In November 15, the Iranian government led by President Hassan Rouhani and the Supreme Leader Ali Khamenei announced a 50% hike in gasoline prices by cutting subsidies to relatively cheap gasoline in the oil-exporting country. Immediately up to 200,000 protesters took to the streets to demand the government to take back these cuts in oil subsidies. This reflects the broader social discontent regarding high general inflation, stagnant wages, high unemployment and discontent with a regime that retains the economic privileges to the ruling caste and that is facing US economic sanctions.
Iran has faced periods of economic and political instability for at least a century. This post summarizes the past century of Iranian political developments to allow for an interpretation of the causes of instability, including foreign pressure, dependence on oil wealth, a restive middle class and despotic and corrupt rulers.
In 1925, the Qajar dynasty was toppled by Reza Khan who became Reza Shah Pahlavi. He served as prime minister prior to his coronation and ouster of Ahmad Shah, the last Qajar ruler. He was a military general, who consolidated power with a coup d’etat in 1921. The Soviets and British divided Iran based on their sphere of influence. In 1909, the discovery of oil attracted British oil corporations. The oil revenues ensured a stable source of revenue for the rulers, but it also prevented the build-up of a strong civil society and permitted despotic rulers both secular and religious. It also resulted in continued foreign interest to influence Iranian politics, first the British and then the Americans.
The 1917 October Revolution encouraged the British to use Iran as a base to undermine the Soviets. The Soviets in turn occupied the northern edge of Iran to thwart the British strategy. Reza Shah was the only person, who could unite substantial factions inside the army to repel foreign occupation. His first inclination was to proclaim a republic, but the British and the Islamic clerics were opposed to that, so he was crowned as Shah. Reza Shah was a secularist, having a similar motivation to Turkey’s Kemal Ataturk. He implemented modernization reforms, including the construction of railways and highways, the building of factories, a modern judiciary, a western education system, and western attire.
Reza Shah was no democrat, and ensured that the parliament was neutered agreeing to all his decrees, and the press was suppressed. The lack of bourgeois freedoms had a negative impact on the many state-run industries, which jump-started during his rule. These industries were unproductive and inefficient. Loyalty and sycophancy were rewarded as opposed to constructive criticism to improve production methods. Authoritarian rule also favored corruption, which means that the Shah and his loyalists, primarily the military, which helped him to power, got very wealthy at the country’s expense. As a result, the clergy, the bourgeoisie and the intellectuals opposed the Shah, which weakened his legitimacy.
Another problem was the Anglo-Persian Oil Company, where the Iranian government provided the British company with a substantial concession in exchange for very low royalties to the Iranian state. Reza Shah’s promise to increase the pay of oil workers and build schools, hospitals, roads and telephone system with the oil revenues were never realized, further causing public discontent.
Reza Shah’s rule ended in 1941. The former enemies, Britain and Soviet Union, teamed up to invade Iran to ensure that it would not fall to the Axis during World War II. It was an uneven war, as Reza Shah’s army was easily routed. Prime Minister Mohammad Ali Foroughi negotiated a peace deal with the Allies, which includes the imprisonment of all German nationals on Iranian soil. Reza Shah undermined this demand, and organized all German nationals to be evacuated via the Turkish border. The incensed Soviets moved their troops to Tehran. Reza Shah announced his abdication. The British wanted to restore the Qajar Dynasty, having the inclination that the old rulers would be reliable partners to allow the British to continue exploiting Iranian oil resources. Foroughi favored Crown Prince Mohammad Reza Pahlavi, Reza Shah’s son, to take over as Shah, which received British approval. Perhaps, they had hoped that Mohammad Shah’s inexperience and youth would make him easily controlled, and, indeed, in the early years of his rule he lacked self-confidence.
In 1951, Mohammad Shah appointed Mohammad Mossadegh as prime minister, as he received overwhelming popular and parliamentary support. His main policy was to abandon the British oil concessions by nationalizing the Anglo-Iranian Oil Company, which was met with wide popular approval. The British pressured the Shah to get rid of Mossadegh in 1952, but riots against the Shah made him back off from that move. Mossadegh became even more popular among the Iranian people. The British realized that they could not legally subvert Mossadegh, so they convinced the US CIA to organize a coup d’etat against Mossadegh. The US was concerned that the nationalization of oil resources could result in the victory of communism and a rapprochement with the Soviet Union to the north. The first coup failed, forcing the Shah to flee to Rome. In the second successful coup, the Americans bribed crowds to protest against Mossadegh. Reza Shah was instructed to dismiss Mossadegh, and the military imprisoned Mossadegh, who was put under house arrest for the rest of his life.
