Iran has disappointed its long-time ally Syria. Despite sending cash, security/intelligence specialists, weapons, and other supplies, Syria feels that Iran could do more. Actually, Syria is pleading with Iran to do more, otherwise the Shia minority that has ruled Syria for decades will be no more and Iran will lose a key ally in its effort to become the leader of the Islamic war. Syria wants Iran to create a state of war against the Gulf Arab states and coerce them to stop supplying Syrian rebels with money and weapons. Iran can't do this without risking a real war and that would make it clear what a massive fraud Iranian military power is. Western intelligence agencies know, from satellite, electronic eavesdropping, and a large number of human informants what shape the Iranian armed forces are really in. While many of the Iranian troops are first rate, their equipment is largely obsolete or shoddy locally made stuff and their commanders are appointed more for their loyalty than for their military skills.
Syria also hoped Iran would order its Lebanese client Hezbollah to attack Israel again, as it had in 2006. But Hezbollah does not want another war with Israel, at least not yet. The Israelis have been preparing for another war and will not be surprised by Hezbollah preparations as they were in 2006. Hezbollah points out that if there were another war, Hezbollah could no longer provide armed men and access to supplies via southern Lebanon (which Hezbollah controls). Still, the Assad dictatorship in Syria expected more and, in fact, needs more help to survive. While the fall of the Assad government will hurt Hezbollah, the damage will not be as great as would be inflicted by another war with Israel right now.
Hezbollah had been very loud about its pledges to attack Israel if Israel attacks Iran. Such an Israeli attack would be an enormous boost for the beleaguered Iranian religious dictatorship. Most Iranians hate the corrupt clerics, and the army of thugs, and secret police enforcing that rule since the 1980s. While the "Israeli attack" is kept in the news, few believe that such an operation could do much more than slow down the Iranian nuclear weapons program. The big damage would be to the Iranian opposition and reformers. These groups would be swept aside as nationalism (always strong in Iran) mobilized popular support for the clerical dictatorship.
September 7, 2012: Canada unexpectedly severed diplomatic relations with Iran. This is normally only done when war is declared. Canada did not have any immediate reason to sever relations, simply stating that bad behavior by Iran against diplomats (especially the attack on the British embassy in Iran earlier this year) and by Iranian diplomats (in Canada, migrants from Iran have long complained about spying and harassment by Iranian diplomats) made such a break appropriate. The severing of diplomatic relations made Iran very angry, as Iran, despite the frequent bad behavior of its diplomats and towards foreign diplomats in Iran, sees every diplomatic connection as a blow against the United States (which severed diplomatic relations in 1979 after Iranians took over the American embassy in Iran and held U.S. diplomats prisoner for over a year. Iran felt it was justified in doing this, and that the U.S. is not justified in still being pissed off about it.)
The new economic sanctions have, in the last three months, reduced Iranian oil exports from 4 million barrels a day to about half that. Iran is fighting back, offering deep discounts and self-insured ships to deliver its oil to customers willing to take a chance (on being punished for breaking the sanctions against buying Iranian oil). The banking sanctions are making it much more difficult for Iran to buy foreign goods and to support its smuggling operations (to obtain items needed for its military and weapons programs). The new sanction and more effective investigations have put international banks on the defensive. For decades many of these banks looked the other way as Iranian (and gangster) cash was quietly moved around (despite laws against this). Now large fines have been levied and criminal prosecution threatened. Iran suddenly finds very few foreign bankers willing to work with them.
The increased pressure on the banks is partly the result of increasingly successful Cyber War operations against Iran by the United States and Israel. In addition to some physical damage to weapons plants, the Cyber War attacks (using special software, much like the stuff that hacks so many PCs connected to the Internet) have collected enormous quantities of data on Iranian government, military, and commercial operations. This can be seen in the growing number of smugglers working for Iran being arrested and prosecuted. Most Iranians have noted many Western products disappearing from the stores and often replaced by cheaper, but shoddier, Asian imports. Iranians do not entirely blame their government for all this because most Iranians back the development of nuclear weapons.
Despite all the new pressure, Iran continues its nuclear weapons development effort. While in danger of losing Syria, Iran still exerts a lot of control over Iraq. Iraqi Arabs dislike the Iranians (who are Indo-European, not Arab and long-time oppressors of the Arabs) and the Shia majority government in Iraq knows that most of the Sunni Arab governments in the region would prefer that the Sunni Arab minority was again running Iraq (as it has done for centuries until overthrown in 2003). This is part of the great Sunni/Shia religious dispute that has been going on for over a thousand years. The Shia have seen better days but now see a chance to gain more power because of the Shia clergy that run the religious dictatorship in Iran. The Shia politicians in Iraq are willing to do favors for Iran (like allowing aid for the Syrian dictatorship to pass through), just in case.
September 1, 2012: Turkish media are reporting that over a hundred additional Iranian spies have been sent to Turkey since March. This data was apparently leaked by the government, which is not happy with the way Iran is trying to stir up trouble in Turkey using the local Shia minority and Kurdish separatists.
Iran and North Korea signed a scientific and technological cooperation agreement. Both countries have long sold each other weapons and weapons technology. This trade continues, even though sanctions against both nations forbid it.
August 31, 2012: For the first time, Iran's only (Russian built) nuclear reactor went to full power (1,000 megawatts). This reactor, at Bushehr, only went online last year. There were many delays in getting this plant operational. The Iranians said that some of the delays were made for safety reasons because of poor construction of the power plant. The Russian designed plant was supposed to be operational three years ago. Government officials kept complaining to the Russians, with no apparent effect. Russians who worked at
Bushehr complained of sloppy work by Iranians and a nuclear power facility that was fundamentally unsafe. Perhaps because of this, the government had 4,000 civilians living near the Bushehr plant relocated at a cost of $10 million. Work on Bushehr began in 1974, but was interrupted by the 1979 revolution and did not resume until 1992, when the Russians took over from a German firm. Russia continues to support the Iranian nuclear power program. This support is largely driven by the need for at least one export customer for Russian nuclear power systems. No one else will buy this stuff because during the Soviet period Russian nuclear reactors were seen as shoddy and accident prone. That is not the case anymore but the Russian reputation persists. So Russia needs to get some safe, reliable Russian nuclear power plants running in Iran to prove that Russian nuclear energy technology is competitive with what is offered by Western firms. Russia does not believe Iran will build nuclear weapons and even if they do, the Russians consider the Iranians too rational to be a nuclear threat.