There is considerable disagreement among scholars and analysts about the exact nature of the Iranian regime. Some have described it as a pseudo-totalitarian state or a theocratic despotism, others consider it an example of Max Weber’s sultanism,¹ and still others have argued that the regime is a form of “apartheid democracy.”² However, there is near consensus on two assessments: the Islamic Republic is one of the most despotic regimes in the world, and it represents one of the biggest challenges facing the new U.S. administration.

Iran’s nuclear program, its defiance in the face of United Nations resolutions seeking the suspension of its uranium enrichment, and evidence that it is in fact trying to become at least a virtual nuclear-weapons state, if not a full member of the “nuclear club,” are only the most urgent aspects of the Iranian challenge.

Other elements of the problem include the Islamic Republic’s support for illiberal forces abroad, including Hezbollah in Lebanon, a variety of Shiite forces in Iraq, Hamas in Palestine, as well as warlords and other destructive elements in Afghanistan. The two largest recipients of Iranian aid in Iraq are the organization led by radical cleric Moktada al-Sadr and the Islamic Supreme Council of Iraq, both of which have fielded militias. The Iranian government has declared that it was paying more than $300 million to Hamas to cover public-sector salaries in the Gaza Strip, and it has clearly admitted its financial, ideological, and military patronage of Hezbollah. For example, the regime has repeatedly boasted, particularly at the end of the 2006 war between Israel and Hezbollah, that supreme leaders Ruhollah Khomeini and Ali Khamenei were the creators and “guides” of the Lebanese militant group.

Iran’s nuclear program could trigger not only a new arms race in the Middle East, but also a change in the broader balance of forces. The 20th-century history of the region shows that Iran is a bellwether state, and that its course has ripple effects on neighbors near and far. The existence of sizable Shiite populations in Bahrain (where they form a majority), Saudi Arabia (where they are concentrated in oil-rich provinces), and Yemen (where the recent resurgence of Shiite radicalism threatens the government) could offer Tehran the opportunity to foment more trouble in the region. Saudi Arabia’s decision to counter Iran’s growing influence, evident most recently in the kingdom’s willingness to act as a mediator between the Taliban and the Afghan government, is creating a veritable cold war between the two rivals. In a theological manifestation of this war, Sheikh Yusuf al-Qaradawi, one of the Sunni world’s most influential clerics, has declared that Shiism is a form of heresy and issued a call to action to confront Shiite proselytizing in Sunni countries.³

Meanwhile, the regime faces little serious opposition at home. Iranian democrats have failed to develop a cogent policy or a unified leadership, and the authorities use a range of tools to sow disunity and confusion among them, disrupting the country’s democratic development.

More broadly, the Iranian leadership hopes to emulate the Chinese model by using improvements in the population’s economic situation to guarantee its continued authoritarian grip on power, although the regime’s economic incompetence suggests that this approach is untenable.

Pursuit of the Chinese model also entails growing cooperation with China, India, and the rest of the Asian countries. Such a realignment, if fully achieved, would be of epochal magnitude: despite the ruling elite’s inclinations, Iran has looked westward for its cultural, political, and economic alliances for most of the last two millennia. The economic foundation of this pivot is a proposed pipeline that would connect Iran to India and China, leaving the country completely independent of any market pressures from the west.

For the present, however, the global economic crisis is crippling the Iranian economy. Should oil prices remain at low levels, they are bound to hamper the regime’s ability to pursue its goals, both at home and abroad. There are also growing signs of public dissatisfaction, and the government has begun reorganizing its coercive apparatus to withstand future domestic instability. It is in this set of complex and volatile circumstances that the Iranian state’s internal order and international pursuits must be understood.