The Shape-Shifting Axis of Resistance: Chatham House Analysis of Iran’s Networked Power

Understanding the Axis of Resistance Network

A groundbreaking Chatham House research paper, drawing on 33 interviews and 3 focus groups conducted across Iraq, Lebanon, Iran, and Syria between 2021 and 2024, presents a fundamentally new analytical framework for understanding Iran’s network of allied groups across the Middle East. The research, authored by Renad Mansour, Hayder Al-Shakeri, and Haid Haid as part of the XCEPT programme, challenges conventional Western assumptions about the Axis of Resistance and proposes alternative policy approaches based on network analysis rather than binary confrontation.

The Axis of Resistance comprises Iran as the central coordinating node, with Hezbollah in Lebanon, Hamas in Gaza, the Houthis (Ansar Allah) in Yemen, and the Popular Mobilization Forces in Iraq as key constituent members. Iran’s Islamic Revolutionary Guard Corps, particularly its Quds Force, serves as the primary coordinating mechanism. The former Assad regime in Syria was also a member until its fall in December 2024. Each constituent group maintains its own domestic political authority, military capabilities, and economic networks while participating in transnational cooperation frameworks.

The paper’s central thesis is that Western observers systematically underestimate the axis’s resilience. Despite unprecedented setbacks in 2024—Hezbollah’s severe degradation, the fall of Assad, direct Israeli strikes on Iranian territory—the axis has demonstrated a historical capacity to adapt and survive that defies predictions of its imminent collapse. Understanding this resilience requires looking beyond military capabilities to the economic networks and domestic political embeddedness that sustain these groups through crises, a dynamic explored in broader research on geopolitical disruption patterns and foreign policy challenges.

From Hierarchy to Rhizome: How the Axis Evolves

The Chatham House analysis employs the concept of the rhizome—a root system that spreads horizontally without a clear beginning or end—to describe the axis’s organizational evolution. This biological metaphor captures a critical feature of the network: it can be cut at any point and continue growing from the remaining nodes. The axis has undergone several distinct evolutionary phases that demonstrate this adaptive capacity.

During the 1980s and 1990s, the axis operated as a top-down, Iran-directed structure built primarily through the personal relationships of Qassim Soleimani, commander of the IRGC’s Quds Force. His assassination in January 2020, along with Iraqi PMF leader Abu Mehdi al-Muhandis, triggered the first major shift toward a more horizontal, autonomous structure. Soleimani’s successor, Ismael Qaani, shifted toward institutional mechanisms rather than personal control, and constituent groups gained greater operational independence.

The post-October 7, 2023 period saw further decentralization as Hezbollah, previously the axis’s most important non-state node, came under devastating Israeli military pressure. Hassan Nasrallah’s assassination in September 2024 removed the figure who had become the axis’s pivotal broker after Soleimani’s death. In response, the Houthis and Iraqi PMF groups assumed greater roles, demonstrating the network’s ability to redistribute functions across nodes when individual components are weakened. Each major shock has led not to collapse but to reconfiguration, often expanding the axis’s reach or capabilities in unexpected directions.

The Economic Lifeblood: Oil, Finance, and Smuggling

Perhaps the most significant analytical contribution of the Chatham House paper is its deliberate shift of focus from military cooperation to economic networks. The research documents two primary supply chains—financial flows and energy trading—that sustain the axis through multiple channels designed to circumvent international sanctions and generate revenue independent of formal state economies.

Financial flows operate through an intricate web of formal and informal channels. The manipulation of Iraq’s Central Bank dollar auction system has been particularly significant, with Al-Huda Bank documented to have used forged documents for at least $6 billion in wire transfers. Interconnected exchange houses across Iraq, Syria, and Lebanon provide additional channels, while physical cash smuggling using military vehicles and the traditional hawala informal transfer system offer alternatives. US OFAC has identified at least 5 cryptocurrency wallets linked to IRGC and Houthi operations, and front companies layer corporate ownership to obscure fund flows across jurisdictions.

Cross-border energy smuggling represents another massive revenue stream. PMF-affiliated groups smuggle approximately 10,000 barrels per day of subsidized Iraqi oil into Syria. In Lebanon, cross-border fuel smuggling through the Baalbek-Hermel corridor generated up to $300 million per month at its peak. Iranian oil is routinely blended with Iraqi oil in Basra to disguise its origin, and Hezbollah facilitated Iranian oil flows through Syria via front companies such as Hokoul SAL Offshore. These economic networks create self-sustaining revenue streams that persist regardless of the formal sanctions regime.

Iran-China Energy Trade and Sanctions Circumvention

China’s role as Iran’s primary energy market represents the single most important external factor sustaining the axis’s economic viability. In 2024, Iran exported approximately 533 million barrels of oil to China, representing 91% of its total exports—a 24% increase over the previous year. Iran-China trade reached approximately $70 billion in 2023, making China an indispensable economic lifeline that no sanctions regime can effectively counteract without Chinese cooperation.

