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It is not surprising that Iraq wanted to find a way out of the war as quickly as possible, but the leaders of Iran thought differently. They wanted to bring down the regime of Saddam Hussein, which had been responsible for unleashing the war, and see it replaced by an Islamic republic.
Large-scale Iranian offensives were undertaken to this end, but there was no breakthrough: the conflict assumed the character of trench warfare. Hardly any territory changed hands, but both sides suffered heavy casualties. Iraq repeatedly used chemical weapons against the Iranian troops, in violation of its international treaty obligations.
In February 1986, a major Iranian offensive on the Faw Peninsula appeared to turn the tide of the war. The pressures that Iranian forces brought to bear in the following months brought the West to intervene openly on the side of Iraq in early 1987. Among the West’s actions was the dispatch to the Persian Gulf of a naval task force responsible for protecting from Iranian attack tankers carrying Iraqi oil.
All tankers carrying Iraqi oil were allowed to fly the US flag, and the Iraqi Air Force was given approval for seemingly unlimited attacks on Iranian oil tankers and Iranian facilities on land. The resulting decline in oil revenues eroded Iran’s capacity to continue the war.
In 1988 extensive financial support from Kuwait and Saudi Arabia, economic, military, and diplomatic support from both the West and the Eastern Bloc, and successful Iraqi military actions tipped the balance back in favour of Iraq. Under these circumstances, the rulers of Iran chose to secure the existence of their young Islamic Republic and their own positions in it.
On 18 July 1988, they informed the Secretary General of the United Nations that they would agree to Resolution 598, passed by the UN Security Council in 1987. This called on both parties to enter into a cease-fire, withdraw to the internationally recognized boundaries, and exchange prisoners of war. A cease-fire was declared on 20 August 1988 and has not been violated since.
Both countries paid a high price for the eight-year war. According to conservative estimates, 105,000 died on the Iraqi side and approximately twice that number on the Iranian side; the number of wounded was two or three times greater. Tens of thousands of civilians were forced to flee the hostilities.
The war cost Iraq over 500 billion dollars (including weapons purchases, loss of income, damage to its infrastructure, etc.), a huge cost for the developing country. On the eve of the war, Iraq held extensive monetary reserves, but, by the beginning of the cease-fire, it was saddled with a massive debt.