Economic Sanctions Are Testing the Resilience of Iran’s Islamic System

Mohammad Ali Jafari and Ayatollah Khamenei (Wikimedia Commons)

By Shireen Hunter

The popular demonstrations in nearly all Iranian cities that followed the increase in the price of gasoline are only one symptom of the growing challenges facing Iran’s Islamic system. From a purely economic rationale, the price increase is justified as a means to regulate the fuel consumption, which, because of its cheap price, is comparatively high. However, in view of Iran’s current economic conditions characterized by mounting inflation and economic stagnation, this price increase acted as a last straw on people’s willingness to accept the government’s decision with equanimity.

The government has tried to pacify the populace by stressing that the revenue yielded from the price increase will be distributed to nearly 60 million economically vulnerable people. However, the revenue obtained by the price increase amounting to roughly $2 billion, depending how the exchange rate is calculated, when divided among such a large group would be insufficient to ease their economic hardships. Moreover, not all of the revenue gained could be spent on living support for the people. A few days ago, President Hassan Rouhani had complained that because of the fall in oil revenues, Iran faced a $21 billion shortfall in meeting the country’s needs.

The increase in the price of gasoline is only one manifestation of Iran’s economic and financial woes resulting from the economic sanctions. The main culprit has been the loss of Iran’s oil income. According to OPEC’s latest monthly report in November 2019, Iran’s oil exports have fallen by 1.65 million barrels per day since the imposition of U.S. sanctions. Moreover, because of banking restrictions, Iran faces difficulty in repatriating the foreign exchange earned by its non-oil exports.

Growing Intra-Elite Discord

A major consequence of economic hardships in Iran has been the intensification of intra-elite disputes. Even before the price increases, economic problems were causing serious tensions between the executive branch, especially Rouhani and the hardline-dominated judiciary and part of the parliament. These tensions became very obvious during the so-called anti-corruption campaign launched by the recently minted head of the judiciary, Ayatollah Ebrahim Raisi. The hardliners accused the government of having wasted $18 billion by the misuse of currency at the lower official rate. Meanwhile, the government complained that the anticorruption campaign did not go after the big villains, and posed questions of its own regarding the misuse of $2 billion. In short, both sides engaged in a bitter blame game.

More seriously, in an unprecedented move, the Friday prayer leader of the holy city of Mashhad and the father in law of the head of the judiciary, Ayatollah Alam al Hoda, demanded that $10 billion allegedly earned from religious tourism to Mashhad should be returned to the city. In addition to exaggerating the amount gained—the total of Iran’s earnings from tourism amounts to roughly $ 7billion—this demand essentially challenged the government’s authority over the city of Mashhad. This challenge, too, is nothing new. Some religious circles have for some time suggested that the holy cities of Mashhad and Qum should become autonomous on the model of the Vatican state.

In a counter-offensive, Rouhani complained of the lack of sufficient authority while having to bear the responsibility for the consequences of decisions taken by others. He demanded more authority and was shouted down by the hardliners, who claimed that he had more authority than the previous presidents. His request, of course, was a veiled criticism of the Supreme Leader, who makes the final decisions on important issues. Rouhani even suggested that on the most serious issues facing the country, people should be consulted through a referendum. This proposal, too, was harshly criticized by the hardliners. 

However, while the people are increasingly disillusioned with Rouhani’s performance, there is a growing awareness that the greatest part of the blame for the government’s shortcomings lie elsewhere. The entry of the Supreme Leader into the dispute over the gasoline price increases indicates that the current situation of responsibility without authority may not last forever. It can also make the Leader directly answerable to the people whereas until now he had mostly remained above the fray.

Structural Problems of the Islamic System: Conflict Between Revolutionary and National Goals

Iran’s latest crisis also highlights the underlying problems of its hybrid Islamic system and its double-headed government, plus the conflict between Iran’s national interests and the revolutionary goals of its hardliners.

Ostensibly, Iran’s political system is a republic based on the principle of popular will. At the same time,  however, it is based on the guardianship of the Faqih and the supremacy of Islamic law, and a large role for clerical figures in various aspects of government. These two concepts are completely at odds. More seriously, however, since the foundation of the system, its survival and the perpetuation of the Islamic revolution rather than Iran’s security and wellbeing has been the system’s main goal. For this purpose, a variety of civil and military organizations, most notably the Revolutionary Guard Corps and the Basij, have been established. These institutions have made governing the country very difficult and have made consecutive governments unable to pursue policies best suited to achieve Iran’s national interests. The current stalemate in U.S.-Iran relations, in addition to the Trump administration’s maximum pressure strategy, is largely because of the influence of this parallel government and its revolutionary organizations.

Continued economic pressures are certain to exacerbate these structural problems as the interests of Iran and its people increasingly grow at odds with material and ideological interests of the hardliner’s parallel government. As the hardliners’ revolutionary ideas and goals are rapidly losing their appeal, the sustaining of this double headed government and its policies are becoming more difficult. If the hardliners insist in maintaining the current conditions, they may have to do it by force.

