MELISSA BLOCK, HOST:
This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.
Iran may be facing a set of crises more serious than anything it has experienced since the war with Iraq in the 1980s. The war in Syria is threatening to bring down the Assad regime, Iran's sole ally in the Arab world. A European oil embargo and U.S. banking sanctions are undermining the Iranian economy, bringing inflation, food shortages and unemployment.
Through it all, Iran is trying to maintain a defiant posture as NPR's Mike Shuster reports.
MIKE SHUSTER, BYLINE: It's an unprecedented set of problems facing Iran's leaders, says Abbas Milani, director of Iran Studies at Stanford University.
ABBAS MILANI: By and large, I think they feel like they're in a very critical moment of a diplomatic isolation and crisis.
SHUSTER: Paramount among the foreign policy challenges for Iran is the war in Syria.
ALEX VATANKA: The loss of Syria on the geopolitical map would be a huge blow to Iran.
SHUSTER: Alex Vatanka, an Iran analyst with the Middle East Institute in Washington, says Iran's recent claims about its power and influence in the Middle East - how Iran has hailed the uprisings across the Arab world - have been turned upside down by events from Syria to Egypt.
VATANKA: From being in a position where you hopefully are going to make inroads into the Arab world, through Cairo and perhaps elsewhere, you're finding the opposite is happening. You're actually losing ground in the Arab world in the shape of losing Syria.
SHUSTER: The war in Syria threatens to sever Iran's connection to Hezbollah in Lebanon. Without Syria, it is more difficult for Iran to move weapons and missiles to Hezbollah, and that undermines Iran's threats to and defense against Israel. To contain the damage, Iran has launched a multipronged diplomatic campaign. Last week, senior Iranian officials made visits to Syria, Turkey, Iraq and Lebanon.
Then Iran's foreign minister, Ali Akbar Salehi, invited some 30 nations to gather in Tehran to talk over a peace initiative for Syria. Afterward, Salehi claimed that Iran could be the peacemaker.
ALI AKBAR SALEHI: We have announced our readiness to host a meeting between the opposition and the government of Syria, to facilitate for such meeting. We have contacted the Syrian government. Yes, we have been in contact with the opposition.
SHUSTER: But it's not clear who speaks for Iran's government. Foreign Minister Salehi has been the voice of moderation. But others, some of the top commanders of the Revolutionary Guards, have been more bellicose, threatening Turkey and hailing what they call the axis of resistance: Iran, Syria, Hezbollah.
Iran is also facing challenges from elsewhere in the Middle East, notably Saudi Arabia, says Muhammad Sahimi of the University of Southern California.
MUHAMMAD SAHIMI: A big part of what they see that is happening in Syria, the Iranian government sees it as instigated by Saudi Arabia. And they see Saudi Arabia as basically a puppet of the United States.
SHUSTER: It is not lost on Iran's leaders that Saudi Arabia is supplying funds and weapons to the Syrian opposition. As Syria weakens, Saudi Arabia's influence is growing, an even greater challenge to Iran.
And there's more, a whole other dimension to Iran's problems, says Stanford's Abbas Milani.
MILANI: Remember, all of this is taking place in the context of a very, very serious economic crisis.
SHUSTER: A European boycott of Iranian oil went into effect on July 1st, as did sharp U.S. banking sanctions. Right now, Iran's export of oil is roughly half what it was a year ago. And by some estimates, that is costing Iran more than $130 million a day.
The Iranians counted on the oil embargo prompting a jump in oil prices, says Muhammad Sahimi, who also writes for the website Tehran Bureau. But that didn't happen.
SAHIMI: Altogether, I would say that the oil sanction has been very successful. In fact, that has surprised the Iranian government.
SHUSTER: That has brought inflation, unemployment. Even some food riots have been reported. The effects of the sanctions have been too apparent to deny, says Alex Vatanka.
VATANKA: There's no doubt, based on all the figures and even statements coming from Tehran, that they are suffering. I mean, we only have to take the words of the leadership in Tehran. They are saying they are hurting.
SHUSTER: And this has led to unprecedented criticism of Supreme Leader Ali Khamenei's foreign and domestic policies in the press, in parliament, from a wide spectrum of conservative voices.
At the same time, the U.S. and Europe have allowed the ongoing negotiations over Iran's nuclear activities to slow to a crawl. That benefits the U.S. and Europe in the view of Abbas Milani.
MILANI: Their strategy is to allow these sanctions to continue. They think they are biting, and I think they're right. And they think the bite will increase and, again, I think they're right.
SHUSTER: Increasingly, Iranians see the link between their nation's nuclear ambitions and the pain of the oil embargo and banking sanctions. Add to that the trouble on the diplomatic front and a series of effective cyber attacks, and it's fair to say Iran is facing unprecedented challenges it did not expect just a few months ago.
Mike Shuster, NPR News.
NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR’s programming is the audio.