Iran: from the White Revolution to the collapse of the Islamic regime

In 1979, Iran overthrew the Shah, believing that this would put an end to inequality, corruption and repression. Almost half a century later, the country faces an even deeper crisis: a stifled economy, an impoverished population and an isolated regime that is sustained solely through coercion. This article analyses how the very same economic and social forces that brought about the Shah’s downfall are present today — and have been amplified — and why Iranian history seems, once again, to be heading towards a breaking point.

19 January 2026 Reading time: 5 minutes 45 seconds

For the past few days, we have been in the midst of a turbulent situation following the Israeli-US attack on Iran. It is an attack that many people have failed to understand, given that we were being led to believe there had been hypothetical progress in the Geneva talks. Let’s start there. These supposed advances were subject to certain ‘red lines’ for the regime, which the Iranian Supreme Leader had publicly stated. The most important of these was its opposition to the US demand that Iran abandon the development of its nuclear energy programme. But that ‘red line’ drawn by the Ayatollahs’ government was, in itself, a red line for the Americans.

We do not know how effective the US attack on the uranium enrichment facilities had been, but it had already been confirmed that Iran had resumed the programme.

Iran had the weapon; all it lacked was sufficient fuel. Once the fuel had been secured, the geopolitical landscape of the world’s most unstable region was set to be turned completely on its head. Not only for the Israelis, but also for those ‘friendly’ Arab countries in the region, for whom Iran is a worse enemy than Israel. From that point on, everything was decided.

To understand the balance of power in Iran, we must go back some 40 years and gain at least a basic understanding of who the Ayatollahs are. In the Shia world, the title of Ayatollah is attained when a cleric is recognised by other scholars and by religious seminaries as a mujtahid. Today, there are an unknown number of such clerics, though the figure is estimated to be between 200 and 400.

Above this rank is a higher one, that of Grand Ayatollah, which is attained when an Ayatollah is recognised as a source of emulation, or marja’. There are barely 10–20 such figures. And the one with the most followers, due to his influence, is Ali al-Sistani, based in the main holy site of the Shia world, Najaf. This city is not in Iran, but in Iraq.

We must go back to the time when Khomeini was living in exile in Paris. Khomeini, drawing on his status as a Grand Ayatollah and eminent jurist, brought about a constitutional and doctrinal change, which was introduced as soon as he returned to Iran. This was the incorporation into the Iranian Constitution of the principle of the ‘Government of the Islamic jurist’. This principle stipulates that government must be exercised by an Islamic jurist who is an expert in religious law. Until then, a cleric could exert social influence but could never hold a position in government. And this is where an important feature comes into play: that supreme leader was required to be a Grand Ayatollah.

It is stipulated that the body responsible for electing and supervising the Supreme Leader would be an assembly known as the Assembly of Experts, comprising 88 clerics, technically elected by the people. However, there is a caveat: in order to stand for election, candidates must first be approved by the Council of Guardians, comprising six clerics and six jurists. The former are appointed by the Supreme Leader, whilst the latter are appointed by the head of the judiciary, who is in turn appointed by the Supreme Leader.

That said, all 88 of those clerics must have been regarded as mujtahids. Anyone reading this will get the impression of a dictatorship masquerading as a supposed democracy.

Then Khomeini died, so a successor had to be chosen. And that is where the then Ayatollah Khamenei came into the picture. The problem was that the constitutional provision imposed by Khomeini stipulated that the Supreme Leader must be a marja’, and Khamenei was not.

And this is where the power games common to all dictatorships come into play. Khamenei may not have been a marja’, but he was already a highly influential figure within the Revolutionary Guards Corps, which had assumed the role of the regime’s principal military and political force. Added to this was a strong alliance with his potential rival, Akbar Hashemi Rafsanjani. In other words, he came to power not by adhering to what was laid down in religious rules, but through his power manoeuvring. Anyone with an interest in modern history will find striking similarities with the communist dictatorship of the former USSR.

Over the past 37 years, Khamenei has ruled the country with an iron fist – just as every single one of the communist dictators of the USSR did. He controlled all the country’s governing bodies. This is why it comes as no surprise that his successor is one of his six sons, Mojtaba Khamenei. Mojtaba is a cleric, but he does not even hold the title of mujtahid. He holds a lower rank, that of a cleric with advanced studies in Islamic jurisprudence (hojatoleslam), but he is, admittedly, very well connected within the Revolutionary Guard. It used to smack of a dictatorship; now it is a hereditary dictatorship.

