Fragility of the Islamic Republic: A Long-Term Trend

According to geopolitical expert Norman Roule, a former National Intelligence Manager for Iran at the Office of the Director of National Intelligence, the current protests are not isolated incidents but rather symptoms of a deeper fragility within the Islamic Republic. “Since 2017, a combination of domestic repression, persistent inflation, declining living standards, international isolation, and a lack of policy credibility has repeatedly sparked widespread unrest,” Roule explains. “While Iranian security forces have historically responded with force, these protests have eroded the regime’s political confidence.”

The regime’s inability to demonstrate genuine popular support is increasingly evident. Historically high voter turnout figures, once touted as evidence of legitimacy, are now overshadowed by record-low participation rates and the acceptance of ongoing unrest as a permanent feature of Iranian life. The economic challenges are compounded by environmental issues and a growing sense of disillusionment among the population.

The dramatic decline of the Iranian rial serves as a potent symbol of the government’s economic failures. In 1979, the exchange rate stood at 72 rials per dollar. By the time the Iran nuclear deal was signed in 2015, it had risen to 29,500. When Farzin assumed office in late 2022, the rate was approximately 430,000. Today, it has plummeted to 1.42 million rials per dollar, a staggering devaluation that underscores the severity of the economic crisis.

Sectoral Contraction and Rising Inflation

Beyond the currency crisis, Iran’s economy is facing broad-based contraction. Industry and mining have declined by 3.4%, construction by 12.9%, and agriculture by 2.9%. Simultaneously, inflation continues to accelerate, with food, tobacco, and beverages experiencing a year-over-year price increase of 72%. This persistent inflation is eroding purchasing power and pushing more Iranians into poverty. What long-term strategies can Iran employ to address these interconnected economic and social challenges?

Pezeshkian’s Response and the Hemmati Appointment

President Pezeshkian’s administration faces limited options, as addressing the root causes of the crisis would require significant political and ideological shifts. The resignation of Central Bank Governor Farzin provides a convenient scapegoat, but does little to resolve the underlying issues of fiscal mismanagement, sanctions pressure, and a lack of public trust. Pezeshkian has nominated Abdolnaser Hemmati, a 64-year-old former economy minister, as Farzin’s successor.

Hemmati’s appointment is somewhat surprising, given his previous impeachment by Parliament for failing to stabilize the currency. However, he brings extensive experience, having served as governor of the Central Bank of Iran from 2018 to 2021 during a period of intense sanctions. He also possesses deep ties to both hardline and pragmatic conservative factions within the regime. His previous roles in banking, including leadership positions at Sina Bank and Bank Mellat (both linked to the Revolutionary Guard’s Qods Force), demonstrate his established connections within the Iranian power structure. Hemmati will need to prioritize measures to curb inflation and protect vulnerable populations, while also addressing structural weaknesses within the banking sector.

Budgetary Constraints and Foreign Policy Challenges

Pezeshkian will also grapple with significant budgetary constraints, as security and military spending remain prioritized over civilian needs. A proposed 20% salary increase for public workers is unlikely to keep pace with inflation. On the foreign policy front, the government will seek to mitigate the impact of sanctions through closer ties with Russia, China, and African nations, while continuing to explore avenues for negotiations with Washington. However, the hardline elements within the regime, particularly the Quds Force, remain committed to aggressive regional policies that hinder any prospect of meaningful rapprochement with the West. Without a fundamental shift in these policies, foreign investment in Iran will remain elusive.

Ultimately, Iran’s leaders are confronting a situation reminiscent of the pre-revolutionary period: institutional failure, elite fragmentation, generational alienation, economic suffering, and a lack of a unifying national narrative. President Pezeshkian’s rhetoric, framing the country as “in a full-fledged war with America, Israel, and Europe,” reflects a strategy of appealing to domestic hardliners while reinforcing Iran’s confrontational image abroad. During this volatile period, Iran is likely to pursue a cautious approach, testing Western red lines while attempting to navigate its most challenging economic and political crisis since the 1980s.

Frequently Asked Questions About the Iran Protests

• What is driving the current protests in Iran?

  The protests are primarily fueled by economic grievances, including high inflation, a collapsing currency (the rial), and a decline in living standards. Political and social factors also contribute to the unrest.

• How has the Iranian rial’s value changed over time?

  The Iranian rial has experienced a dramatic devaluation over the past four decades. From 72 rials per dollar in 1979, it has plummeted to over 1.42 million rials per dollar today, reflecting a severe economic crisis.

• What is President Pezeshkian’s response to the protests?

  President Pezeshkian has acknowledged public dissatisfaction and attributed the crisis to internal mismanagement, but his options for addressing the underlying issues are limited.

• Who is Abdolnaser Hemmati, and why was he appointed as the new Central Bank Governor?

  Abdolnaser Hemmati is a former economy minister with extensive experience in Iran’s financial sector. Despite a previous impeachment, he was chosen for his experience and connections within the regime.

• What role does foreign policy play in Iran’s economic crisis?

  Sanctions and a lack of foreign investment, exacerbated by Iran’s aggressive regional policies, significantly contribute to the economic challenges facing the country.

• Could these protests lead to broader political change in Iran?

  While the outcome remains uncertain, the protests highlight the deep-seated discontent within Iranian society and could potentially contribute to broader political shifts in the long term.