Almost 1.5 million. This is how much Iranian rial a single US dollar will cost in January 2026. Last September it was still around 1 million. And when the revolution in 1979 transformed Imperial Iran into the Islamic Republic, the exchange rate was still 70 riyals per dollar.
You hardly need to know more to understand the current state of the regime. And to be able to understand why so many Iranians have taken to the streets against those in power in recent weeks – despite the brutal violence and repression of the statedespite the risk to their health, their freedom and their lives.
Over 5,000 of them are dead and identified, reports the Human Rights Activist News Agency (HRANA). According to the organization, thousands more corpses are currently being assigned to the lives that were extinguished. Supreme Leader Ali Khamenei himself speaks of “a few thousand dead,” while Iran International reports 12,000.
It is not possible to say exactly how big the protests were recently: the sources are too unclear, also because of the ongoing internet shutdown across the country. But the fact that, according to HRANA, over 26,000 people were arrested gives an indication of the extent of the demonstrations. A whole small town of prisoners, imprisoned within a few weeks.
Given the economic situation, a window is opening
Frozen assets
What began as a protest against the economic situation quickly grew into resistance against the regime itself. Many people in Iran know that the system – including the economic one – cannot be reformed. There are three main reasons why the Rial is now falling further – and the regime actively contributed to all of them.
Activated at the end of August 2025 Germany, France and Great Britain use the snapback mechanism“As a result, sanctions that had been suspended in 2015 with the nuclear deal came back into force. They affected, for example, individuals whose assets were frozen abroad.
But above all, they hit the Iranian economy: the import, purchase and transport of oil, gas and gold from Iran was banned. Iran has the third largest oil reserves in the world.
In addition, the assets of the Central Bank of Iran and other Iranian banks abroad were frozen. A transition phase until January 1, 2026 has been set for existing contracts.
Prices are likely to continue to rise
These sanctions reduced the flow of US dollars from oil and gas sales into Iran’s foreign exchange reserves. However, the Iranian central bank needs the US dollars from the sale to stabilize its own currency by selling US dollars and buying rial.
In addition, the state budget has had holes in it for years – massive ones at that. “Iran International” reports a budget deficit of around 30 percent per year – and this has been the case since 2018, when the USA withdrew from the nuclear deal and US sanctions came into force again. The regime’s response: print money. And thus contribute massively to inflation. Between 2021 and 2024 alone, the money supply in Iran doubled, central bank data shows.
The Islamic Republic’s financial problems resulted in another decision to the detriment of the Iranians: previously, the Iranian government had helped importers of certain essential goods – such as staple foods – with subsidized exchange rates.
This means that businessmen received around one US dollar for just under 290,000 riyals. Better conditions than the free exchange rate would allow. The state ultimately paid the bill for this difference. This, President Massud Peseschkian announced on January 1, 2026, should now end. This means that prices are likely to rise further.
A state within a state
One could argue that the sanctions are what put Iran in this situation. But that would be too short-sighted. Because while the population became increasingly impoverished since 1979 and saw their savings and wages melt away with the devaluation of the rial, others took action. The Islamic Revolutionary Guards became a state within a state, an economy within an economy. One of the largest engineering service providers in the country is Khatam-al Anbiya Construction Headquarters. It is controlled by the Revolutionary Guards. They are also close to large banks, insurance and investment companies. People close to the Garden also own restaurants, hotels, shopping malls and real estate companies.
This type of system is typical of dysfunctional states. At least that’s how economists Daron Acemoglu and James A. Robinson describe it in their book “Why Nations Fail: The Origins of Power, Wealth and Poverty.”
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The authors observe: Some countries remain poor while others become rich – not because of their culture, not even because of geographical circumstances. But because so-called extractive institutions prevail in some states and inclusive institutions in others. This refers to the power structures and regulations according to which a state functions.
Inclusive institutions stand for the rule of law, participation and open markets. According to the authors, this will result in growth and prosperity for a large part of the population. Extractive institutions, on the other hand, prevail when personal rights are limited, power is less concentrated, and corruption is prevalent. This, according to the authors, leads to stagnation and widespread poverty.
Refused orders
The Islamic Republic largely meets these criteria. It is an extremely autocratic state run by a small elite that controls a solid portion of the economy. The book itself was confiscated at the Tehran Book Fair in 2015. According to Radio Liberty, his Persian translation was made in Tehran Evin Prison.
So far the regime has been able to hold on to power. Despite various waves of protests over the past 30 years – think of the Green Revolution in 2009 or the Women’s Life Freedom protests in 2022 and 2023. This was achieved through massive repression: tens of thousands of citizens were and are sitting in prison and were executed.
But given the economic situation in Iran, a small window opens up for weakening the repressive apparatus: prison guards and security forces also want to be paid. And the gap between the salaries of Revolutionary Guard elites and ordinary police and soldiers is wide.
There are reports that security forces refused to obey orders during the recent wave of protests. They are often unconfirmed. But such a man was recently sentenced to death, reports the human rights organization Center for Human Rights in Iran. Javid Khales, a young soldier who refused to shoot at the demonstrators. The US State Department also took up the case.
Weakened capacities
And something else is currently underway: the USA is moving military equipment to the region. The aircraft carrier “USS Lincoln” is on its way, accompanied by two destroyers. The US military brought a dozen F-25 fighter jets to Jordan, and more planes, including tankers, are expected. Patriot PAC-3 and THAAD missile defense systems are also being moved into the region.
US President Donald Trump had previously threatened the Islamic Republic: If more protesters were killed, they would act.
The military confrontation between Israel, Iran and the USA in June 2025 has weakened Iran’s defense and offensive capabilities. Given the economic situation, a possible attack could have a serious impact on the regime. And maybe shake it up.