Iran Edges Closer to a Revolution That Would Reshape the World

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The stakes for oil traders are significant. But it’s unclear if Khuzestan, the main oil-pumping 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’s 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.

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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.”

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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. American officials are also increasing pressure on Denmark to cede control of Greenland, signaling the administration has the appetite for more forays abroad.

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Trump may well be tempted, for all the risks, to try to topple a government that’s been an archenemy to the US and Israel for over 45 years. 

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“The balance of power would change dramatically,” Mark Mobius, the veteran emerging markets investor, said of the 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.”

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Trump at times ran against American adventurism in the region, where the ousting of longtime US enemy Saddam Hussein in Iraq unleashed a generation of chaos and terrorism, costing hundreds of thousands of lives and trillions of dollars.

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It’s just that kind of potential power vacuum that’s worrying Arab leaders in the Gulf Cooperation Council, according to regional officials. 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 specter of the Arab Spring, where dictators fell across the region only for chaos to follow, looms large.

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Iran has warned that if it’s attacked, American assets in the region — where it has deep commercial ties and tens of thousands of troops stationed — and Israel will be “legitimate targets for us.”

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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.

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For the GCC and the likes of Turkey and Pakistan, the worst outcome would be chaos in Iran, said Ellie Geranmayeh, deputy program director for the Middle East and North Africa at the European Council on Foreign Relations. 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.

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“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,” said Geranmayeh.