Mohammad Reza Shah, deposed in the Islamic Revolution of 1979, had many faults. An enthusiasm for shedding the blood of his people was not one of them. After his fall, when people queried why he had not unleashed the full force of the state against the protesters, he reflected that “no throne could be based on blood”. Many of his revolutionary opponents would disagree but the facts as collated by one study after the revolution indicate that a total of 3,164 people died in opposition to the shah from 1963 until his departure from the country in January 1979, and the majority of these (2,781) were in 1978 and from Tehran.
The greatest bloodletting occurred in the struggle for power after his departure, and since then the authorities of the Islamic Republic have shown no reticence in killing their own people. By all accounts they have exceeded the number killed under the shah by some measure, killing some 4,000 prisoners in extrajudicial murders in 1988 alone. In 2025, they executed on average five people per day. In the current protests, which began in late December and were triggered by the depreciating currency, the verified death toll at the time of writing stands at 646. Unusually, this figure includes 133 law enforcement officials. But if previous experience is any indication, this is likely to be a vast underestimate of the number of protesters killed, since it remains difficult to verify deaths outside the main cities. Most assessments suggest that the number of deaths is well into four figures, approaching the number killed in the contest for power after the shah left in 1979. This also does not include the people who are deliberately maimed.
The relative ease with which the shah was overthrown clearly surprised the revolutionaries – Ebrahim Yazdi, the foreign minister of the provisional government in 1979, admitted as much in an interview in the 1990s – but given his reputation as a ruthless dictator, they ascribed this to divine providence. The consequence was a regime that combined complacency with a paranoia born of a curious impostor syndrome. The current supreme leader, Ali Khamenei, elevated to the top job by chance more than ability, is in many ways emblematic of this contradiction. They are there by the grace of God, but what if that grace is withdrawn? Vigilance is required and the mistakes of the shah are to be avoided. No one should be coy about the exercise of violence.
It helps of course if you define your opponents as enemies of the revolution, foreign agents and, above all, heretics and apostates – terms that have been used with increasing frequency since the protest Green Movement of 2009. Back then, in a rather blunt impression of the Chinese example, regime officials let it be known that they would be happy to kill 10,000 people to save the regime. But of course, the Islamic Republic has none of the advantages of the Chinese political economy, and many more weaknesses. The exercise of brutality has its limits when the structures of the state it seeks to sustain are so fragile.
The resilience of authoritarian states is much debated these days, but in many ways this is the wrong question. Authoritarianism, in one shape or another, is the norm in the human experience – democracy is the exception – and will always benefit from the exercise of violence, and, above all, the inertia that characterises political endeavour. Deliver on the basics, provide security and a relatively healthy economy, and protest, if it ever does emerge, can be contained. In Iran, the aftermath of the revolution in 1979 was so traumatic that few wish to revisit it; this innate antipathy to political action has served the revolutionary leadership well. Along with the relative ease with which it captured the Pahlavi state – built up over the preceding 50 years – this antipathy has not only engendered political complacency but a laid-back attitude to economic planning.
The Pahlavi state, for all its flaws, was rich and the new revolutionary elite was keen to spend the spoils of its victory. There was little sense of the cost of anything. After the end of the Iran-Iraq War in 1988 and the demise a year later of the father of the revolution, the austere Ayatollah Ruhollah Khomeini, the Islamic Republic proclaimed itself open for business and making money was welcomed – at least for those with political connections. The problem was that the means of making money largely revolved around trade rather than investment. This reflected the “mercantile mentality” of the Iranian political economy and the absence of a stable legal environment that might protect and promote investment.
Indeed, one of the great failings of the shah was his inattention to political and legal reform which would have protected the vast economic development his rule had overseen. Strategic industrial investments were largely state-led and, while the economic framework was changing, it did not change fast enough to prevent a dramatic retrenchment of traditional mercantile practices after his fall.In the absence of clear institutional and legal parameters, the political economy retreated into familiar mercantile territory: personal, opaque and transactional, with an emphasis on high returns over the short term.
