For nearly half a century now, an imminent end to the Islamic Republic has been regularly predicted. But so far, the opposition forces, often at odds with one another, have never come together and formed a consensus as they did in 1979 to overthrow the Shah. In spite of ever-violent repression, popular rebellions are frequent, but they are always fragmented, either geographically or socially. Social groups rise up, one at a time, each with its own demands and slogans, without ever really disturbing the powers that be.
In 2019, the working class suburbs rose up against the increased price of petrol; in 2022 young women protested the obligation to wear a veil; since 28 December 2025, small shopkeepers and heads of low-income families have protested against hyperinflation. But this latest uprising is very different from the previous ones. The crowds’ economic demands are directly related to the functioning and political structure of the Islamic Republic. It all began in Parliament when the conservative factions rejected the budget for the Year 1405 (to begin on 21 March 2026) presented on 23 December 2025 by Massoud Pezeshkian’s reformist government.
This crisis is not technical (controlling the price of petrol), or legal (changing the law on the veil); it concerns the regime’s very bases, its riches, its corruption and hence the legitimacy of the elites who rule the country. The solution to the present conflict goes deeper than the ideology, the symbols and slogans hostile to Supreme Leader Ali Khamene’i or in favour of Reza Pahlavi, the son of the Shah who was overthrown in 1979. It is an existential crisis that can only be understood by examining concretely the political power balances within the country.
A dual exchange rate for the dollar
The Islamic Republic has favoured the construction of a political system in which the elites and the institutions originating with the clergy (religious foundations) or with the security apparatus (especially the Revolutionary Guards, the IRGC) have appropriated the nation’s wealth and promoted a liberal economy which benefits a super-rich minority, a situation which scandalises the population. Any political change would have to involve an economic revolution that would abolish these privileges which outrage all Iranians.
Now the plutocratic management of the country has found its limits, for the economic crisis which is crushing the Iranian people is also weakening the state and calling into question its role as a regional power. Thus the Islamic regime is seen clearly today as the weak spot of both the state and the population.
In order to avoid the collapse of the state and the regime, Massoud Pezeshkian’s reformist government put forward on 23 December 2025 a draft budget which would have put an end to the plethora of exchange rates and hence to the allocation of currencies at a preferential rate – the official rate being 280,000 rials for a dollar, as against 1,400,000 on the “free” market. This preferential rate was applied to prioritised purchases, operations monopolised by individuals and institutions that have been close to the power structure for decades. They fuelled a parallel economy and a massive capital flight. In order to justify his reform before parliament, President Pezeshkian pointed to one example: this year, of the $12bn allocated to the importation of food products and medicine, $8bn was misappropriated by importing only a portion of the scheduled goods in order to pocket the balance.
His plans to “moralise” the economy went hand in hand with Iran’s ratification, in October 2025, of the international conventions on banking transaction transparency in order to stop being blacklisted by the Financial Action Task Force (FATF), which has blocked all the country’s legal international transactions. In December, the Central Bank announced it had closed 6,000 accounts suspected of money laundering. That probably didn’t affect those within the power circles as much as it did small shopkeepers purchasing electronic equipment in Dubai in ways which were not strictly legal.
These attempts at financial reform and the obvious failure of the government to carry them out only confirmed the regime’s inability to manage the economy realistically. They also caused the price of the dollar to skyrocket and the country’s shopkeepers to revolt, marginalised as they were by the corruption of the elites and totally unable to cope with hyperinflation.
The uprising of Tehran shopkeepers quickly spread to their small town counterparts who have never ceased to protest for years, but who are encouraged now by the mobilisation of social groups previously cautious and conservative. Hoping to avoid a direct clash with the shopkeepers and a broader social movement, the government – and even the Supreme Leader, Ayatollah Ali Khamene’i –began by declaring that they “understood” their demands. This was an effort to separate them from the “trouble-makers”, i.e. politically-motivated demonstrators clearly supported from abroad, notably Reza Pahlavi’s followers. But the repression unified the movement around several political slogans aimed at the Islamic regime itself.
And so the movement spread, but in a sporadic and spontaneous manner, with no mass demonstrations in the big cities for lack of a clear political perspective, and of networks or leaders with domestic social forces behind them. Society remained divided and hesitant, while on 9 January, the Supreme Leader decided to order a massive crackdown which could well be fatal for him.
Quite obviously, the reformist government is divided and does not have the means – nor perhaps the will – to impose its reforms. To be credible, it would have to single out and sanction the oligarchs who have accumulated privileges, power and fraudulent wealth and who constitute the core of the Islamic Republic. That would be the price to pay for those who are trying to save a part of the Islamic regime. Since the reforms have failed, are there any other credible ways for Iran to escape these crises?
Political divisions and stalemates
The Islamic Republic is often referred to as “the regime of the mullahs”, and the Revolutionary Guards (IRGC) as “the armed wing of the regime”. These labels must not be allowed to obscure the differences of nature, culture and interests which set the clergy and the IRGC at odds. The rivalry between these two pillars of the Islamic Republic is an important key to understanding its longevity and to identifying a possible escape route from the present crisis.
