| PYQ Relevance
[UPSC 2018] In what ways would the ongoing US-Iran Nuclear Pact Controversy affect the national interest of India? How should India respond to its situation?
Linkage: This question directly examines how great-power sanctions, nuclear diplomacy, and West Asian instability affect India’s energy security, strategic autonomy, and regional interests. It links India’s foreign policy choices with sanctions diplomacy, balance of power politics, and national interest formulation in a volatile geopolitical environment. |
Mentor’s Comment
Iran has seen many phases of unrest in the past, and the government usually managed them in a predictable way. However, recent developments show deep structural changes in Iran’s society, economy, and geopolitics, which are weakening the regime’s old methods of handling crises. This article explains what is different this time, why it is important, and how it affects the region and the world, including India’s strategic interests.
Why in the News?
Iran is facing a new wave of protests across the country, driven mainly by economic collapse rather than ideological issues, unlike earlier movements. The unrest began with the Tehran Bazaar strike in December 2025, which was unusual because traders have traditionally supported the regime. In 2025, the Iranian rial lost about 45% of its value, falling to 1.45 million per dollar, making even basic imports like rice, sugar, and edible oil too expensive despite government price controls.
Although protests have spread nationwide and over 2,000 deaths have been reported, key pillars of the state, the oil sector, ruling elite, Islamic Revolutionary Guard Corps
(IRGC), and the military, remain loyal, stopping any immediate regime collapse. This crisis is important because it reveals new weaknesses in Iran’s system, while also showing the regime’s ability to survive strong internal unrest and external pressure.
How did the current Iranian crisis originate?
- Currency Collapse: Reflects macroeconomic breakdown, with the rial depreciating nearly 35 times since 1979.
- Bazaar Shutdown: Signals rupture in state-merchant symbiosis; bazaaris historically functioned as regime stabilisers.
- Import Compression: Renders essential goods unaffordable despite subsidies and controlled prices.
- Social Spillover: Mobilises unemployed youth and low-paid workers into a nationwide protest movement.
Why is the Bazaar strike a decisive structural break?
- Elite Defection: Demonstrates withdrawal of support from an influential economic pressure group.
- Historical Parallel: Mirrors the 1979 episode when bazaar support withdrawal accelerated Shah’s fall.
- Economic Squeeze: Caused by sanctions, IRGC dominance, and Bonyads (powerful, quasi-governmental charitable trusts in Iran) crowding private enterprise.
- Policy Uncertainty: Lack of clarity on whether IRGC-linked economic capture will be reversed.
Why has Iran’s traditional protest-management strategy worked so far?
- Four-Stage Playbook: Combines policing, controlled concessions, attrition tactics, and exemplary punishment.
- Institutional Loyalty: IRGC and army remain unified, preventing elite fragmentation.
- Economic Continuity: Oil sector remains operational, sustaining regime finances.
- Leadership Vacuum: Absence of an alternative political leadership among protesters.
What new vulnerabilities have emerged despite regime resilience?
- Economic Exhaustion: Nuclear and missile prioritisation diverts scarce resources from welfare.
- Demographic Shift: Over two-thirds of Iranians born post-Revolution reject clerical gerontocracy.
- Governance Alienation: Women and non-Shia minorities feel excluded due to clerical dominance.
- Kleptocracy Perception: Visible corruption at top echelons erodes regime legitimacy.
How have foreign threats altered the internal dynamics of unrest?
- External Encouragement: U.S. and Israeli rhetoric emboldens agitators but lacks viable regime-change pathways.
- Deterrence Capacity: Iran retains retaliation capability despite losses in June 2025 conflict with Israel.
- Martyrdom Ethos: Cultural acceptance of sacrifice reduces deterrence effectiveness.
- Strategic Escalation: Closure threats to the Strait of Hormuz elevate global energy risks.
Why are non-kinetic tools now preferred against Iran?
- Cyber Operations: Capitalises on Iran’s vulnerability to digital disruptions.
- Secondary Sanctions: Targets trade partners rather than direct military engagement.
- Financial Policing: Uses crypto-tracking to disrupt sanctions evasion networks.
- Limited Impact: China and UAE continue as top trading partners, accounting for over $70 billion in trade.
Why does Iran’s crisis matter for India?
- Gulf Stability: Disruption affects India’s oil supplies, remittances, and diaspora security.
- Regional Balance: Enables Pakistan to project itself as an alternative security interlocutor.
- Domestic Linkages: India hosts around 25 million Shias, creating social and diplomatic sensitivities.
- Economic Opportunity: Post-sanctions revival could reopen strategic projects aligned with India’s connectivity vision.
Conclusion
The Iranian conundrum is no longer defined solely by regime-versus-protester dynamics. It reflects a complex interplay of economic collapse, elite consolidation, demographic alienation, and calibrated external pressure. While immediate regime collapse appears unlikely, the erosion of traditional stabilising pillars introduces long-term uncertainty with direct regional and global consequences.