The absence of legal protections, such as the protection of private property, meant that any accumulated capital was usually deposited in overseas banks, where it was safer, which encouraged a depreciation in the currency. This suited those accruing capital: access to hard currency meant they could live very well in Iran. It is this perverse system, rather than sanctions, that has been the chief cause of currency depreciation in Iran over the years. As the regime had little incentive to encourage legal clarity or transparency, Iran’s political economy settled into a mutually reinforcing depreciation cycle in which the revolutionary heirs of the shah squandered their inheritance in what amounted to large-scale kleptocracy. As Marx notes, “Merchant’s capital, when it holds a position of dominance, stands everywhere for a system of robbery.” The Islamic Republic became the extractive state par excellence, with the only real variable being the price of oil.
Its halcyon moment was the presidency of the populist firebrand Mahmoud Ahmadinejad from 2005-13, when the oil price jumped to well over $100 a barrel and the Islamic Republic was flush with money. It appeared to be a rerun of the 1970s commodity boom without any of the economic foresight and strategic planning of the shah’s technocratic elite. By some estimates Iran earned more in oil revenue in Ahmadinejad’s eight-year presidency than it had done since the discovery of oil in Iran in 1908. In his profligacy, some $800bn of oil revenue was left unaccounted for, in no small part because Ahmadinejad had stripped the government of what auditing powers it had left. There was no sovereign wealth fund, no protection against the vagaries of international relations and no investment in strategic infrastructure. As economists in Iran lament today, if the country cannot supply water, electricity and gas to its citizens, it is because of failures to plan effectively and invest 20 years ago. There are no quick fixes.
In enthusiastically distributing largesse, Ahmadinejad oversaw the transformation of Iran’s already weak banking sector into an over-extended Ponzi scheme with little capital assets, lending sums that could never be repaid. Some Western analysts point to international sanctions as the cause of Iran’s economic woes. This is incorrect. They have undoubtedly made things worse, but many beneficiaries of the Iranian economic model regard sanctions as an advantage – they are not a cause of Iran’s economic difficulties. The problems are internal.
The most serious penalties were only imposed on Iran in 2011-12, when banking and oil sanctions were inflicted in response to the Islamic Republic’s opaque nuclear programme. Prior to that US sanctions were far from comprehensive, and the Europeans actively worked against any secondary sanctions imposed by Washington. There were many opportunities for the Islamic Republic to secure foreign investment, not least in its oil industry, but its government systematically failed to do so. This is partly down to ideology (and the paranoia that accompanied it), but also because of an economic system that simply did not answer to global norms. The near-complete lack of transparency and accountability has resulted in Iran being one of three countries to be blacklisted by the G7’s international anti-laundering watchdog, the Financial Action Task Force.
The clearest argument against sanctions being the cause of Iran’s economic malaise is the very real possibility that the country will soon be the poster child for government-induced environmental catastrophe. Put simply, the Iranian plateau is running out of water and while this is exacerbated by climate change, the fundamental cause of the collapse in its water table is mismanagement, corruption and the failure to plan. A civilisation founded on an inability to manage its water resources is, according to the former, somewhat repentant minister of agriculture, Isa Kalantari, in danger of catastrophic failure. Kalantari explained in a December interview that research and planning conducted in the 1970s had later been dismissed as counter-revolutionary and ignored. He added that research conducted with the help of the French and the Americans had concluded that Iran could only sustain a population of 50 million by very careful harnessing of its water resources. Iran now has a population of more than 90 million.
Kalantari is pointing to the failure of governance when it is subject to the idiosyncrasies of revolutionary ideology. In this, like many of his compatriots who have been humbled by the environmental and economic mess they have made of their inheritance, Kalantari is remarkably candid about the good intentions of the shah and those around him. The contrast is a major reason why Pahlavi nostalgia is so widespread. In their excellent study on Why Nations Fail (2012), Daron Acemoglu and James A Robinson focus on the failures of governance with respect to the economy, and how the absence of institutions and the rule of law lead to economic failure and, ultimately, collapse. A focus on governance to explain Iran’s woes is not new, but it is welcome nonetheless in refocusing our attention away from economics and its purported “hard facts” towards the political economy and its “soft facts”.