The British retook the oil company renaming it British Petroleum, but now the Americans pressured the British to open up the oil company to American oil corporations, which promptly happened in 1954, thus ensuring a second supply of cheap oil for the US aside from Saudi Arabia. After the CIA coup against Mossadegh, Iran became an important informal US ally in the fight against the Soviet Union. Mohammad Shah made sure to cultivate close relations with the US, warning president Eisenhower that Iraq is already under Communist influence and that if anyone dared to overthrow the Shah it would result in a Communist takeover of Iran. Iranian leverage over the US increased substantially by the early-1970s. The OPEC oil embargo in 1973 rocketed oil prices and hurled the western world into recession. US president Nixon pleaded with Mohammad Shah to lower oil prices, which he refused (decisions on the oil embargo were controlled in Saudi Arabia anyway). Because Iran did not participate in the Arab oil embargo, increased production meant rising oil revenues and wealth for the Shah.
Mohammad Shah increased his standing and power after the coup by decrying poverty and announcing a White Revolution in 1963 which gave women the right to vote, lifted the requirement for local officials to swear on the Koran, introduced land reform (government purchases land cheaply from landlords and sold it to peasants), the building of infrastructure (dam and irrigation, roads, rail, airports), the eradication of diseases, nationalization of forests and pastures, literacy and health campaigns in the rural countryside, and profit-sharing schemes with workers in industry. Notably, the reform package included no loosening of the authoritarian grip on power, which was guaranteed by the Shah’s secret police, the SAVAK.
Mohammad Shah wanted to broaden his power base by receiving support from peasants and workers, while accepting the wrath from landlords, the urban bourgeoisie (including students) and the Islamic clerics. Unfortunately for the Shah, these reforms incensed the latter three groups, while the land reform transformed peasants into independent farmers and landless laborers who lacked loyalty with the Shah. More than half of the peasants did not receive any land, and they became landless laborers in the city, who could be easily mobilized for anti-government protests. The mass education campaign backfired, as increasing levels of education were not correlated with more high-paying jobs, so the educated unemployed became an important anti-Shah constituency.
One linchpin of the White Revolution was the fight against corruption and “trickle-down” economics, where the elites would use the oil revenues to create jobs and factories. If that had actually happened, perhaps the laborers and peasants could be kept docile even as the bourgeoisie, the intellectuals and the clerics opposed the Shah. But the Shah’s regime was extremely corrupt, and inequality became a growing concern even after his reforms.
The strongest and most charismatic opponent to the Shah was Ayatollah Ruhollah Khomeini, who was imprisoned and exiled to Iraq by the Shah in 1964. Khomeini was incensed about the appointment of Christians and Jews into the Iranian civil service, which would surrender the power of Muslims to non-Muslims. Over the long years of rule, Mohammad Shah became more autocratic. His secret police SAVAK murdered hundreds of political prisoners, usually critics of the regime. It arrested and tortured tens of thousands. In 1975, he forced the two large parties to merge into a single Rastakhiz (Resurrection) Party. Mohammad Shah became blinded by the oil wealth pouring in the 1970s, promising the Iranian people a high standard of living on par with the west, when in reality, ordinary Iranian complained about inflation, poverty, air pollution and corruption among authorities (such as the need to bribe police to legally sell fruit on the streets). People also disliked his lavish state celebrations, like in 1971 where he threw a big party for the 2500th anniversary of the Iranian monarchy, while many people remained poor.
The popular discontent was in search of a leader, which was provided by the religious clerics around Khomeini. In October 1977, SAVAK killed Mostafa Khomeini, Ruhollah’s son, which sparked mass unrest. A January 1978 article penned by the regime to attack the character of Khomeini led to the beginning of mass protests that would last over a year and culminate in the Islamic Revolution in 1979. Mohammad Shah might have more effectively reacted against the protests, but by 1978 he was weakened by lymphatic cancer. The many drugs that he received made him delirious and passive. His wife Fara Dibah asked the Shah to appoint her as regent, so he can go abroad for cancer treatment, which the Shah refused. In his sane moments, Mohammad Shah accused the west and the Soviet Union for paying protesters to instigate his overthrow. These allegations were made without evidence and made him refuse any concessions to protesters. The incapacity of the shah paralyzed the state system, which was highly centralized and required the shah’s approval for any change in policy. In October 1978, oil workers went on strike, thus cutting off the main revenue source of the Iranian regime and bringing the country close to economic collapse, which further fueled discontent.
