The Beginning of the End for Iran’s Regime?

The value of Iran’s national currency, the rial, is at its weakest compared against the American dollar in the past two decades. Over the past five days, its plummeted an estimated 40 percent, and has declined by roughly 80 percent in the past year. While this news was mostly missed by Western media, its causing a buzz amongst observers of foreign policy and the international environment. What we are now witnessing has the possibility of decisively changing the attitude in Tehran, or, more significantly, could lead to protests on the street and the overthrow of the Iranian regime.

In order to understand what might result from these developments, it is important to understand what caused the economic crisis in Iran. One of the most significant factors is the economic sanctions that have been put on place against the Iranian government. Washington first placed financial sanctions on Iran in 2006, and four rounds of sanctions by the United Nations Security council followed. Since then, the United States has boosted its efforts to get allies and other foreign governments to implement financial sanctions against Iran. As a result, Iran has become essentially isolated from much of the global financial system, and  has suffered a sharp decline in its oil sales. A European oil embargo imposed in July of this year further dropped its export of oil. Right now, Iran’s oil exports are less than half what they were last year.

Experts analyzing the financial news coming out of Iran are also pointing to more economic statistics which demonstrate a worsening economic crisis. Inflation has spiked to 27 percent, and has been getting worse in light of food shortages and the plunging strength of the currency. Monthly inflation appears to have reached 70 percent, qualifying as hyperinflation according to John Hopkins University economics professor Steve Hanke. Iran’s GDP slowed in 2011 and is likely to stagnate by the end of this year. Unemployment was around 15 percent at the end of 2011, and expected to grow. Unemployment among the youth was seen at nearly 25 percent.

This combination of economic woes is potentially explosive. The Arab Spring uprisings of last year were sparked by economic woes and worsening living standards across the Arab world. Iran has also had a recent history of unrest, with the ‘Green Revolution’ of 2009 producing mass protests across Iran following its elections. Iran cracked down on that movement, but the resentment that it formed from has been left to simmer instead of being rooted out. Now, the economic woes which Iran are facing , coupled with the precedent set by the Arab Spring, could serve as the spark needed for a fresh round of protests. While anger could be directed at the West for placing the crippling sanctions, much of it has instead been directed towards the government, which has been said to have mismanaged countering the sanctions and squandered its revenue. Already we’re seeing protests beginning to develop: riot police in Tehran have been firing teargas against demonstrators protesting against the plummeting Iranian currency.

What are the implications of these developments, then? It’s a bit hard to tell right now, and anything can happen. However, it is quite apparent that Iran cannot continue to do what it has been doing without changing course somewhere. The collapsing economy is beginning to bring people out on the streets, and without a doubt the Iranian government is eyeing the protests nervously. What are, in my opinion, the two most likely ways things are going to play out are: the protests will pick up momentum, and Iran will be embroiled with a crisis like it was in 2009, though this time perhaps even worse. Economic woes are a powerful influence, and one just needs to look at the toppling of several Arab dictators to see that. If this happens, the Iranian government will either need to crack down on protests, which it has done in the past, or institute some sort of change to deal with the economic issue and appease the population. Cracking down on the protests might solve the problem in the short term, but if the economy doesn’t improve (and it won’t if the sanctions remain in place), then the resentment will continue to simmer and build and likely reemerge even more explosively. If this is the case, then the Iranian regime might be facing an existential threat.

The most effective course of action the Iranian government can do to improve its economic standing is remove the sanctions, and this would require it to compromise on the nuclear program. We are already seeing a toning-down of Iranian rhetoric, be it Iranian President Ahmadinejad clarifying his position on Israel at the U.N. recently or recent proposals to return to the discussion table with the United States regarding uranium enrichment. The fact of the matter is, however, neither the US or Israel will stand down unless Iran completely dismantles its nuclear program, and the sanctions are likely to remain in place. What we might see, then, is Iran gradually warming to the idea that pursuing nuclear energy and nuclear weapons is just too much of a cost to continue.

No matter what happens, what is happening right now in Iran will be of profound significance for  the coming year. Iran is dealing with a massive crisis which has the possibility of getting out of control. While it is too early to say now, there is the chance that this will be the spark that leads to protests like what we saw in Egypt last year, and might very well result in the collapse of the current regime. What is more likely is that Iran will be more open to compromise, and possibly even admit defeat, when it comes to its nuclear program.

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