After the war with Iraq (1980-88), IRGC veterans pursued university studies and profitably demonstrated their proficiency in company management or high tech activities. That much is attested by their successes - using every means, including the illegal - in the nuclear field and that of missiles, in public works and the management of big cities and companies. They know how to “manage” their relationship with the international economy, for example, by circumventing US sanctions. And they are trying to overcome the failure of their regional ambitions after the collapse of the "Axis of Resistance” against Israel.
The clergy, trained in the seminaries, have at times confined themselves to the realm of ideas, but the majority remain largely trapped in a traditional and patriarchal Islam, out of touch with present-day Iranian society. By becoming involved directly in state management, they have lost the social, economic and even intellectual foundations which enabled them to mobilise the masses in 1979. Aside from a few slogans drawn from the past, Islam is absent from the political, security, economic or geopolitical debates that are now shaking Iran, one of the most secular-minded countries in the Middle East today. None the less, all sides are careful not to offend the people’s religiosity in order to ensure the tacit consent of that large part of the population who remain attached to this heritage.
The duality between “conservatives” and “reformists” which for many years allowed the Islamic Republic to function seems to have reached its limits. The “Thermidorian” movement which raised some hope after the death of Ayatollah Khomeini in 1989, had no follow-up. As for the radical conservatives, represented in particular by the 2024 presidential candidate Said Jalili, the failure of the Axis of Resistance and their bigoted vision of Islam concerning women has brought about a radicalisation of their positions.
They support the Leader, whose death or forced departure would deprive them of an irreplaceable source of support. In the opposite camp, where reformists and "pragmatic” conservatives have just united to form a new party, there are heated debates and clashes in search of an acceptable way forward, a transition towards a deep and irreversible political change, but one which would not compromise the country’s independence and would avoid a radical revolution. However these political manoeuvres appear to have run their course.
Given this internal political stalemate and the divisions in society, the Islamic Republic may have no future. The systematic repression may even prove ineffective by radicalising the opposition and drawing criticism from within the power structure itself. So in fact the stalemate is two-fold: the riots are being put down and have no concrete prospects, while the conservatives block budget reforms that might prove fatal for them and the reformists lack the means and courage to push them through.
This political vacuum explains the success of Reza Pahlavi, in exile in the US. But then he is the only opposition politician whose name is familiar to all Iranians. His media impact is obvious, due to Persian language media based in foreign countries and benefitting from the official, political and possibly military support of Israel and to a lesser degree the United States, which is nonetheless threatening to intervene. The son of the ruler overthrown in 1979 claims to be the only alternative to the Islamic Republic. His name has become the symbol of all the factions opposing the Islamic Republic. But beyond the symbol, nothing is clear, except the prospect of more repression, all the more violent because the protests are scattered, badly coordinated, with no leader and no coordinated organisation inside the country.
This political landscape is not without parallels with the situation in 1978, when the Shah’s army was obliged to authorise massive demonstrations in which some protesters brandished portraits of Ruhollah Khomeini, then in exile and little known. He could, however, bank on a solid network of followers organised around the mosques. But the comparison has its limits, because Iran has undergone profound changes. The population has become politically conscious and acquired solid political experience forged by 45 years of Islamic Republic. They have become republican and they know the cost of revolutions imported from the outside, especially in neighbourhood Iraq, “liberated” by the United States in 2003. So the question is not when, but how the profound political change considered inevitable will happen, perhaps even within the ruling regime.
Towards a break within the regime itself?
To produce an immediate response to the internal and external crises which are dramatically weakening the Iranian people and state, it would in fact probably mean looking inside the regime itself, not for forces but for a strongman capable of standing up to the clergy and the security apparatus. Economist Said Leyaz, a friend of former President Mohammed Khatami (in office 1997-2005), is not alone in publicly calling for the emergence of a “Bonaparte” from the ranks of the present regime : a powerful figure capable of gathering popular support and silencing the regime’s dignitaries and factions to impose the economic reforms necessary for the survival of the state, and the measures of economic justice and freedom demanded by the Iranian people. This would imply prosecuting and punishing the corrupt elites, “cutting off the thieves’ hands”. A profound change, much harder to bring about than the departure of the Supreme Leader.
This scenario is reminiscent of Crown Prince Mohammed bin Salman’s takeover in Saudi Arabia, when he detained and shook down the Kingdom’s most powerful figures. It also calls to mind the rise of Mikhail Gorbachev, General Secretary of the Communist Party, who pronounced the end of the USSR, or that of Deng Xiaoping, Mao Zedong’s successor, who turned the page on Maoism. We might also be reminded of Napoleon Bonaparte’s 18 Brumaire coup, which put an end to the revolutionary period while preserving its gains.
Nothing can be ruled out after the American abduction of the President of Venezuela on 3 January, or the attempts by the exiled royalist opposition to take over the present uprising with the backing of the US and Israel. But it is inside the country that the dynamic for transition, for a durable and credible change, is to be found.
Bernard Hourcade is a geographer, director of research emeritus with the CNRS, former head of both the Institut français de recherche en Iran (1978-1993) and the Monde iranien research team (1992-2003).
Translated from French by Noël Burch.
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