It should be clear that the discontent, while being led by the cleric Khomeini, was a broad coalition including the secular, left-wing nationalists as well as right-wing Islamists, who each abhorred the Shah’s maintenance of power. By December 1978, Mohammad Shah finally realized his untenable position as the western leaders gathered to “discuss the crisis in Iran”. He sensed that he no longer had any support, neither abroad nor at home. On January 4, 1979, he appointed Shapour Bakhtiar, an anti-Shah politician, as prime minister. Bakhtiar accepted the role fearing that a revolution would empower communists and mullahs. Bakhtiar freed all political prisoners, allowed Khomeini to return from exile, dissolved SAVAK and implemented a constitutional reform that should bring new elections in a few months. He also pressured Mohammad Shah to be exiled, which he promptly did on January 16. He died a year later in Egyptian exile, succumbing to his cancer. When president Carter admitted the Shah for cancer treatment in the US, the new Iranian government stormed the US embassy in Tehran, holding US diplomatic staff as hostage, which may have cost Carter his reelection in 1980. Bakhtiar was in no stronger position. His concessions emboldened the Islamists.
Khomeini denounced Bakhtiar, having compromised with the Shah. Bakhtiar asked Khomeini to create a Vatican-like state in Qom, but Khomeini refused, sensing his opportunity to take over Iran. Pro-Khomeini guerrilla and rebel soldiers took over the streets of Tehran, while the military remained neutral. By February 11, Khomeini succeeded in taking power, removing Bakhtiar, who fled to exile in France, where he was assassinated 12 years later. Khomeini ended the monarchy and declared the Islamic Republic of Iran after a successful referendum. In the Islamic Republic the country would get an Islamic constitution, placing Khomeini as supreme leader or leading jurist at the top of the political hierarchy. The secular capitalist orientation was replaced by Islamic economic and cultural policies.
Under Khomeini, sharia law was introduced, which includes the requirement for women to cover their hair and for men not to wear shorts. Alcohol, western movies/ music and practices like men and women swimming or sunbathing together were banned. Feminists, ethnic/ religious minorities, liberals and leftists were repressed in the name of Islam. Laws to encourage polygamy, decriminalize child sexual molestation, lower the marriage age to 13, introduce death penalty on homosexuals, drug addicts, prostitutes, rapists and adulterers, implement forced sex change surgery for transsexuals, and prohibit women-initiated divorce were passed.
The new regime killed hundreds of political prisoners, which were Shah loyalists, and 30,000 who were part of the People’s Mujahedin of Iran, a Marxist-Islamist guerrilla force opposed to the Islamic Republic. Christians and Jews were tolerated, although all major government positions were reserved for Muslims and any converts to Islam would be favored by law (e.g. they could be entitled to all of their parents inheritance). The Bahai faith, a separate monotheist religion native to Iran, was brutally suppressed.
Economically, Islamization was catastrophic to the economy. 4 million entrepreneurs, professionals and technicians, the main providers of a strong economy, left the country. Poverty increased and the economy languished. Saddam Hussein, president of Iraq, believed that he could take advantage of the chaos of the Iranian revolution by invading Iran and seizing Khuzestan, the oil-rich region, close to the Iran-Iraq border. The war became protracted and took 8 years to resolve, and also retarded any economic progress made during the Shah era. Most major powers backed Iraq, but Iran fought back and called for a Shia led uprising inside Iraq to topple Saddam Hussein. Khomeini sacrificed a substantial number of Iranians via human wave attacks: civilians running toward enemy formations so they could be mowed to death. They also fell victim to the chemical weapon attacks of Iraq.
In 1985, Khomeini designated Grand Ayatollah Hussein-Ali Montazeri as his deputy and successor, but by 1989, Montazeri began to push for liberalization, freedom for political parties and the release of political prisoners. He also criticized the poor treatment of prisoners. This outraged Khomeini so much that he demanded Montazeri to be replaced by Ali Khamenei, president from 1981-1989, as Supreme Leader in March 1989. Perhaps Khomeini might have switched his mind again on choosing his successor but he died in June 1989 of a heart attack.