While the economic and environmental infrastructure has been neglected, it’s also true that there are deficiencies in the regime’s political and moral capital. We ought to be clear that when we look at the structural failings of the Islamic Republic, we mean the political system, the nezam (in Persian) or regime, not the country or wider society. Far too many analysts attesting to the strength and durability of Iranian civilisation are really talking about the society and political culture, not the state. It is important we keep this distinction in mind. This “sacred republic” might be blessed, but it cannot survive, let alone thrive without systematic investment in its political and moral capital, much of which has, over time, also been squandered.
The Islamic Republic of today is not the Islamic Republic of 1979, or indeed 1999. In those days, the public still had hope for the future and a belief that reform from within, even if slow, was feasible. But after the crushing of the Green Movement in 2009, this belief dissipated. It was under Ahmadinejad that the authoritarian tendency took a decided turn towards what the political theorist Hannah Arendt would describe as totalitarianism. The 2009 uprising shocked the elite, causing some to doubt their loyalty to the system.
The system responded with paranoia, demanding unconditional loyalty. It was no longer sufficient – to paraphrase Arendt – to limit freedom, the state demanded total control. These demands were more aspirational than real: however brutal the regime could be, it was always hindered by emerging economic difficulties. If in 2009 the regime could complement its brutality with some bridge-building, the growing economic malaise limited the largesse of the government. What effectively emerged was an apartheid state in which the large majority of Iranians, distrustful and disenchanted, were excluded. It should come as no surprise that election turnout, on which the Islamic Republic has prided itself, declined precipitously. But perhaps most striking has been the collapse in moral capital. The republic has lost its virtue in the eyes of the public; the people have lost their belief. By most accounts, Iran is now the most secular society in the Middle East.
Between 2017 and 2026, this disenfranchised majority erupted into protest four times. Three protests had economic triggers. All rapidly became political, and all experienced the full force of state violence. Reduced to the exercise of brute strength, the Islamic Republic has justified this on the basis of the existential threat to the regime – an admission of fragility that contradicts the public rhetoric. Last year, one insider noted that the failure to impose the dress code on women was a desire to avoid another uprising. The leadership knows that it is no longer loved, and that it has fewer resources to distribute, so it concentrates on its own diminishing circle of loyalists and takes action to embed fear among the rest: fear of repression and fear of the unknown. But fear is a poor basis for a political system, especially when it cannot deliver the basics of economic life.
The last few years have not been good for the Islamic Republic. Its dithering over the nuclear deal and decision to back the Russian invasion of Ukraine have lost it valuable sympathy in Europe. Its war with Israel, the collapse of the axis of resistance (which included Hezbollah and the Houthis), lack of civil defence facilities and the military loss of its airspace have exposed its bombast for the hollow rhetoric that it is. Meanwhile, Trump’s unpredictability has, in the eyes of many Iranians, made the unthinkable thinkable. Recognising its own vulnerability, the regime sought to invest in political capital by glorifying Iran’s pre-Islamic past, but for many this has been too little, too late. Nothing smells of moral bankruptcy like an Islamic Republic, predicated on a hatred of kings, turning to pre-Islamic monarchs for moral ballast.
The president, Masoud Pezeshkian, meanwhile, offers people little more than condolences on their economic plight. He even suggested that because of the absence of water, the capital city of 15 million people may need to be evacuated. In such a situation, it really was only a matter of time before desperation exploded into protest. This time the catalyst was the currency, which has been depreciating steadily since 1979, when it stood at 70 rials to the dollar. In echoes of Hemingway’s famous comment on bankruptcy – gradually then quickly – the pace has accelerated over recent years such that $1 will now buy you more than a million rials. The threat of economic collapse looms large.
Other than prayer, and doubling down on an ideology that cannot deliver, the Islamic Republic has few options that don’t include its own demise. Fear is dissipating, anger is growing and the public no longer have much to lose. Even the apathetic are becoming exasperated with a system that seems to offer little but blood. The difference this time around is that a psychological threshold has definitively been crossed. Few believe the Islamic Republic has a future. As Hannah Arendt noted, “Totalitarian domination, like tyranny, bears the germs of its own destruction.”
[Further reading: Cracks in Iran’s brutal regime are now visible]
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This article appears in the 14 Jan 2026 issue of the New Statesman, Battle for power
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