From Inflation to Isolation; Why Recent Protests Could Become the Most Serious Crisis for the Islamic Republic

Street protests in Iran are not new, but several factors make the current unrest appear much more serious than previous instances. On Monday, January 15, it marks the ninth day of protests, yet U.S. President Donald Trump threatened Iranian officials with intervention if they violently confront protesters, stating, 'We are ready and armed'; a threat reminiscent of U.S. special operations to capture Nicolás Maduro in Venezuela. Such actions by a U.S. president during ongoing protests are highly unusual and could have a direct impact on the situation. Iranian law enforcement and security forces have responded violently to protesters from the outset, with human rights organizations reporting over 20 deaths so far. Attention is now focused on possible next steps from Trump. The protests, which began peacefully on Sunday, January 7, were initially rooted in public anger over rampant inflation and a severe decline in the national currency's value against the U.S. dollar; the dollar has increased in price by about 80% over the past year, with the most severe increases occurring in recent months. Iran's economy is in a very critical state, and there is no bright outlook for growth or relief from constraints this year or next. The official annual inflation rate is around 42%, with food inflation exceeding 70%, and reports indicate that the prices of some essential goods have increased by more than 110%. International sanctions led by the U.S. have played a significant role in worsening economic conditions, but the situation is not solely attributed to sanctions. High-profile corruption cases involving senior government officials and their families have intensified public anger and reinforced the belief that parts of the ruling class are profiting from the crisis. Many Iranian citizens believe that some officials and their relatives are directly benefiting from sanctions through special mechanisms, including controlling imports and exports, transferring oil revenues abroad, and profiting from money laundering networks while enjoying various special privileges. Tehran's merchants were among the first groups to publicly protest. In response to daily currency fluctuations, they closed their shops and took to the streets demanding market stabilization. The protests quickly spread beyond the market to other segments of society. At the same time, economic slogans soon took on a political tone, with protesters calling for the overthrow of the entire Islamic Republic system. Students joined the protests, followed by small businesses in other areas and ordinary citizens in subsequent days and other cities. Within a few days, slogans against the Supreme Leader of the Islamic Republic became a central theme of the gatherings. The last time Iran experienced unrest on this scale was four years ago when the death of Mahsa Amini in the custody of the morality police sparked the largest anti-government protests since the establishment of the Islamic Republic. Those protests, later known as the 'Mahsa Movement' or 'Women, Life, Freedom,' shook the foundations of the government but were ultimately suppressed through the use of force, resulting in hundreds of deaths and injuries among protesters and widespread arrests. Journalists in Iran are under severe pressure, and independent international media either are not allowed to report from within Iran or face strict limitations if they do receive permission. As a result, much of our understanding of developments comes from social media and narratives shared by citizens who document what they see. This situation makes verifying information increasingly difficult, especially since social media, while allowing ordinary citizens to report on social events, can also serve as a platform for misinformation, baseless claims, and distorted representations of reality; a challenge that has been exacerbated by the rise of artificial intelligence. In such circumstances, many observers believe the current situation could have more serious consequences. The Iranian government is in its weakest position in decades, facing internal unrest while its influence beyond its borders and in the region has significantly diminished. The 12-day war last summer between Iran and Israel marked an important turning point. This conflict escalated with direct U.S. involvement, including airstrikes on Iran's nuclear facilities. The war largely damaged Iran's defensive capabilities, nuclear infrastructure, and some military and industrial centers. Simultaneously, Iran's regional position was weakened. The fall of Bashar al-Assad in Syria deprived Tehran of one of its key allies, and ongoing Israeli attacks on Hezbollah in Lebanon have decimated much of the group's senior leadership, which had previously played a major role in Lebanon's political scene and regional relations. In Iraq, Iran-backed Shiite groups are under pressure to disarm. In a development further afield from the Middle East, U.S. operations in Venezuela and the arrest of Nicolás Maduro and his wife, Cilia Flores, have further restricted Iran's transnational influence and presence. These developments have transformed the regional and international position of the Islamic Republic of Iran. The Iranian government now has fewer allies to rely on in regional conflicts and has more limited channels for transferring oil revenues. This issue becomes even more significant considering Iran's prominent role in Venezuela's oil sector alongside Russia and its reliance on complex financial mechanisms reportedly linked to markets believed to be in China. Disruption of these networks has increased Iran's economic vulnerability at a time when internal pressures are also on the rise. In such a situation, Ali Khamenei appears to be facing one of the most complex conditions of his rule. More than three decades of planning to create regional proxy forces, mechanisms to circumvent sanctions, and nuclear infrastructure built with significant investments have been destroyed or weakened in a relatively short time. Given the long time remaining in Trump's presidency in the U.S. and Benjamin Netanyahu's continued leadership in Israel, it seems there is no clear diplomatic path to exit the current crisis without incurring heavy costs. For years, Khamenei and his close circle justified the heavy costs paid for regional allies and the nuclear program as necessary investments for Iran's long-term security and technological advancement. However, today this argument seems more hollow than ever. As pressures increase both domestically and internationally, securing the safety and survival of the regime, which was once presented as an achievement and justification for these policies, has now become more of a challenge than ever.