Khamenei had extensive executive experience, taking much interest in military, budget and administrative details. He also lacked the experience of an Islamic Jurist (marja), which originally was deemed an essential qualification to become Supreme Leader. The Assembly of Experts waived this requirement to allow Khamenei to become supreme leader. In the Iranian constitution, the Supreme Leader is the head of state and commander-in-chief of the armed forces. He also approves any cabinet appointments and important personnel changes. The president is the head of government, but is fully answerable to the Supreme Leader, carrying out his decrees. His administrative decisions and appointments can be repealed by the Supreme Leader. The president is elected by direct popular vote for four years and can serve no longer than two terms. The Supreme Leader, in contrast, is a lifetime appointment.
Khamenei has also articulated his ideology, which is internally to maintain an “Islamic democracy”, where Iranians have a choice of their elected leader but that the Islamic cleric (himself and the ayatollahs) can supervise the government to ensure it follows Islamic principles. This is already an advancement to the Shah, who preferred a straight-up dictatorship loyal only to himself. Externally, the Islamic Republic of Iran is held together via its opposition to Zionist Israel, whose existence the cleric regards as abomination, and to the United States, an infidel imperialist power that plays the world police to the detriment of all Muslim people (Hovsepian-Bearce 2017). To focus on the US as external enemy is extraordinarily effective given the hated shah’s close attachment to the US. The regular invocation of Zionist and American enemies ensures loyalty among the masses.
Khamenei’s rule has not been without controversy. Through Setad, a parastatal firm controlled by the Supreme Leader, Khamenei controls a vast financial empire, consisting of $95 billion, which he can use to spend on religious education, building mosques and schools, but also to maintain his personal compound with a staff of 500 employees. The original fund came about by seizing the property of oppressed religious minorities, and it has grown via diverse investments in industries like real estate, finance, oil and telecommunications. Setad allows Khamenei to be independent from political infighting in parliament, which does not control Setad.
The Islamic conservatism and disregard for economic development produces opposition from the urban bourgeoisie and students, as evidenced in the anti-government protests in 1999, 2009 and now most recently again. The first president under Khamenei was Akbar Hashemi Rafsanjani (1989-1997), who favored authoritarian rule, privatization of state industries, the free market and avoiding conflict with the west.
The liberal reformist factions temporarily gained influence under President Mohammad Khatami (1997-2005), who favored freedom of expression, tolerance, strong civil society, strong diplomatic relations with the west, and free market policies. Khatami’s efforts to liberalize were continuously thwarted by the conservatives in parliament. And without the conservative Khamenei’s approval many policy decisions could not be implemented, showing the farce of Islamic democracy in Iran.
In 2005, the conservative faction’s Mahmoud Ahmadinejad became president (with the strong backing of Khamenei), and he took a more populist political stance, increasing subsidies for food, housing and petrol for the masses and cutting the interest rate to stimulate borrowing. The human rights situation worsened with the opening of new detention centers for political opponents, thus reversing any liberalization moves by Khatami. Ahmadinejad also took a more confrontational stance with the west by reaffirming the country’s commitment to enrich uranium for “peaceful” nuclear energy, which the regime regards as important energy alternative to oil. The US and Israel suspected that Iran wanted to develop nuclear weapons, which could threaten Israel. In 2006, under their prodding UN economic sanctions against Iran began to be applied, which put pressure on the Iranian economy. Given the economic sanctions from the west, Iran worked to strengthen relations with left-learning states in Latin America like Venezuela, Bolivia and Ecuador.
Discontent over the economic sanctions strengthened the position of the centrist Hassan Rouhani, who was neither a reformist nor a conservative, but he received the support of clerics and the Green Movement, that was founded in 2009 to remove Ahmadinejad from power. The protesters, including human rights activists, lawyers, professors, students, artists didn’t believe that Ahmadinejad legitimately won, but the election result was upheld by Khamenei. The Green movement was led by Mir-Hossein Mousavi, former prime minister (1981-1989) and a reformist politician, who contested and lost the 2009 presidential elections.
