Iran’s Revolution and Economy Are Intertwined

Taking a broad view of Iran’s revolution, Abbas Milani, the Hamid and Christina Moghadam Director of Iranian Studies, says that understanding the country’s future requires understanding its past.

“The 1979 Iranian revolution was no revolution at all. It was a cunning bait-and-switch game cleverly played by Ayatollah Ruhollah Khomeini, who put himself at the head of the movement,” Milani writes in the New York Times.

For decades, this regime, first led by Khomeini and until recently his successor, Khamenei, has successfully kept its population under repressive control through a combination of fear, violence, and brutality, says Milani. But that stronghold has shown cracks, and fear of the regime had begun waning prior to the U.S.-Israel attacks. Coupled with frustrations with a failing economy, skyrocketing inflation, and plummeting currency, Milani sees opportunity for real change within Iran.

“The economy is a clear source of constant threat to the regime, and the new secular women and men of Iran are unwilling to accept anything less than what they were initially promised before being deceived nearly half a century ago. The machinery of the regime may survive today. But the counterrevolution of yesteryear is begetting the revolution of tomorrow.”
 

America’s Firepower Is Superior, but Not Infinite

Speaking at a panel discussion hosted by the Center for International Security and Cooperation (CISAC), FSI Director Colin Kahl, a former under secretary of defense for policy at the U.S. Department of Defense, acknowledged the magnitude and deft execution of the unfolding military operation.

“The U.S. and Israeli militaries are doing things that no militaries in the history of the world have been capable of doing. From a kind of tactical and operational sense, it is extraordinarily impressive,” he said.

But Kahl also warns that an extended military campaign could spell trouble for the United States both in the current conflict and for future readiness.

“Iran has what is basically an inexhaustible supply of short-range, one-way attack drones that only cost about $35,000 apiece. We are shooting them down with $2 million missiles. That is an exchange rate Iran will take any day of the week.”

China and Russia are also watching this conflict and America’s artillery usage, says Kahl:

“We are expending a lot of long range precision munitions and a lot of air interceptors. And a lot of these weapons are exactly the systems you need for a contingency in North Korea, across the Taiwan Strait, or in the Baltics,” he says. “If you're in Moscow and Beijing, you’re counting those, and you know that for the next two or three years, the United States' cupboard is going to be bare and a more confrontational posture will not be viable.”

U.S.-Israel Interests are Aligned but Not Identical

Unlike in previous conflicts when the U.S. was joined in combat with NATO allies or other partners, the strikes on Iran were conducted in tandem with only one other nation, Israel.

Amichai Magen, the director of the Jan Koum Israel Studies Program, believes some of the impetus for the strikes is to send a message to anti-American and anti-Israel actors.

“If you can take out Maduro or undermine the regime in Iran, you are signaling to Russia and China that America is repositioning and re-establishing deterrence against its peer competitors,” Magen told NBC Bay Area.

Or Rabinowitz, a visiting scholar of Israel studies, also points to Iran’s insistence in recent negotiations on keeping its ability to produce advanced centrifuges as being particularly significant in the decision to execute military action.

But there is the possibility of divergence in the United States and Israel’s overarching goals as well, Rabinowitz says, especially when it comes to questions of nuclear capabilities. 

“Take Qatar as an example,” she told the CISAC panel. “Qatar is an actor that the Trump administration is very at home with, even though they are an anti-Israel actor. Something similar could emerge in Iran that feels malleable enough for the U.S. to work with on the nuclear issue, but they don’t forgo their ideology, their anti-Israel rhetoric, or their support for destabilizing Israeli-Arab normalization. The U.S. may choose to live with that even if Israel isn’t happy about it. That’s where you’ll see divergence.”

China Is Likely to Sit This One Out

When it comes to Iran’s partnerships and allies, experts believe Tehran is unlikely to see much help from Moscow or Beijing. Writing for Foreign Affairs, Michael McFaul and Abbas Milani track how Russia’s focus on Ukraine has diverted its ability to engage with players in the Middle East, citing its meager response to the fall of Bashar al-Assad’s regime in Syria and limited engagement with Iran in the aftermath of the airstrikes in June 2025 targeting nuclear facilities.

Lisa Blaydes, an FSI senior fellow, thinks China—Iran’s major trading partner—will take a similar backseat approach to the current conflict. 

