On June 18, 2026, US–Iran negotiations on the terms for ending the conflict launched by Operation Epic Fury on February 28, 2026, opened in Switzerland. After the first round, the parties set up four working groups, and the United States suspended its sanctions on Iranian oil. Finalizing the terms will take up to 60 days.

The alternating breakdowns and resumptions of the talks — including the collapse of the round scheduled for June 19 — reflect an active struggle between two factions within Iran’s leadership. The negotiations rest on a memorandum of understanding that took effect on June 18, 2026, under Pakistani mediation. The document recorded the end of the active phase of hostilities and provided for reopening the Strait of Hormuz, lifting the naval blockade of Iranian ports, and launching a plan to rebuild Iran’s economy worth no less than $300 billion. That struggle is fueled by the vagueness of the memorandum’s terms and the prospect of revising them during the talks, which gives each faction grounds to read the document in its own favor.

The pragmatist camp uses the memorandum to demonstrate the promise of dialogue with the United States, while the hardliners regard its terms as unacceptable concessions and see closer alignment with the autocratic axis as the only guarantee of the clerical regime’s stability.

The outcome of this internal struggle will determine both China’s continued ability to use the clerical regime as its main channel of autocratic influence in the region and the success of US efforts to reduce Tehran’s asymmetric dependence on Beijing. For that reason, Washington and Beijing shape the struggle indirectly, through signals that strengthen the position of one Iranian faction or the other.

China and Russia’s failure to provide Tehran with real support during the war strengthened the factions within Iran’s leadership that favor distancing the country from the autocracies and handed them leverage to advance their own course. The United States and the European Union are drawing closer through a mutual exchange of concessions on Russia and China.

The US–Israel alliance is in crisis, as the goals of Washington and the Netanyahu government in the Middle East show widening divergence.

These shifts are forming a new balance of power in which Washington is moving its focus to the Pacific theater as the projected point of its main collision with Beijing, while weakening the economic and political ties through which China kept Iran within its orbit.

The White House’s rapid exit from Operation Epic Fury is subordinated to a broader strategic calculation. A drawn-out campaign in the Middle East was draining American resources, and turning the conflict into a direct ground operation would have benefited Beijing above all, tying down US forces in a secondary region. Freezing an interim status quo also works as a signal, because holding forces in reserve demonstrates to Beijing the volume of resources the United States can concentrate on its main, Pacific theater without exhausting them on the periphery.

Although the specific terms of the deal with Iran are still to be negotiated, even their final content will remain secondary to the fact of the conflict’s end, since the global US–China confrontation will outweigh the significance of individual clauses of any Middle East agreement.

Iran Reconsiders Its Allies After Their Inadequate Support During the Conflict

The strengthening within Iran’s leadership of the faction that favors partial distancing from cooperation with Russia and China rests on evidence gathered during the fighting of Beijing and Moscow’s unreliability as allies.

Despite the declarative support of the autocratic axis governments, Tehran ran up against Beijing and Moscow’s unwillingness to provide tangible military and economic aid while Operation Epic Fury was under way.

Russia, which had concentrated its military and economic resources on the war in Ukraine, viewed the Middle East conflict mainly as a factor pushing up energy prices and lacked the capacity to give Tehran effective aid. This was borne out by the “Russian–Iranian Cooperation” conference in Moscow on June 3, 2026, after which the Iranian side noted the gap between the rhetoric of alliance and the actual level of support, since Tehran’s requests for military-technical assistance during the conflict largely went without an official response. Moscow’s stance rested on the comprehensive strategic partnership treaty, which does not oblige Russia to take part in armed conflicts involving Iran — confirming to the elite that the perception of Russia as one of Iran’s security guarantors, held from 2022 to 2025, had been overstated.

Throughout the conflict, China’s foreign ministry confined itself to calls for peace and respect for Iranian sovereignty. At the May 2026 meeting between Iranian Foreign Minister Abbas Araghchi and Wang Yi, the Chinese diplomat pressed for a swift restoration of shipping through the Strait of Hormuz, through which more than a quarter of China’s oil imports had passed before the operation.