President Rouhani’s key objective was to end the western sanctions on Iran by negotiating a a nuclear agreement, which was made easier by the more accommodationist US president Obama, which saw a diplomatic deal as a way to cement his foreign policy legacy and weaken the military-industrial complex and the neoconservative wing (such as Hillary Clinton and most Republican Party officials). The ending of sanctions announced in 2015 would bring in much needed capital to Iran, which contributes to economic growth, which could benefit ordinary Iranians, and thus restore the legitimacy of the government. The problem was that the US neoconservative establishment beat back as all Republican candidates, including Donald Trump, wanted to restore economic sanctions against Iran. With the opposition of all the other parties, including the EU, Russia and China, the US withdrew from the Iran nuclear agreement in May 2018, which motivated the Iranian regime to restore the enrichment of uranium.
The US neoconservatives hope that economic sanctions against Iran will destabilize the regime. Rouhani’s successful effort to bring down the high inflation under Ahmadinejad (upward of 40% by the end of his term in 2013) were reversed in 2018, pushing inflation to 50% before declining to 28% in October 2019. The US leverage appears to be substantial because of their threat to sanction any companies that trade directly with Iran. However, the European countries or China circumvent these sanctions by trading via INSTEX, an international payment system to bypass SWIFT. Without the US being able to pressure other countries to prohibit trade with Iran, it has limited leverage, because only 0.1% of Iranian trade is with the US. Nonetheless, US sanctions reduced Iranian oil output.
To return to the current protests, we have seen that the Iranian people are restive, and whoever was in power has to reckon with popular resistance. Authoritarian rule means that the only way for the people to show their discontent is by public protests. This time the increase of fuel prices by 50% has been the immediate trigger for the protests, which is additional pain to the high general inflation rate. The regime saw no choice but to raise the fuel prices given the declining export of oil following the sanctions and the rising budget deficit of the national government.
The street protests were countered by a brutal police crackdown which resulted in over 150 deaths and a complete shutdown of the internet, including social media, which are used to coordinate protests. Within two weeks, the streets quieted down again, but it is unclear whether the tensions are resolved. Without a compromise with the public, resentment against the Iranian regime will intensify.
The regime is also concerned about the broader stability in the Middle East. The consolidation of the Bashar al-Assad regime in Syria is certainly welcomed by Iran, but Lebanon and Iraq are two further centers of unrest. Each of these governments are supported by Iran both financially and militarily. As economic discontent and opposition to the government is becoming more pervasive in these two countries, an anti-Iranian sentiment is fomenting, as protesters blame Iranian influence for corruption, inflation and unemployment. If the pro-Iranian regimes in these countries fall, then Iran’s political stability is also undermined.
In order to alleviate discontent the US would have to lift sanctions and restore full economic relationships with Iran, but if Trump wins his reelection campaign these chances are not good. The US neoconservatives may be celebrating political instability in Iran, but it comes at a heavy human cost. The review of Iranian history reveals the sad reality that Iran has been the playball of international forces, first the British in the first half of the twentieth century, and by the Americans since the second half.
On the other hand, despite foreign incursion Iran maintained its own government, whether via the Shah’s rule or Islamic rule. Oil dependence which has lasted for more than a century now allowed rulers to be despotic because they make money by selling black gold abroad. As such, inadequate and corrupt rule justify public anger against the regime, which then responds with harsh crackdowns, incarceration and denouncement of supposedly foreign instigators (which was certainly the case in the 1950s under Mossadegh). Even with dictatorial controls in place, what is remarkable is the resilience of Iranian civil society, which have forced the ruling regimes to at least pretend that they are working on behalf of the people. Literacy rate and life expectancy have continued to improve, while the middle class has been increasing and three-fourth of the population live in cities, which bring legitimacy challenges to authoritarian rule.
In 1979, the Islamic clerics have promised that they are the true representatives of the Iranian people, but the multiple protests suggest that even the Islamic rulers have to earn legitimacy and public trust the hard way. Mohammad Shah’s son, Reza Pahlavi, living in US exile, has been calling continuously for the overthrow of the Islamic Republic of Iran, and wants to see a “transitional” government with liberal democracy and rule of law as its end, though he is not specific on whether he should be part of it or whether the monarchy should return (Radio Farda 2019). I doubt that there is a lot of appetite in Iran for the shah to return, but a secular democracy sounds like a good alternative to the status quo.