“We think that China might have some leverage over Iran. But it's not clear how much will there is in China to get involved in this,” she explained at an event hosted by the The Program on Arab Reform and Development. “We know one of the only planes to land in Tehran recently was a Chinese plane that was bringing weapons to support the Iranian regime. Will this continue? Is it a one-off? Is it a pattern? I don't think we know yet.”

While a majority of Iran’s oil does end up in Chinese markets, China also has important economic and trade interests in the Gulf, says Blaydes, where all six Gulf Cooperation Council nations have been hit by retaliatory Iranian missile strikes.

“The Gulf is an important part of the Belt and Road Initiative. And there's a lot of money at stake. Disturbances in a place like the Strait of Hormuz would cause major disruptions to global supply chains. So I don't know if the Chinese want to weigh in strongly on either side.”
 

The Risk of Global Destabilization Is Real

The question on most people’s minds in regards to the war is, “What happens next?” Hesham Sallam, a senior research scholar at the Center on Democracy, Development and the Rule of Law, acknowledges the complexity and gravity of the situation.

“This is a very unpredictable situation. And it is concerning that multiple U.S. officials don’t seem to have a consistent answer about a situation that is so consequential and that puts so many people in harm's way,” says Sallam.

If not handled carefully, Sallam warns that the threat of escalation is very real. Faced with a potentially existential risk, leaders in what remains of the regime may seek broad global destabilization. 

“There’s a logic here for the regime that if you don’t exact more costs and prolong the conflict and make this as inconvenient as possible for everyone, Iran will not be dealt with on equal footing,” he says. “So they may be looking to exact huge costs not just on the U.S. and Israel and countries in the region, but to disrupt global energy markets and the flow of trade as a means of ensuring something like this never happens again.”
 

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This is the second of several articles—focusing on the 50-year history of SPICE—that will be posted this year. 

As noted in the article, “Celebrating SPICE’s 50th: SPICE’s Roots in the Bay Area China Education Project (BAYCEP),” that was written by Dr. David Grossman, founding director of SPICE, SPICE was established in 1976. Professor Daniel Okimoto joined Stanford in 1977, and I met him in 1988 when I joined SPICE. I had first heard of Professor Okimoto in fall 1972 during my freshman year in college. I read an excerpt, “The Intolerance of Success,” from his book, American in Disguise, that was reprinted in Roots: An Asian American Reader. During my first meeting with him, I learned that his family was incarcerated in the same concentration camp for Japanese Americans as my family during World War II. The camp was in Poston, Arizona. Okimoto was born in 1942 at the Santa Anita Assembly Center, a temporary detention facility for Japanese Americans. The detention facility was located at the Santa Anita Racetrack in Southern California, and Okimoto was born in a horse stable. From there, his family was moved and incarcerated in Poston. Since learning about this connection between Okimoto’s family and mine, I felt a strong personal connection to him.

Since the beginning of my time at SPICE, Professor Okimoto has been unwavering in his support of SPICE’s projects on U.S.–Japan relations and the Japanese American experience. He served as the Principal Investigator for multiple U.S.–Japan relations- and Japanese American-focused curriculum projects, the Reischauer Scholars Program (an online course that has been offered to high school students in the United States since 2004), and Stanford e-Japan (an online course that has been offered to high school students in Japan since 2015). One of SPICE’s most popular multimedia offerings is “An Interpretive History of Japan,” which is based on six lectures by Okimoto. Through these projects, I also established a strong professional connection to him.

Professor Okimoto has been an incredible champion for the Reischauer Scholars Program from its inception, rallying other U.S.–Japan experts and leaders to back our mission of teaching and inspiring the next generation of young scholars to strengthen ties between the United States and Japan. Over the past 20+ years, his guidance and example as a mentor have shaped me as a teacher and profoundly strengthened a vibrant community of educators and students.—Naomi Funahashi, Reischauer Scholars Program instructor

Prof. Daniel Okimoto has championed the Stanford e-Japan Program since its inception. In addition to providing some of the lectures for the initial cohorts, Dan was also generous with his time and knowledge with high school students in Japan through guest speaking in Virtual Classrooms.—Waka Takahashi Brown and Meiko Kotani, Stanford e-Japan Program instructors

