Iran, US sink into awkward limbo of ‘no war, no peace’

With plans for US-Iran peace talks derailed, at least for now, Tehran and Washington are sinking into an awkward limbo of neither peace, nor war, each hoping to outlast the other in a standoff with drastic stakes for the global economy.

Iranian officials seem confident they can withstand economic pain caused by war longer than President Donald Trump, analysts say. But they are still concerned that without the momentum of negotiations, they will remain trapped under the persistent threat of United States or Israeli attacks.

“What’s happening is something akin to what we had at the end of the 12-day war, which is ending the war, but without any permanency,” Sasan Karimi, a vice president in Iran’s previous government and political scientist at the University of Tehran, said of the Israel-Iran war last June.

Over the weekend, an article published by a prominent conservative newspaper, Khorasan, and redistributed by several other Iranian outlets described the current moment as “a strategic limbo” with considerable risks.

“Both sides have stepped back from the costs of full-scale war but have not moved beyond the logic of force and pressure,” it said. This “may be more dangerous than short-term war itself.”

The halting efforts to restart ceasefire talks brokered by Pakistan reflect the dynamics since the US-Israeli bombardment of Iran ended in a ceasefire earlier this month.

Both sides argued that they emerged with the upper hand. And Trump also seems to believe that the United States can outlast Iran in withstanding the war’s economic pain of the parallel blockades of the Strait of Hormuz.

The result is that neither side is willing to give ground that could allow talks to move forward.

Trump on Saturday called off sending his special envoy, Steve Witkoff, and his son-in-law Jared Kushner to the Pakistani capital, Islamabad, for a second round of truce talks. He said the Iranians would waste the negotiators’ time.

Iran’s top officials maintain they will not meet for direct negotiations until Trump lifts a US naval blockade he imposed on Iranian ports after agreeing to the ceasefire.

Yet Iran’s top diplomat, Foreign Minister Abbas Araghchi, headed on Saturday to meetings in Oman after his visit to Pakistan a day earlier, although he returned to Pakistan on Sunday. He is set to fly to Russia later this week, according to Iranian state media, after holding a second meeting with counterparts in Pakistan.

Beyond Islamabad, which would host a future round of talks, the Iranians see coordinating with the Persian Gulf nation of Oman, the other government whose country lies along the strategic Strait of Hormuz, as critical to hammering out a settlement.

Karimi urged Iran’s current leadership to take the moment to lay out an entire framework for a deal with the United States — from Iranian concessions to its ultimate demands, and a vision for a regional peace pact.

But in Iran, “the status quo is the most conservative way of behaving politically now,” he said, “because any change raises the possibility of being blamed in the future” if the plan fails.

Iran also still believes that in terms of economics, “it can wait Trump out, at least on the horizon of several weeks, where actually the disruptions in the strait are more costly for Trump than they are for the Iranians,” said Esfandyar Batmanghelidj, CEO of the Bourse & Bazaar Foundation, a research organization based in London.

But Iran’s economy is already facing a severe crisis. Reports of layoffs are spreading across the country, which is grappling with shortages in production of petrochemicals and medicine as a result of the war.

Iran’s most prominent economic newspaper, Donya-e-Eghtesad, has forecast that annual inflation could rise to 49% “in the most optimistic case” of reaching a deal. A state of “no war, no peace,” it warned, could push inflation closer to 70% over the coming months while a return to war might cause hyperinflation of more than 120%.

Yet some economists estimate Iran’s authoritarian rulers can survive the current economic crisis for three to six months.

By contrast, Batmanghelidj said, the disruptions to oil production and exports like fertilizer could start to cause deeper economic shocks to the global economy within weeks that could persuade Trump to move talks along.

Yet even if Iran can economically outlast the current impasse, he said, its strategic dilemma remains.

“The no-deal, no-war mode, from the Iranian standpoint, leaves them vulnerable,” he said.