The logistics of this trade involve sophisticated evasion mechanisms including ship-to-ship transfers at sea, the use of shadow tanker fleets, and transit through intermediary ports. Malaysia-registered companies such as Blu Shipping and Tefcas Marine provide services to Iran-linked vessels, while the UAE’s Fujairah port has been documented as involved in Iranian oil transit. Iran also maintains significant energy relationships with Gulf states: a joint exploitation arrangement with Qatar on the South Pars/North Dome gas field and engagement with Saudi Arabia on the Arash-Dorra gas field.

Russia’s deepening partnership with Iran, formalized in a January 2025 security agreement, adds another dimension to the axis’s external support structure. Russian ports, including Murmansk, have been used in Iranian oil shipping operations, and the two countries increasingly coordinate on military-economic integration. These relationships with major powers ensure that the axis’s economic networks benefit from state-level protection and facilitation that makes unilateral Western sanctions fundamentally insufficient as a containment tool.

Iraq as the Central Node: State Capture and PMF Power

Iraq occupies a unique position in the Axis of Resistance as the site where the blurring of state and non-state boundaries is most advanced. The Popular Mobilization Forces, originally formed in 2014 to fight ISIS, have evolved into deeply embedded state-adjacent institutions that control significant resources and political power. The PMF’s budget allocation from the Iraqi state reached $3.5 billion in 2024, making it one of the most well-funded military-political organizations in the region.

PMF groups, particularly Kataeb Hezbollah, control government border posts, formal banking institutions, and segments of the Iraqi state budget allocation process. This embeddedness creates a situation where conventional policy tools struggle to separate the axis’s infrastructure from legitimate state functions. Government officials, military commanders, and banking executives may simultaneously serve state functions and facilitate axis economic activities, creating networks that are visible but practically impossible to dismantle without destabilizing the Iraqi state itself.

The figure of Qassim al-Araji, Iraq’s national security advisor, exemplifies the phenomenon of the “broker”—an individual who maintains ties to both Western countries and axis decision-makers, facilitating communication and negotiation across otherwise adversarial boundaries. The Chatham House research suggests that such brokers may be essential interlocutors for any serious diplomatic engagement, rather than obstacles to be eliminated, as understanding the intersection of economic deterrence and geopolitical power requires engaging with the full complexity of these networks.

Why Assad’s Fall Confirms Axis Resilience

The fall of the Assad regime in December 2024, far from disproving the axis’s resilience, actually validates the analytical framework proposed by Chatham House. The authors argue that axis resilience depends on two factors: domestic public authority and transnational connectivity. Assad’s regime ultimately failed on both dimensions. A decade of civil war and violent repression had eroded his domestic legitimacy, his relationship with Iran was always transactional rather than ideological, and he refused to join Iran’s campaign against Israel after October 7, 2023.

Crucially, it was the Syrian public that ultimately dismantled the regime, not external military pressure or sanctions. Iran and Russia, recognizing that Assad had become a liability rather than an asset, ultimately decided he was not worth defending at the cost of their broader strategic interests. This outcome illustrates the Chatham House paper’s central policy insight: the axis’s greatest vulnerability lies not in military or economic pressure from external powers but in domestic accountability demands from populations living under axis-affiliated governance.

In contrast to Assad, Iran’s other axis partners maintain stronger domestic social bases. Hezbollah, despite its severe military losses, retains significant support within Lebanon’s Shia community. The PMF is deeply embedded in Iraqi state and social structures. The Houthis control much of Yemen’s populated areas and draw on genuine grievances against the Saudi-led coalition. This differential in domestic legitimacy explains why the same shock that destroyed one axis member has been absorbed and adapted around by others.

The Failure of Western Policy Tools

The Chatham House paper systematically critiques three primary Western policy approaches to the Axis of Resistance, finding each fundamentally inadequate for addressing a networked, embedded adversary. Military strikes, the most immediately visible response, temporarily degrade capabilities but cannot destroy networks that maintain both domestic authority and transnational connectivity. A UK policymaker quoted in the research admitted that strikes on the Houthis had not damaged their military capabilities to date.

Economic sanctions, the workhorse of Western containment policy, are rendered ineffective by the very economic networks the research documents. Sanctioned leaders reportedly boast about continued private plane travel. Iran Air opened a daily Istanbul route shortly after EU sanctions were imposed, and Mahan Air continues flying to China and Russia under sanction. More fundamentally, in a multi-aligned world where major economies like China actively engage with sanctioned entities, enforcement relies on cooperation from states with no incentive to comply. Sanctions also carry the perverse effect of strengthening informal economic networks by creating profitable arbitrage opportunities for smugglers.