Importantly, numerous SPICE staff (past and present) have studied under Okimoto, including Dr. Mariko Yang-Yoshihara, an educational researcher and instructor for SPICE whose primary advisor was Okimoto. She noted the following: “Having Dan Okimoto as my doctoral advisor was one of the greatest blessings in my life. What I gained from his mentorship both as a student and as a person was immense, and two moments in particular stay with me today. The first was the Japanese Imperial couple’s visit to the Stanford campus in 1994. Dan’s role as Stanford’s leading Japan expert often meant welcoming distinguished visitors from around the world; and on that occasion, he chose to share something deeply personal, that he had been born in a horse stable as his family was sent to a concentration camp. And in response, Empress Michiko called him ‘another great man born in a horse stable.’ This brief exchange stayed with me through my time as a student as it felt like a real glimpse into my advisor’s life as a Japanese American scholar, carrying the weight of history while still holding onto the quiet warmth of our shared humanity. The second anecdote came shortly after 9/11, when so many of us were grappling with fear and uncertainty of the future. As I sat in his office, anxious and overwhelmed, Dan said very little except, very quietly, ‘I worry about the Muslim American community.’ In that moment, I came to understand how deeply his own experiences had shaped how he cares for the world: amid a national crisis, his heart instinctively focused on vulnerable communities. These were the moments from which I learned the most as his student: lessons in humanity and empathy. They have since become the foundation of the learning goals in the courses I teach. I hope that our work at SPICE will honor and carry forward Dan’s legacy by developing curricula that shed light on the Japanese American experience and nurture empathy and a sense of shared humanity in future generations.”

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On behalf of the SPICE staff, I would like to express my heartfelt gratitude to Professor Okimoto for his unwavering support of SPICE. As someone who was born in a horse stable and unjustly incarcerated as a child without due process by his own country—along with approximately 120,000 people of Japanese descent, two thirds of whom were U.S. citizens—and is now Professor Emeritus of Stanford University, he remains a tremendous role model and inspiration to us at SPICE. He and his wife, Michiko, are still contributing greatly to U.S.–Japan relations through organizations like the Silicon Valley Japan Platform and the U.S.-Japan Council. They worked closely with the late Secretary Norman Mineta (left) and the late Senator Daniel Inouye (center); photo above courtesy of Daniel Okimoto. Like Okimoto, Secretary Mineta was also incarcerated by his country as a child during World War II. Senator Daniel Inouye was a Medal of Honor recipient for his service in the U.S. Army during World War II. Like Okimoto, Mineta and Inouye were also recipients of the Order of the Rising Sun. 

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The optimistic assumptions that shaped the wave of globalization at the turn of the 21st century have given way to geoeconomics, also known as economic statecraft, or the use of economic leverage to advance the geopolitical interests of nation-states. In this environment of "weaponized interdependence," corporations have become actors on the frontlines of the U.S.-China rivalry, the Russia-Ukraine war, China-Taiwan tensions, and other national security conflicts in which they are organizationally ill-suited to play a central role, cautions APARC Faculty Affiliate Curtis J. Milhaupt, the William F. Baxter-Visa International Professor of Law and a senior fellow at the Freeman Spogli Institute for International Studies. 

Milhaupt, an internationally recognized expert on comparative corporate governance, delivered a keynote speech titled Corporate Governance in an Era of Geoeconomics at the Corporate Governance Conference in Milan, Italy, on February 12, 2026. He described the era of geoeconomics as representing a dramatic departure from early 2000s thinking, when capital markets were viewed as politically neutral, shareholder identity was considered irrelevant, and scholars predicted global convergence on Western corporate governance models. All three assumptions have collapsed, posing significant repercussions for firm-specific legal risks and governance challenges. Watch Milhaupt's presentation:

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Heightened Compliance Risk

The U.S.-China rivalry has created a particularly complex challenge for corporate governance, says Mihaupt. The United States has enacted multiple laws to curtail technology transfers to China, with China responding in a tit-for-tat fashion. The resulting, rapidly shifting and conflicting legal environment makes it "virtually impossible for a compliance department to comply with both U.S. and Chinese regulations."

Milhaupt introduced the concept of "ESG + G," adding geoeconomics to the Environmental, Social, and Governance framework used by investors and companies to assess a company's sustainability, ethical impact, and risk management beyond mere financial performance. Like ESG, geoeconomics involves corporations taking on roles traditionally played by governments. "I think in many respects private companies have become national security partners of their home country governments," he said.

