A Weakened Iran Prepares to Face Trump 2.0

From worsening social unrest to its allies’ military collapse, Tehran is bracing for what could be a difficult year
A billboard shows Iranian military commander Qassem Soleimani in Tehran ahead of the fifth anniversary of his killing in a U.S. strike.

By Benoit Faucon. WSJ. 

Iran faces a tough year of confrontation with the incoming Trump administration while holding an exceptionally weak hand after 2024 left it with an acute economic crisis at home and setbacks in the Middle East.

The new U.S. administration plans to increase sanctions on Iran as part of an effort to contain its support for militant groups in the Middle East. Tehran's strategy, less potent than it was, still threatens Washington's allies and partners, especially Israel, and is also unpopular among many ordinary Iranians. President-elect Donald Trump's team is also weighing options, including airstrikes, to keep Iran from building a nuclear weapon.

Iran's economy has already been crippled by bad management, corruption and sanctions. Power shortages disrupt offices, schools and manufacturing plants. Iran's military threat has been blunted by Israel's battering of allies Hezbollah in Lebanon, Hamas in Gaza, the now-collapsed Assad regime in Syria and much of Iran's air defenses.

The Islamic Republic's difficulties represent the biggest challenge to its clerical leaders since 2022, when the death of a young woman in police custody after allegedly wearing an improper veil sparked widespread unrest, crushed with brute force. While protests over the worsening economy remain limited, the regime appears more vulnerable to unrest now.

Iran's leadership "is probably experiencing the most profound challenges of its own making" in years, said Sanam Vakil, director of the Middle East and North Africa program at Chatham House in London. That could push Tehran to negotiate a compromise with the West, she added.

President Masoud Pezeshkian was elected in July on a platform of social reforms, economic revival and political opening to the West. But Iranians' hopes of improving their daily lives are unraveling.

Iran's currency, a bellwether of economic sentiment, ended 2024 at a record low against the dollar, down 40% for the year. Gross domestic product per capita has fallen 45% since 2012, when sanctions escalated, the World Bank said.

Merchants in Tehran's main bazaar staged a rare strike on Dec. 29 over high inflation, said Hamidreza Rastegar, head of the Tehran Chamber of Guilds, which represents vendors. Protests over economic issues are becoming more frequent. Nurses and telecommunications workers have protested delayed payments.

The discontent is spreading to the vital oil sector. Workers at the Abadan petrochemical plant, one of the country's biggest, protested over three months of unpaid wages, according to state-run media and Iranian trade unions.

Energy shortages because of years of mismanagement and underinvestment have exacerbated the crisis. Industrial facilities last month were at 41% of capacity because of electricity and natural-gas shortages, the Iranian Chamber of Commerce, Industries, Mines and Agriculture, said on Dec. 18. Lower poultry and meat production threatens food security, the chamber said.

Factories are in the throes of "a deep recession," Mahmoud Najafi Arab, the head of the chamber, which represents some of Iran's biggest companies, said in on the chamber's website. The energy shortage has idled 22 cement plants and slowed pharmaceutical production, according to the semi-official Iran Labour News Agency. Power issues are also set to hurt this year's harvest by shutting down water pumps and disrupting the supply of natural-gas-dependent fertilizers, Ali Gholi Imani, head of the National Wheat Farmers Association, told business newspaper Tejarat News on Wednesday.

The energy crisis has fueled inflation, running at an annual rate of 37% in November, according to the central bank. In the past three years, the price of meat has quintupled and potato prices have more than doubled, Iran's Statistical Center said on Dec. 31. About 32 million Iranians-more than one-third of the population - live below the poverty line, according to the chamber of commerce, compared with 18 million people in 2017.

Even under the most crippling sanctions, Iran could still deter foreign attacks on its soil by leveraging threats from the Axis of Resistance, an informal Tehran-led alliance of Middle East militias.

But those allies have been largely defeated over the past year. The removal in December of Bashar al-Assad of Syria, Iran's main state ally in the Middle East, followed a cascade of events catalyzed by Hamas's deadly attack on Israel on Oct. 7, 2023. Israel has devastated Hamas, Iran's main Palestinian ally, and killed most of the leadership of Hezbollah, Iran's most powerful ally.

The events leave Tehran with far less wiggle room as it prepares for Trump. The past year's setbacks have raised concerns that Iran might accelerate its nuclear program to restore some deterrence against foreign attacks.

Trump, a Republican, has also been eyeing ways to stop Iran from being able to build a nuclear weapon, including possible preventive airstrikes. Iran's foreign minister, Abbas Araghchi, said Friday that his country was ready to resume nuclear negotiations "without delay" in exchange for lifting the sanctions. But in November, he also said Tehran's advancing nuclear program showed it could cope with any new restrictions.

To reach a deal, both sides will need to move away from acrimony. Trump's approach is likely colored by his knowing Iran tried to assassinate him, former Trump officials have said. Khamenei frequently invokes Qassem Soleimani, the Iranian military commander Trump ordered killed in 2020.

"There is a narrow window where the regime will be eager to negotiate and Trump will have momentum to get what he wants to sell," said Chatham House's Vakil. "But time is not on [Trump's] side. The ideologues in the Trump camp will want compromise from Tehran it may not be ready to accept. So there is a lot more pain ahead for Iran."

Feeble Economy Feeds Dissent

Iran's sorry economic state worries the country's leadership. The Islamic Revolutionary Guard Corps, the paramilitary force tasked with protecting the Islamic Republic, warned on Dec. 30 of further unrest and criticized "attempts to portray the system as ineffective, and fearmongering within society."

Ali Rabiei, President Masoud Pezeshkian's social-affairs adviser, said younger generations are rejecting the economic isolation and social restrictions of recent years. They are "showing signs of rebellion against the status quo," he wrote in the reformist newspaper Shargh on Dec. 27. "Prolonged sanctions have significantly contributed to the prevailing sense of despair, leaving deep social and po- litical scars."

Pezeshkian's administration has responded by easing some of Tehran's most repressive policies. In late December, it lifted a ban on the WhatsApp messaging service.