselves on regional strategic calculations.   This issue was written on July 2, 2026