Late on Monday (AEDT), Iran’s foreign minister told foreign diplomats “the situation has come under total control” after the bloody crackdown on protests, but offered no evidence to support the statement.
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Trump’s repeated warnings to Iran that the US will strike if it kills peaceful protesters come as he escalates his assault on the post-World War II global order in a stunning assertion of US power that’s included claiming Venezuela’s oil after seizing Maduro, and threatening to take over Greenland from NATO ally Denmark.
Israel, which battered Iran during a US-assisted 12-day air war in June, is liaising closely with European governments about the situation on the ground, according to a senior European official, who asked not to be named discussing private talks.
If the regime does fall, it would be a blow to Russian President Vladimir Putin, who would lose another foreign ally after Maduro this month and the overthrow of Syria’s Bashar al-Assad just over a year ago, the official added.
The stakes for oil traders are significant. But it’s unclear if Khuzestan, the main oil-producing province, has seen unrest and, so far, there are no signs of reduced crude exports. On Saturday, Reza Pahlavi, the son of the former shah who is exiled in the US and positioning himself as an opposition leader, urged petroleum workers to strike. Oil strikes in 1978 were one of the death knells of his father’s monarchy because of how they immediately hit the economy.
Iranian Supreme Leader Ayatollah Ali Khamenei (left) and US President Donald Trump (right), who ordered US strikes on Iran during Israel’s 12-day war last June.
The market’s “focus has now shifted to Iran”, said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management, which helps clients manage volatility in energy markets.
“There is also growing concern in the market that the US, with Trump at the helm, could exploit the chaos to attempt to overthrow the regime, as we have seen in Venezuela.”
The White House is on a high after the tactical success of the operation against Maduro, as well as Trump’s decision to bomb Iranian nuclear facilities at the end of the 12-day war. US officials are also increasing pressure on Denmark to cede control of Greenland, signalling the administration has the appetite for more forays abroad.
‘The best outcome would be a complete change in the government. The worst outcome would be continued internal conflict’.
Mark Mobius, emerging markets investor
Trump may well be tempted, for all the risks, to try to topple a government that’s been an arch enemy to the US and Israel for over 45 years.
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“The balance of power would change dramatically,” veteran emerging markets investor Mark Mobius said of the possible downfall of the Islamic Republic.
“The best outcome would be a complete change in the government. The worst outcome would be continued internal conflict and a continuing rule by the current regime.”
But Trump has at times run against US adventurism in the region, where the ousting of long-time US enemy Saddam Hussein in Iraq unleashed a generation of chaos and terrorism, costing hundreds of thousands of lives and trillions of dollars.
Potential power vacuum
It’s just that kind of potential power vacuum that’s worrying Arab leaders in the Gulf Co-operation Council (GCC), regional officials say.
While the group – which includes Saudi Arabia, the United Arab Emirates and Qatar – has often viewed Iran as an adversary, its members have sought to improve ties in recent years to ensure Tehran doesn’t lash out against any Israeli or US military action by attacking them. The spectre of the Arab Spring, where dictators fell across the region only for chaos to follow, looms large.
‘A collapse appears unlikely for now. Iranians are frightened of chaos, having seen it wreak havoc in neighbouring Iraq and Syria.’
Dina Esfandiary, Middle East analyst
Iran has warned that, if it’s attacked, US assets in the region – where it has deep commercial ties and tens of thousands of troops stationed – and Israel would be “legitimate targets for us”.
The Islamic Republic has been severely weakened in the past two years, thanks to its stagnating economy, rampant inflation and Israel striking both it and its proxies. But it retains a large and sophisticated arsenal of ballistic missiles able to hit targets across the Middle East, from military bases to oil installations, and the regime still has the backing of the country’s myriad security forces, including the all-important Islamic Revolutionary Guard Corps.
For the GCC and the likes of Turkey and Pakistan, the worst outcome would be chaos in Iran, Ellie Geranmayeh, the deputy program director for the Middle East and North Africa at the European Council on Foreign Relations, said. It’s an eventuality made more possible by the sheer diversity of Iranian protesters, who include everyone from urban, secular elites to religious conservatives and lack a unifying leader.
Iran retains a significant arsenal of missiles that it could use against US targets in the Middle East.Credit: AP
“With the GCC reconciliation of the past few years with Tehran, there’s a sense of better the devil you know rather than complete chaos or an unknown power structure that is alien to them,” Geranmayeh said.
US and Israeli strikes might even strengthen the government and reduce the appeal of the protest movement. In June, there was a surge in nationalism as the Jewish state and Washington rained down bombs.
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The Islamic Republic probably won’t survive in its current form by the end of 2026, Bloomberg Economics Middle East analyst Dina Esfandiary said.
The most likely scenario, she said, would be a leadership reshuffle that largely preserved the system, or a coup by the IRGC, which could mean greater social freedom – the organisation is run by generals rather than clerics – but less political liberty and a more militaristic foreign policy.
The chances of a revolution are still fairly low, she said.
“A collapse appears unlikely for now,” she said. “Iranians are frightened of chaos, having seen it wreak havoc in neighbouring Iraq and Syria. More importantly, the government is cracking down hard.”
Collapse ‘would not be pretty’
On Sunday, President Masoud Pezeshkian, a former heart surgeon and a moderate relative to others at the top of the Iranian government, struck a conciliatory note, offering condolences to families affected by the “tragic consequences”.
“Let’s sit down together, hand in hand, and solve the problems,” he said on state TV.
It’s unlikely many protesters will believe him. The supreme leader, a much more powerful figure, as well as members of the security forces, are increasingly bellicose, floating the death penalty and making clear they’re prepared to respond as they always have – with brutal force.
“I don’t think a collapse of the regime would be pretty,” Usher, the former CIA analyst, said. “Short-term, I could imagine some fracturing of the country as ethnic minority groups and some provinces pursue autonomy from Tehran. The IRGC will fight vigorously to save the regime, so I think there’d be a strong possibility for large-scale violence.”
Paul Wallace, Golnar Motevalli, Fiona MacDonald, Ben Bartenstein and Peter Martin – Bloomberg
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