The 2021 Iran–China partnership agreement was meant to secure Beijing’s purchases of Iranian oil at below-market prices in exchange for $400 billion in Chinese investment in Iran’s economy.

Yet Chinese companies steered clear of real investment for fear of US secondary sanctions, so that over 2021–2025 China’s cumulative direct investment in Iran came to roughly $2 billion — 30 to 40 times less than China’s investment in other countries of the region.

Despite declarations of expanding cooperation, bilateral trade over the past decade narrowed mainly to the energy sector, underscoring Iran’s dependence on a single major buyer. At the end of 2025 China was importing up to 1.4 million barrels of Iranian oil per day, roughly 80–90% of all Iranian oil exports, which let Beijing dictate the terms of trade.
One sign of Tehran’s heavy dependence on the Chinese market was the widening of the discount on Iranian Light crude for Chinese buyers from $4 a barrel in August 2025 to $8–9 a barrel by the end of 2025.

The May 2026 appointment of parliamentary speaker Mohammad Bagher Ghalibaf as Tehran’s special envoy to China, intended to renegotiate the terms of the strategic-cooperation agreement, signaled the Iranian elite’s reassessment of the country’s earlier bet on Beijing as its priority partner.

The Final Shape of the War’s Terms: A Struggle Between Two Factions in Iran’s Leadership

The killing of Ayatollah Ali Khamenei in the first hours of Operation Epic Fury accelerated the shift to a collective decision-making model, in which the new supreme leader, Mojtaba Khamenei, found himself forced to balance between the two factions.

The pragmatist faction of the Iranian elite, consolidated around President Pezeshkian and parliamentary speaker Ghalibaf, controls the Supreme National Security Council (SNSC), the presidential apparatus, and the foreign ministry.

This faction’s position rests on the view that easing tensions with the United States lays the groundwork for lifting sanctions, attracting investment, and restoring transit through the Strait of Hormuz in order to stabilize the economy.

The hardliners, led by former SNSC secretary Saeed Jalili and relying on the Steadfastness Front (Paydari), religious institutions, and the Basij militia, regard a deal with the United States as a disadvantageous way to end the fighting.

The pragmatists use the limited support from China and Russia as their main argument for a deal with the United States, contending that the hardliners’ bet on the autocratic axis led to foreign-policy setbacks and that, absent real allied guarantees, direct arrangements with Washington are the only way to preserve sovereignty. This argument has won support among a wider circle of the military and political leadership that recognizes the threat the economic crisis poses to the regime.

The decisive factor behind Tehran’s acceptance of the memorandum was the stance of the military-security apparatus, part of which backed a diplomatic path out of the conflict. Quds Force commander Esmail Qaani and IRGC Aerospace Force chief Majid Mousavi publicly endorsed the memorandum, while the IRGC’s deputy for political affairs, Yadollah Javani, described diplomacy and combat as two parallel routes to the regime’s interests.

A key part in carrying the pragmatist position into the Corps falls to parliamentary speaker Ghalibaf, who combines a pragmatic course with the background of a career IRGC officer, former commander of the Corps’ Aerospace Force, police chief, and mayor of Tehran. That background gives his arguments for a deal weight precisely inside the military-security apparatus, since Ghalibaf is a product of its own structures who retains a network of ties within the senior command. Through this figure, the pragmatists gain a channel of influence into the part of the IRGC that had previously stayed closed to the civilian wing of the elite.

A lever for the moderates was granting representatives of the regular army a vote in approving the deal at the SNSC, which gave the pragmatists an instrument they had not previously held and temporarily shifted the internal balance toward de-escalation.

The memorandum is built so that both factions can present its provisions as their own victory in the internal struggle. The flexibility of the wording made it possible to keep Tehran from blocking the document at signing, but did not resolve the disagreements over the final terms of the deal.

The pragmatists secured confirmation of an immediate halt to the military operation, the lifting of the naval blockade within 30 days, US Treasury licenses for oil and gas exports, and the central bank’s full access to $24 billion in frozen assets.