Is There A Way Out?

Clearly, Iran’s current conditions, especially the perpetuation of revolution, cannot be sustained much longer. Economic sanctions and resulting difficulties have only made this reality clearer. The question remains how this situation can end. The committed opponents of the regime want a total overthrow of the system if need be through violent means, which would plunge Iran into chaos and even civil war. The regime’s opponents, including those abroad and separatists who want the country’s disintegration, are a divided group and lack a charismatic leader who could mobilize the people. Therefore, in case of a violent overthrow of the regime, as happened after the Islamic Revolution in 1979 when the diverse opponents of the monarchy began to fight amongst themselves, the collapse of the current system will generate similar infightings among opposition groups. In 1979, there was no appetite for Iran’s dismemberment among major international and regional players, with the exception of Saddam Hussein’s Iraq. This time, however, in case of turmoil in Iran, outside actors, including some of its Arab neighbors, will certainly become involved with unpredictable consequences for the country. In fact, they already manipulate Iran’s difficulties.

The other way out is for the hardliners to wake up, admit the untenability of present conditions and agree to wide ranging reforms. These reforms would include, the elimination of parallel military organizations and their incorporation in the national army, the weakening of clerical influence in politics, cultural liberalization, greater respect for people’s wishes, tolerance  of diverging opinions, and most important, prioritizing Iran’s national interests over revolutionary and Islamist goals .

However, the failure of past efforts to reform the system from within, leaves one with little optimism that they would be undertaken, thus leaving Iran with a clouded future.

Shireen Hunter

Shireen Hunter is an affiliate fellow at the Center For Muslim-Christian Understanding at Georgetown University's School of Foreign Service. From 2005 to 2007 she was a senior visiting fellow at the center. From 2007 to 2014, she was a visiting Professor and from 2014 to July 2019 a research professor. Before joining she was director of the Islam program at the Center for Strategic and International Studies, a program she had been associated since 1983. She is the author and editor of 27 books and monographs. Her latest book is Arab-Iranian Relations: Dynamics of Conflict and Accommodation, Rowman & Littlefield International, 2019.



  1. In very simple terms, the Islamic myth has been totally obliterated. Allah cannot save them. Secular thought has finally destroyed the Ayatollah regime. Just like theocracy was destroyed in Europe, so the ancient Iranians secular morality of Good Thoughts, Good Words, and Good Deeds has held Islam responsible for the economic management and has brought millions out in non-violence resistance. It has forced the Ayatollahs to get defensive and shutdown the internet. They are scared. The people have blocked the roads with their cars and have learned that they can bring the regime down non-violently in some areas. In time massive traffic jams will grind the regime to a halt. Iranians are united by non-violence. In Ahuramazda we trust.

  2. Ali Mostofi

    Iranians are not Europeans and the Western Christians history largely irrelevant to Shia history.

    The regime, as you call it, will endure as Trump and Europeans destroyed the political position of any potential opposition to ayatollahs.

    Let us face it, the West is earnestly trying to destroy Shia Islam’s political power as manifested in Iran to help Jews and Sunnis.

    The Friends of the West in Iran have no legs to stand on. Secular? You are thoroughly ignorant then of the political program of Zoroaster as well.

    Zoroaster was no secular wimp, he was a fighting prophet, martyred by the damned Turanians.

  3. Dr. Hunter

    We are no longer in an ers of national politics. We are in the era of religious politics. Iranians have theirs, Sunni Arabs theirs, Israelis theirs, and Americans theirs as well.

    Americans, with their low-brow and ignorant forms of Protestanism bear major responsibility in getting us to this point.

    They acted to contain Iran in 1994 in order to please Israeli Jews and tell themselves that they were now the equals of Patriarchs of the Old Testament fame.

    Later, they declared, in 2002, the enemies of Israel to be their enemies as well and proceeded to destroy 2, Iraq and Libya, tried to destroy Syria and are trying to starve Iran as well. All for their queer ideas about the religious significance of the Old Testament to the Gospels.

    And I am not even discussing their role in fostering jihadism in Afghanistan.

    That is why Iranians also played their religious cards outside of their borders.

    These wars will not end until either Iranians & Shia are crushed, or Sunni Jihadism is crushed and American Protestanism tires of its wars and settles with the Shia strategically.

    Era of national politics in the Middle East is over. And Americans best be careful lest they lose Jordan and Egypt too.

  4. Is not just economy , this regime with its rigid religious ideology that belongs to fourteen century ago is unfit to the modern world and needs of young Iranian people.

  5. Why doesn’t Rouhani just resign? After all Khamenei makes all the important decisions, let him shoulder the blame. Any one appointed in place of Rouhani is going to be in a similar situation – all responsibility and no authority. I see Trumpsters trying to protect Trump and I don’t see any difference with Khameneist trying to protect Khamenei. All dictators need a stooge to deflect pressure.

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