An anti-regime alliance of rich and poor could be the key to ending clerical rule.

While the debate over the future of the Iran nuclear deal and U.S. military strategy in Syria rages in Washington, policymakers cannot afford to miss the historic events unfolding inside Iran. The United States’ response to these developments will not only affect the future of the Islamic Republic but Syria and the broader Middle East, too.

Over the first three months of 2018, Iran’s currency collapsed into total free fall, with the Dollar gaining 37 percent against the Rial — accelerated in part by John Bolton’s appointment as U.S. President Donald Trump’s national security advisor. Iran started the year with widespread protests across the country, fueled by low-income Iranians’ economic grievances. These protests cast a shadow of doubt over the regime’s stability and put a downward pressure on the Rial.

Tehran spent February and March fighting its currency depreciation and flight of capital without much success due to the increasing probability of the United States leaving the nuclear deal. On April 9, Bolton’s first day on the job, Iranian President Hassan Rouhani rolled out a series of draconian steps to halt the crisis.

The regime first adopted a single unified exchange rate of 42,000 Rial to the Dollar for both official and “street” transactions. Fearing a likely run on foreign currency, Rouhani then prohibited the practice of foreign currency trading and acquisition. Private foreign currency trading became a crime, with regime officials likening it to drug trafficking. Security forces arrested traders who didn’t listen — and Iranians who stood in line to buy dollars faced the threat of imprisonment.

Even more shocking, the Central Bank of Iran prohibited Iranians from keeping more than 10,000 euro at any given time. Any amount held in excess had to be immediately sold back to the government — at a loss — or put into government-owned bank accounts with the knowledge that the regime could freeze or access the funds at any time. Additionally, Rouhani declared that Iranians could buy only 1,000 euro, once per year, before traveling to another country.

These decrees are not only signs of a regime in severe crisis. They are direct assaults on the livelihoods and lifestyles of Rouhani’s last remaining supporters: Iran’s upper-middle class. The measures target those looking to protect their wealth by hedging against the Rial and those looking to have enough money to travel abroad. Long-distance travel with less than 1,000 euros in spending money makes leaving the country a significant challenge for the average upper-middle-class Iranian family.

Back in 2009, these wealthier and more educated citizens of Tehran — those who have traditionally backed the so-called reformist movement — took to the streets to protest then-President Mahmoud Ahmadinejad’s stolen election. In 2013, these same people helped elect Rouhani, believing he was a reformist capable of moderating the regime and moving it into the 21st century.

This bloc of Iranians long ago abandoned the hard-liners, believing they could change a totalitarian state from within by supporting regime officials with more moderate tendencies. Once these people abandon Rouhani, they have nowhere else to go but the direction of pro-democracy activists such as Shirin Ebadi, writing off the potential for the regime to change from within and instead favoring a change of political system entirely.

More significantly, this is a different segment of the Iranian public than the one that began pouring into the streets in late December 2017. The more recent protests comprise blue-collar Iranians who live in traditional hardline strongholds. The mullahs now run the risk of seeing a coalition of opposition to the regime emerge, combining the working class and the upper-middle class — the former asking where their paychecks went, the latter asking why their money is being taken away and their travel restricted.

An anti-regime alliance of rich and poor could be the key to ending Iran’s clerical rule. The Trump administration should aggressively pursue policies that widen the gap between Iran’s government and its people, strengthening the pro-democracy movement along the way.

One way to quickly exacerbate the regime’s currency crisis is to restore the congressionally enacted sanctions on the central bank. That law, which is currently suspended as part of the 2015 nuclear agreement, did more than just prohibit financial transactions with the central bank and force importers of Iranian oil to significantly reduce their purchases. It also put all the bank’s foreign-held accounts on lockdown, denying the regime the ability to freely access or transfer its foreign exchange reserves.

With the foreign currency market shut down by Rouhani, the regime has two options right now: back all imports with cheap foreign currency by depleting its foreign exchange reserves, or face a shortage of goods and certain social instability. The government is likely to choose the first option, and if it loses all access to foreign-held reserves at the same time, the mullahs will soon face a balance of payments crisis that could bring down the regime.

Trump has already threatened to bring back sanctions on the Central Bank of Iran by May 12 if U.S. and European negotiators can’t agree on a way to fix the nuclear deal. Others have suggested that Trump should re-impose these sanctions regardless of those negotiations because of the bank’s role in backing Syrian President Bashar al-Assad. In case Trump needed any more reasons, here’s one: It might just help the people of Iran bring an end to the Islamic Republic before its 40th anniversary in February 2019.





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