The regime now has a popular uprising on its hands, which it has subdued through brutish means against a people with notoriously long memories.
Iran protesters may have last laugh on ageing regime
Some years ago, Hashemi Rafsanjani, a former Iranian president, revealed something that speaks volumes about the bare-knuckled quality of politics currently on display in Tehran. In late 1978, with protests mounting against his abusive reign, Shah Mohammad Reza Pahlavi went on television and expressed contrition. "He admitted to past transgressions and past sins and said 'I've heard the voice of your revolution'," Karim Sadjadpour, an expert on the Middle East republic, told a conference held recently at the Carnegie Endowment for International Peace. He believed that was going to appease the crowds and silence the unrest.
On the contrary. In hard-boiled Iran, the Shah's mea culpa was a fatal show of vulnerability. "That's when we smell blood", said Mr Rafsanjani. "That's when we pounce." Mr Rafsanjani's aside explains the uncompromising stance staked out by Ayatollah Ali Khamenei, the Iranian supreme leader, as his regime faces the most serious threat to its legitimacy since the Shah's removal. "What Khamenei has long believed is that you never compromise when you're under siege," Mr Sadjadpour said at the Carnegie briefing. "That projects weakness, which invites even more pressure."
The Iranian regime is indeed weak, and has been long before it struggled to win the latest election with president Mahmoud Ahmadinejad apparently receiving more votes cast. If anything, the events of the past 10 days have revealed the Iranian government to be the hollow shell that it is, and not a rising power as it was so ludicrously portrayed by George W Bush, the former US president, and his neoconservative cadres.
No one understands this better than the Iranian people. The issue that dominated Iran's elections was not Holocaust denial or western decadence, but the nation's sclerotic economy. Unemployment, the primary source of discontent with the regime, is estimated by private economists to be much worse than the 10 per cent rate posted by the government. The number of adults entering the workforce each year is growing at about 4 per cent, among the fastest in the world. More than half of all Iranians are under 25 and many of them are preyed upon by a nationwide Aids epidemic and drug addiction.
Iran's GDP, which grew by just over 6 per cent last year, is expected to slow considerably this year; by as much as two thirds, according to some projections. Inflation hovers at 30 per cent. When Mr Ahmadinejad imposed a 3 per cent sales tax last fall, businessmen closed their shops in protest. The country is heading for sustained balance-of-payment deficits by 2011, according to the IMF, but unlike cash-rich energy exporters such as Saudi Arabia, it lacks the reserves needed to fund its way through the crisis. Access to short-term loans, which saw the regime through similar spending gaps in the 1990s, has all but dried up in the current credit environment.
Most ominous for Iran, which depends on its energy reserves for 60 per cent of revenues, is the projected shortfall in petroleum output. Because of chronic underinvestment in the country's energy fields, Tehran is expected to be a net oil importer by 2020. True, Iran has managed to avoid economic collapse despite the onerous embargo imposed on it by the West. But that has only nourished a massive smuggling network that has deepened contempt for the regime. The main beneficiary of the contraband trade is the regime's Revolutionary Guard, which over the years has built for itself a massive business empire. Another nebula in Iran's economic universe is the bonyads, the charitable trusts that account for nearly 40 per cent of Iran's GDP. The bonyads finance an immense patronage system that gives it enormous clout within - and sometimes over - the regime.
What about Iran's bankrolling of Shiite militants in Iraq and Islamist groups in Lebanon and Palestine? Does that not make Iran a key geopolitical player? Not particularly, according to a study by the Rand Corporation, a Pentagon-related think tank. The paper reported that "Iranian funds and military assistance are not essential to the survival of major Shiite political factions" in Iraq. "It is best to conceive of Iran as exerting influence over its allies," the study suggests, "but not control." Iran's huge and honeycombed military is "relatively weak", according to Rand, mired as it is with ageing and poorly maintained weapons and equipment, bureaucratic inertia and frequent infighting.
All in all, the Rand study concludes, Iran's impact on the Middle East is limited by its labyrinthine political system and ineptly run economy. It suggests that the regime faces greater threats at home - particularly from the Sunni resistance groups in Khuzestan and Baluchistan provinces - than any threat it may pose to the West. In addition to Sunni militants, the regime now has a popular uprising on its hands, which it has subdued through brutish means against a people with notoriously long memories. If concessions betray weakness, as Mr Khamenei has argued, so too does a violent response to peaceful protest.