This is very important for understanding what we are about to see, namely that there can be no peaceful change – or even change instigated from within – in the Ayatollahs’ regime, because the person in power is no longer an Ayatollah.

Let’s change the subject and try to analyse the conflict and how it might develop. Iran has developed, at the expense of its people’s poverty, a powerful military industry. This military industry is estimated to have had an arsenal of between 2,500 and 3,000 ballistic missiles, complemented by a powerful drone R&D programme. These kamikaze drones, which have become widespread in the Russia–Ukraine war due to their use by Russian troops, include the Shahed 136, which costs around 50,000 USD per unit, with upgraded versions costing around 80,000 USD.By contrast, its troops are far from being predominantly elite forces. The vast majority belong to the Revolutionary Guard, which is more focused on internal repression than on the defence of the country. These are poorly trained troops with obsolete weaponry. Their true strike force is a section of the Guard known as the Quds Force. However, this force is very limited, numbering around 15,000 members.

In this scenario, the Americans and the Israelis, backed by the Mossad’s extraordinary intelligence capabilities – which, amongst other things, have been monitoring Tehran’s CCTV network for the past 20 years – are managing to ‘weaken’ Iran’s defences by destroying its anti-aircraft batteries, its command centres, its communications network and its arms and munitions factories. Mossad intelligence enabled the country’s strategic decision-making chain to be decapitated in a single attack. Once the air defence system has been weakened – which, at most, will take a week – a clear path will have been created for fighter jets to enter, which will wipe out all air defence systems, but also allowing the entry not only of the F-35s or F-22s, but of the most destructive aircraft in existence, the AC-130 gunships. But will this bring about the fall of the regime? NO, certainly not. So what is going to happen? It is said that the Kurds will act as the shock force. Once they have been armed by the Americans. But the Kurds are not a regular army, so their effectiveness in combat against a military force – however very, very weak it may be – numbering between 500,000 and 600,000 troops Not even all the air support in the world will enable 5,000 Kurdish fighters to take over the country without the help of American ground troops. So, what’s going to happen? Well, to be honest, I haven’t the faintest idea. Could this cause the conflict to drag on? Well, once again, my answer is the same: I haven’t the faintest idea.

Now I’ll turn to my profession. So, we’re facing a global crisis. Well, I do have an idea about that. No, we’re not heading for an economic crisis, and I’m going to explain why.

The energy crisis we are now experiencing is a direct consequence of the military blockade of the Strait of Hormuz by Iranian troops. This strait, which connects the Persian Gulf with the Gulf of Oman, is barely 38 km wide, but the navigable channel through it is much narrower. At present, missile batteries are guarding this strait. These batteries will be completely destroyed in less than two or three weeks, and the Houthis in Yemen, armed by the Iranians, stand no chance. Especially not after the devastation the Israelis are inflicting on them.The 5th Fleet is in the area and, in less than 15 days, should have cleared the area, allowing safe navigation through the strait. The only nation that could help the Iranians and thus prevent this from happening would be China. But China is the main party affected by the closure of the strait, as it is the main destination for the crude oil and gas that passes through it. The closure of the Strait has blocked 20 per cent of the gas and crude oil that circulates around the world. But of that 20 per cent, 70 per cent is destined for Asia. The Chinese may be many things, but they are certainly not fools.

The other reason why this conflict could affect us Westerners in the medium and long term would be if the Arab nations were to become involved in the conflict. That is not going to happen. Firstly, because the Persians are Shia, the archenemies of the Arabs, most of whom are Sunni. They are all Muslims, but that is all. And to top it all off, Iran is attacking them, and for all intents and purposes it makes no difference whether it is in their own interests or those of the Americans.

And finally, let’s look at the impact on our economy and whether this could lead to imported inflation that would force a rise in interest rates. On Monday, Sydney kicked off the week with a barrel of WTI at nearly 113 USD. A day later, the price stands at US$86 – the same level it was at on Friday before the New York close. But there is also a very effective indicator for analysing market sentiment: the exchange rate between the Canadian dollar (CAD) and the Swiss franc (CHF). The franc is a safe-haven currency. In other words, it is a currency that prices in fear. But fear is a feeling; the price per barrel is a reality. The-

Because it’s always the same. History repeats itself.