For the hardliners, the key points were the absence of any clauses limiting the ballistic-missile and drone programs, the US commitment to withdraw forces from territories in Iran’s immediate vicinity, and the agreement to process uranium domestically without exporting it abroad.

Iran’s concessions to the United States are minimal: Iran retained a significant part of its missile arsenal — the largest in the Middle East, estimated before the conflict at more than 3,000 short- and medium-range ballistic missiles — did not abandon support for its regional proxies, and gained access to financial resources.

Even before the final terms took shape, Iran’s energy sector reaped its first gains from the start of the negotiating process. Between June 14 and 19, 2026, after the blockade was lifted, the country put roughly 18 million barrels of crude on the market — much of it stockpiled during the blockade — earning its economy about $1.44 billion.

For the hardliners of Iran’s foreign policy, who sustained their grip on power and their own financial and economic standing through the country’s isolation from world trade and its refusal to democratize, the gains granted to Iran’s economy and trade lay the groundwork for an erosion of their influence.

As early as June 20, 2026, the IRGC-linked Tasnim news agency reported the closure of the Strait of Hormuz, announcing further steps that would complicate work on the final version of the US–Iran deal.

Financial Levers Against the IRGC’s Economic Power

The resistance that part of the IRGC mounts against de-escalation and the restoration of free trade stems from the command’s drive to preserve the basis of its power, which rests on the Corps’ role in circumventing sanctions. For decades the IRGC has held a monopoly over the illicit channels of foreign trade and financial settlement through which Iranian business was forced to operate. The Corps controls a fleet of tankers under foreign flags that disguise Iranian oil as Malaysian blend, a network of financial intermediaries in Turkey, the UAE, and Hong Kong for bypassing SWIFT, and the construction conglomerate Khatam al-Anbiya.

IRGC-affiliated entities and religious foundations control between a third and more than half of Iran’s GDP, dominating construction, energy, telecommunications, and banking, while smuggling through the Corps-controlled ports is estimated at $20–25 billion a year, around 30% of all imports. Establishing conditions for legal trade directly threatens this basis of influence.

Financing for the $300 billion reconstruction plan will come from the Gulf states and from an international consortium of European, Asian, and American energy corporations through the purchase of goods, works, and services in dollar settlements. Under sanctions, the ultimate beneficiaries of such contracts were mainly the regime’s autocratic allies, whereas access to dollar settlements opens up a wider circle of suppliers for Tehran without the intermediation of IRGC-controlled structures. Lifting sanctions strips the Corps’ shadow infrastructure of its economic rationale, while keeping the IRGC’s terrorist designation, together with financial-monitoring requirements, will push foreign investors to avoid dealing with it. The Corps’ loss of its central position will strengthen new economic elites oriented toward the solvent markets of the United States and Europe.

Because the closed, sanctioned economy was advantageous above all to China, which received cheap oil in exchange for limited investment, its dismantling runs directly counter to Beijing’s interests — which is why China’s leadership is backing the hardliners and stoking a crisis inside the Israeli–American coalition.

Contradictions Between the US Administration and Israel Deepen

Despite the joint conduct of Operation Epic Fury, the strategic goals that Washington and Jerusalem set for the Iran campaign differ. From the spring of 2026 the US administration sought a time-limited operation to destroy Tehran’s missile and nuclear infrastructure, so as to reopen the Strait of Hormuz as quickly as possible and avoid an economic recession ahead of the midterm congressional elections.

The government of Benjamin Netanyahu, by contrast, sought to harness American military power to achieve Israel’s strategic objective of toppling the clerical regime and building a new model of power in Iran.

Jerusalem pursued this line against the backdrop of the worst state of its own economy in decades, as spending on the continuous war since 2023 pushed the budget deficit to nearly 7% of GDP in 2024 and drove government debt from 60% to about 70% of GDP, prompting all three leading rating agencies to downgrade the country’s credit rating.

Despite a long history of political and security cooperation, in the Iran campaign Washington and Jerusalem acted as situational allies with opposing ultimate aims.
The clash of interests between the two coalition allies came to a head after Israel struck the southern suburbs of Beirut just as the memorandum’s text was being finalized, which led to the postponement of the US–Iran talks in Switzerland scheduled for June 19.