Building alternative institutions, such as the UK’s investment of over £106 million in Lebanon’s armed forces since 2009, has produced some security improvements but has not curbed axis economic networks. The research documents how the Lebanese Armed Forces actually collaborated with Hezbollah against mutual threats while avoiding confrontation with axis economic interests, creating what the authors describe as “isolated entities detached from centres of power” that cannot substitute for the axis’s deeply embedded influence.

The Multi-Aligned World Order and Boundary Blurring

The Chatham House analysis describes an emerging world order characterized by fluid multi-alignment rather than rigid blocs. States engage transactionally on an issue-by-issue basis, creating situations where traditional allies and adversaries collaborate across supply chains. UAE firms refuel Iranian-linked ships, Gulf states share oil fields with Iran, and traditional Western allies unwittingly participate in sanctions-evading supply chains. This boundary-blurring renders the binary “us versus them” framework underlying Western policy fundamentally obsolete.

The paper identifies three types of boundaries that the axis systematically blurs. State and non-state boundaries dissolve as PMF groups control Iraqi state budgets and government institutions. Formal and informal boundaries collapse as central banks work through informal exchange houses and military vehicles transport smuggled cash. Ally and adversary boundaries become meaningless as countries simultaneously maintain security partnerships with the West while facilitating axis economic activities.

This multi-aligned reality has profound implications for any attempt at containment or engagement. Policy frameworks designed for a world of clear ally-adversary distinctions and sovereign state boundaries cannot effectively address actors that operate across all these categories simultaneously. The axis’s networked, boundary-blurring model may represent a template for how other actors navigate the post-unipolar order, making the lessons of this analysis relevant far beyond the Middle Eastern context. For deeper analysis of how these dynamics intersect with economic warfare, see our coverage of evolving security threat landscapes.

Chatham House’s Alternative Policy Framework

Rather than recommending intensified versions of existing approaches, the Chatham House paper proposes a fundamentally different policy framework organized around three pillars: mapping, brokering, and accountability. Mapping involves comprehensive network analysis that reveals the full ecosystem of state and non-state, formal and informal, ally and adversary actors across all jurisdictions involved in axis economic and political networks. This mapping would reveal the uncomfortable truth that Western allies unknowingly participate in axis supply chains.

Brokering involves engaging with individuals who maintain ties to both Western countries and axis decision-makers—figures like Iraq’s al-Araji who bridge otherwise adversarial networks. The paper argues that the axis’s current weakened state creates a window for negotiation focused on mutual economic benefits, regional stability, and curbing informal economic activity. The JCPOA nuclear agreement is cited as a precedent demonstrating that productive engagement is possible even with adversarial actors, though any new agreement would need to address regional military and economic activities beyond nuclear issues.

Accountability represents perhaps the most innovative element of the framework. Rather than relying primarily on punitive external measures, the paper advocates supporting civil society, independent journalists, and reformist movements as organic checks on axis power. The al-Zaidi case in Iraq, where civil society and reformist pressure on the PMF secured the release of a detained teenager, illustrates how domestic accountability mechanisms can constrain axis behavior in ways that external pressure cannot. The paper’s core prescription is that the axis’s greatest vulnerability is domestic, and Western policy should be oriented toward strengthening that pressure rather than substituting for it.

Geopolitical Implications for Global Security

The Chatham House analysis carries implications that extend well beyond Middle Eastern regional dynamics into the fundamental questions of how international security operates in a post-unipolar world. For the United States, maximum pressure campaigns have repeatedly failed to dismantle the axis, merely forcing reconfiguration. The Iraq dollar auction system demonstrates how US financial infrastructure can be exploited by the networks Washington seeks to contain. Any comprehensive approach requires moving beyond punitive measures toward engagement frameworks that address both security and economic dimensions.

For the United Kingdom and Europe, the research highlights a fundamental mismatch between country-specific programming and the transnational nature of the challenge. Brexit-era bilateral UK policy needs coordination with European partners on transnational networks to be effective. The analysis also raises difficult questions about the return on investment of institution-building programs that operate alongside but do not challenge axis economic infrastructure.

Gulf Arab states emerge as increasingly important intermediaries rather than simple Western allies or Iranian adversaries. Their economic engagement with Iran through shared oil fields, port services, and financial flows positions them as potential brokers in any future diplomatic framework. Several Gulf states are already urging Western governments to reconsider antagonistic stances toward Iran, reflecting their practical experience of multi-alignment.

Perhaps most importantly, the paper describes a world where the foundational assumptions of Western security policy—clear ally-adversary distinctions, state sovereignty as the organizing unit, and sanctions as effective coercive tools—are increasingly obsolete. The axis’s networked, boundary-blurring model may represent the future of how power operates in international relations, making the analytical frameworks developed by this research essential for anyone seeking to understand 21st-century geopolitical dynamics.