Milhaupt's review of the disclosures of risk factors in the securities filings of public companies in the United States over the past 20 years shows the dramatic shift in corporate risk perception. Mentions of geopolitical risks related to export controls, the China-Taiwan conflict, and supply chain vulnerabilities have spiked sharply since 2020, with a particularly dramatic increase following Russia's invasion of Ukraine.

Despite these challenges, corporations appear to be unprepared for the exploitation of the vulnerabilities created by economic interdependence in the era of geoeconomics. Only 5% of Russell 3000 companies disclose information on how they monitor geopolitical risk, Milhaupt finds. Among those that do, most provide no details about their strategies. Meanwhile, the expertise necessary for geopolitical risk assessment is declining as a percentage of S&P 500 boards of directors.

Divergent Governance Paths

In the era of globalization, corporate governance systems worldwide largely converged around the liberal vision of shareholder primacy. In today’s geoeconomic era, however, a different kind of convergence may be emerging: one shaped less by market ideology and more by the shared political values and strategic priorities of the home governments of globally active firms. Thus, we are witnessing increasing concern with the national identity of corporations and their shareholders, Milhaupt observes. "The standard legal tests for corporate national identity – jurisdiction of incorporation, or the real seat doctrine – are in danger of being overriden by political determinations such as the one that was applied to TikTok in the United States."

At the same time, Milhaupt argues, we may be witnessing the beginning of a movement in the opposite direction to the Western model of corporate governance: "the spread of what might be thought of as state capitalism in the West." To illustrate this trend, Milhaupt cites the case of the U.S. government's "golden share" in U.S. Steel as a condition for allowing its merger with Japanese company Nippon Steel.

While Milhaupt recognizes the necessity of government actions to protect national security in the corporate sector, he warns against ad hoc informal interventions in the private sector. "I don't think that these are really the answer to competition with Beijing," he said. "I'm particularly concerned about the impact of these government interventions on global investment, which relies on a predictable legal regulatory enforcement regime."

Milhaupt concludes that the era of geoeconomics is "the new normal," and both companies and governments must adapt to a world where economic and national security concerns are inextricably linked.

The deliberations yielded clear priorities for building trust through safeguards during this early phase of agentic development and adoption. Currently, participants favor AI agents for low-risk tasks, while expressing caution about high-stakes applications in medical or financial domains. In deliberation, participants indicated an openness to these higher-risk applications if provided safeguards around privacy or user control, such as requiring approval before finalizing an action.

The Forum also revealed support for culturally adaptive agents, with a preference for asking users about norms rather than making assumptions. Lastly, the discussions underscored the need for better public understanding of AI agents and their capabilities, pointing to the importance of transparency and education in fostering trust in these emerging technologies.

"The perspectives coming out of these initial deliberations underscore the importance of our key focus areas at Cohere: security, privacy, and safeguards,” said Joelle Pineau, Chief AI Officer at Cohere. “We look forward to continuing our work alongside other leaders to strengthen industry standards for this technology, particularly for enterprise agentic AI that works with sensitive data."

This pioneering forum sets a new standard for public participation in AI development. By seeking feedback directly from the public, combining expert knowledge, meaningful public dialogue, and cross-industry commitment, the Industry Wide Forum provides a key mechanism for ensuring that AI innovation is aligned with public values and expectations.

“Technology better serves people when it's grounded in their feedback and expectations,” said Rob Sherman, Meta’s Vice President, AI Policy & Deputy Chief Privacy Officer.  “This Forum reinforces how companies and researchers can collaborate to make sure AI agents are built to be responsive to the diverse needs of people who use them – not just at one company, but across the industry.”

Through Stanford’s established methodology and their facilitation of industry partners, the Industry-Wide Forum provides the public with the opportunity to engage deeply with complex technological issues and for AI companies to benefit from considered public perspectives in developing products that are responsive to public opinion. We hope this is the first step towards more collaboration among industry, academia, and the public to shape the future of AI in ways that benefit everyone.

“We have more industry partners joining our next forum later this year”, says Alice Siu, Associate Director of Stanford's Deliberative Democracy Lab. “The 2026 Industry-Wide Forum expands our discussion scope and further deepens our understanding of public attitudes towards AI agents. These deliberations will help ensure AI development remains aligned with societal values and expectations.”