Continuing the fighting serves Netanyahu’s political interest ahead of the October 27, 2026, elections, since after the ultra-Orthodox factions left the coalition in the summer of 2025 his government rests on just 60 of the Knesset’s 120 seats, while the prime minister himself has been on trial since 2020 on bribery and breach-of-trust charges.

Under these conditions, the image of a leader who can guarantee security remains Netanyahu’s only strategic asset, turning the war into his principal instrument for holding on to power.

For the first time since the memorandum was drafted, the camp favoring continued confrontation with the United States gained the upper hand within the Iranian elite, as Tehran used the escalation in Lebanon as a pretext to refuse to send a delegation.

The rift between Washington and Jerusalem, and Israel’s drive to keep fighting the Shiite “Axis of Resistance,” benefit Beijing. China will use the crisis between the two governments in its talks with the Gulf monarchies, persuading them of the unreliability of the United States as a security guarantor and promoting instead its own regional security models as a tool for limiting American influence.

Destructive Actions by the Israeli Government Inflame Political Confrontation in the US Ahead of the Midterms

The 2026 electoral cycle has brought to the fore a US debate over the wisdom of unconditional support for the Netanyahu government’s course.

Within the Republican Party, the influence of advocates of pragmatic diplomacy and of MAGA opinion leaders has grown; they argue that Epic Fury produced purely negative consequences for the United States through rising inflation and higher oil prices, while the protracted conflict drained the American arsenal.

This debate is unfolding against a long-running reversal of public opinion: by 2026 roughly 60% of US adults, and up to 70% of those under 50, held an unfavorable view of Israel, while among Republicans under 50 the share of unfavorable views topped half for the first time, splitting the party’s younger wing from its leadership.

The Democratic Party has focused on the illegality of Israel’s preemptive strikes, using that narrative to mobilize progressive voters ahead of the elections.

The Netanyahu government commands an Israel lobby of unprecedented influence at the very moment its political returns are declining, as even House Minority Leader Hakeem Jeffries has refused further contributions from the American Israel Public Affairs Committee (AIPAC) amid that group’s transformation into a toxic brand in Washington.

Washington’s shift to a more critical stance toward Jerusalem’s actions undercuts the arguments of both opposition camps. Vice President Vance, skeptical of the Iran campaign from the start, publicly drew a line between Israel’s right to self-defense and its strikes on Lebanon, calling the latter unacceptable on the eve of the talks.

This lets the administration separate support for Israel as an ally from approval of the Netanyahu government’s actions, preserving its alliance commitments while easing domestic political pressure.

The Trump administration’s drive to exit the Iran conflict is subordinated to the single goal of consolidating resources ahead of an escalating confrontation with China in the Pacific.

The depth of this realignment remains open, since on the eve of the July NATO summit the range of possible scenarios stretches from tighter transatlantic integration to a partial rollback of US commitments to the Alliance — and it is the course taken within these bounds that will determine whether the division of roles takes hold, with Europe stepping up pressure on Beijing and the United States on Moscow.

The US campaign against Iran and the autocratic axis’s response to Operation Epic Fury have shown that both Washington and Beijing treat the fighting as an episode in preparing for the main confrontation, in which neither side is willing to drain its resources on a secondary front. The Middle East has become a region where the two blocs test the strength of each other’s alliances and probe them for weak links.

The talks in Switzerland — together with the suspension of sanctions, the partial opening of the economy, and Iran’s return to dollar settlements — lay the groundwork for Tehran’s drift away from the autocratic axis.

This drift will unfold over long cycles, as open trade with the democratic world gradually forms new economic players unconnected to the system the IRGC built over decades. These players will have an interest in further openness and will press to widen it.

Decisive for this transition will be the mechanism for allocating the roughly $300 billion in reconstruction funds, since their distribution will determine whether they reach the new economic players or are intercepted by Corps structures seeking to rebuild their monopoly under an open economy. The struggle for control of these funds is the knot in which it will be decided whether Iran’s drift away from the autocratic axis becomes irreversible.