The year 2026 has begun with trials and turbulations for the vulnerable Iranian regime, with protests on the streets, and the world observing the developments in anticipation. On December 28, the merchants of Tehran began a strike, with the Iranian currency, the rial, plummeting and putting additional pressure on Iranian households. Iran has been suffering due to the economic sanctions for a long time, but the insufficient and unsuccessful measures bordering government apathy triggered the ongoing protests. Recent economic decisions, such as the introduction of a new pricing model for nationally subsidised petrol and the halting of preferential subsidised rates for foreign currency imports, added to the existing pressures.
Iran has adopted various economic measures to mitigate the impact of sanctions, including strengthening non-oil exports and reducing import dependence by aiming for self-sufficiency in food security and essential goods and services. It has also developed alternative banking and financial networks, aiming to leverage transport networks, such as the International North-South Transport Corridor (INSTC), expand special economic zones, and develop domestic technologies. The defense sector is one of the major beneficiaries, with Iran being able to create and export drone technologies. Iran has also been diversifying its trade partners by deepening ties with China, Russia, and Venezuela. It has also focused on seeking membership in non-Western multilateral organisations, such as the Shanghai Cooperation Organisation and BRICS.
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However, it is clear that these measures are insufficient, and a new approach is needed to maintain peace and stability in Iran. The resilience and manufacturing success in Iran have come at the cost of broader economic well-being, widespread poverty, and a lack of empathy for the suffering masses. President Trump's pressure tactics, exacerbated by the frequent water crisis and steep inflation, broke the back of the Iranian middle class.
The unaffordability of necessities like bread and cooking oil triggered the protests, and repressive measures have fanned the flames, providing an opportunity for external actors to intervene. The protesters' demands, which began with strengthening the Iranian economy, soon transformed into anti-government chants, and the 'Bloody Saturday' incident added to the gravitas. On January 3, protestors throwing stones at the doors of an IRGC base in Malekshahi county of Ilam province in western Iran were shot, and the forces from the hospitals arrested the injured protestors and their kin.
With the major human rights organisations covering the protests despite the shutdown of internet and telephone services, the US President has expressed readiness to intervene, and Iran has taken note of it, saying that Tehran is ready for war, but it is also prepared for dialogue. Earlier, Iranian authorities accused the US and Israel of sending ‘terrorists’ to foment trouble. A US military strike on Venezuela and the capture of President Nicolas Maduro and the first lady Cilia Flores gives the impression that the days of the Iranian regime are numbered, but Iran is not Venezuela. It has witnessed protests in the past and has decades of experience in surviving under economic sanctions. Secondly, it has a robust system in place with strong support from the IRGC. Also, US intervention might unite the Iranian people under the current government.
The question is what is next after the speculated end of the current regime. Will the exiled Reza Shah return to power and be accepted by the people, offering long-term stability for Iran? More importantly, the key question to ponder is whether the Middle East region, and especially the Gulf, is ready for this kind of transition.
The change of regime in Iran will likely lead to a greater US presence in the GCC, prompting a vocal response from Russia and a more muted reaction from China. Within the region, Arab countries have adopted calculated silence, with Türkiye expressing concern about external intervention and Saudi Arabia reportedly lobbying against a US attack. Iran is too close to home for the GCC countries, and an all-out war with the US would threaten their own territories hosting US bases. Further, the region, as usual, is on the boil with Ahmad al-Shara struggling to keep peace with minority factions in Syria, and Saudi Arabia and the UAE coming to loggerheads in Yemen. Then there is the perennial problem linked to Hamas and Hezbollah activities in the Levant.
Apart from that, the escalating situation in Iran poses a threat to peace and stability in the neighboring regions. The Strait of Hormuz will be affected, leading to a rise in global oil prices. For South Asia, the theatre of war is too close, with Gulf countries hosting millions of expatriates who depend on these countries for their livelihood and are a significant source of remittances. Moreover, South Asia faces its own set of problems, marked by the ousting of Sheikh Hasina's government in Bangladesh, Gen Z protests in Nepal, economic collapse in Sri Lanka, and civil-military issues in Pakistan.
For India, the escalating situation in Iran presents challenges to both traditional and non-traditional security. The Trump administration-imposed tariffs will negatively impact the existing negligible trade ties, with Basmati exports primarily bearing the brunt. Being geographically close, Iran's problem will increase the security vulnerabilities for India and may necessitate measures for evacuating expatriates from Gulf countries in case of extreme escalations. Additionally, India needs to explore alternative sources of energy in the event of disruptions to its energy supply. Most importantly, the speculated transition in Iran will prompt India to revisit its Afghanistan policy. Above all, serious disturbances in Iran will affect the security situation in the Gulf and South Asia, and India will need to be ready for it.
The author is an Associate Professor at the Centre for West Asian Studies, School of International Studies, Jawaharlal Nehru University, New Delhi.