Iran at the cusp of change

Chinese businesses must prepare for possible regime change in Iran

Although Chinese companies are providing an economic lifeline to Iran, whose economy is severely handicapped by US sanctions, the country is teetering on the verge of change to a government that may be possibly friendly to its current foe Israel.

Several Iranians told Asia Sentinel that their country is ripe for regime change and that they yearn for it. They cite spiraling inflation, the sharply rising cost of cars, and the shrinking middle class. Even the wealthy in Iran are discontented with their government because inflation has substantially cut their spending power, said an Iranian woman. The price of a car in Iran is now more than 10 times the level several years ago, she estimated.

For the fifth time since March last year, the point-to-point inflation index in Iran exceeded 50 percent, to hit 53.4 percent ​​in February. Official figures show food prices in Iran have risen by over 70 percent year-on-year in February. Even the state-owned Iranian newspaper, Tejarat News, acknowledged in a May 15 article that: “A sharp decline in economic growth is highly probable for 2023.”

“The annual inflation rate has surged back to a staggering 50 percent threshold,” the newspaper added. In a sign of division within the establishment, the state-owned newspaper said the Iranian government manipulated statistics to conceal the extent of inflation.

“The government is losing control of the people,” an Iranian, Naser (not his real name), told Asia Sentinel.

These days, a few Iranian women occasionally dare to go without the headdress (hijab) required by the strict Islamic government, even as the morality police continue to conduct spot checks on cafes and restaurants. If the morality police find women not wearing the hijab at a café or restaurant, they close it down.

The turning point was the death of a 22-year-old Iranian woman, Mahsa Amini, three days after she was arrested and reportedly beaten by the morality police in Tehran last September. That sparked a wave of protests in multiple Iranian cities. The number of violent demonstrations in Iran skyrocketed to nearly 500 in 2022 from roughly 120 in 2021 and fewer than 50 in 2020, according to a report of the Armed Conflict Location and Detection Data Project (ACLED), a US non-profit organization, on April 12.

“Use of Molotov cocktails was widespread during these events, with nearly 70 incidents reported across 23 provinces between mid-September and December 2022. Despite a lull in demonstrations, Molotov cocktail attacks have continued into 2023, with over 30 incidents recorded by early April,” said the ACLED report.

“Iran is a land of contradictions,” an Iranian man, Ali (not his real name), told Asia Sentinel. The Iranian government censors the Internet and social media, yet Iranian officials sell virtual private networks (VPNs) to Iranian people to enable them to get around the controls because VPNs fetch so much revenue, Ali said.

Even former Iranian President Mohammad Khatami said Iran's Islamic revolution has deviated from its path and former Iranian Parliament Speaker Ali Larijani called for major policy changes, reported Iran International Newsroom on May 12. Khatami called the current government’s policies “self-destructive”.

“There are already many splinters within what we call the tent of the leader (Ayatollah Khamenei). There’s a rift and it affects the IRGC (Islamic Revolutionary Guard Corps, Iran’s armed forces) as well,” Reza Pahlavi, the son of the last Shah of Iran, Mohammad Reza Pahlavi, told Politico on February 18. At the age of 17, Reza Pahlavi accompanied his father who left Iran for exile in January 1979. The Shah died of cancer in Egypt on July 27, 1980.

If enough Iranian military officers defect, regime change is possible, Pahlavi told Politico. “The average guy is working two jobs to make ends meet. In the hearts, the military is prepared to come towards the people. But to do so they need to have a clear sense of the alternative and understand the crucial role that they could play during the transition to maintain law and order. We need them for that.”

In April, Pahlavi visited Israel, where he met Israeli Prime Minister Benjamin Netanyahu and President Isaac Herzog. Pahlavi was accompanied throughout his visit by Israeli Intelligence Minister Gila Gamliel. When the Shah ruled Iran, Iran, and Israel had friendly relations but are now enemies.

Pahlavi cited the relationship between Iran and the Jews in Biblical times, when Cyrus the Great, the Emperor of Persia from 550 to 530 BC, allowed Jews to leave Babylon and return to Israel, reported Nova News on April 18. The “quickest solution” to the Iranian threat to Israel is the downfall of the Iranian regime, he added.

“We are delighted to host the Iranian Crown Prince and admire his courageous decision to visit Israel for the first time. The crown prince symbolizes a different leadership from that of the regime of the ayatollahs and promotes the values ​​of peace and tolerance, unlike the extremists who reign in Iran,” Gamliel was quoted in media reports saying.

The time spent by the Israeli intelligence minister with Pahlavi raises the question whether Israel is participating in efforts to change the Iranian government. If that happens, the new Iranian government may be friendly to Israel.

Former Israeli Deputy Defense Minister Ephraim Sneh told Al-Monitor on December 13, 2022, “What we are seeing is changing the face of Iran and there will be no going back.”

However, Al-Monitor, a Middle Eastern news outlet headquartered in Washington, quoted an unnamed senior Israeli security source saying, “The deep change Iran is undergoing will not necessarily result in a revolution and regime change.”

Chinese support

China is providing crucial support to Iran’s economy which is curtailed by US sanctions, “increasingly seen as a major lifeline for Iran carried out mainly via Iranian oil purchases that reached US$47 billion since US President (Joseph) Biden came to office in 2021,” said an article of Silk Road Briefing, an international business intelligence service, on February 12.

China is Iran’s biggest oil customer. To get around US sanctions, most of Iran’s crude oil exports to China are rebranded as crude oil from other countries, the Silk Road Briefing article revealed. For instance, in 2021 China only constituted 28 percent of Iran’s oil exports, with Russia, rebranded Malaysian oil and other countries making up the difference, the article added. “It is therefore considered that the official numbers may not be reflective of a true nature of oil Iranian oil exports to China and the oil sent to Malaysia may be rebranded to skip the sanctions for safely entering the Chinese market.”

Although China has friendly relations with the Iranian government, which is disliked by many Iranians, Chinese people are welcomed. When Chinese tourists visit Iran, they often receive friendly greetings, with Iranians taking selfies with them, according to anecdotal accounts.

Iran is hoping to join the BRICS group comprising Brazil, Russia, India, China, and South Africa, Al-Monitor reported on May 10. Iran’s non-oil trade with BRICS rose 14 percent to US$38.4 billion in the 2022-2023 fiscal year, of which China accounted for the majority at US$30.3 billion, according to official Iranian data.

Naser told Asia Sentinel that the recent rapprochement between Iran and Saudi Arabia is a welcome development, because Saudi Arabia will provide Iran another international channel for trade and investment. In March, in a major diplomatic coup that signaled Beijing’s arrival on the world diplomatic stage as a counterweight to the US, China brought about the reconciliation of the two countries, which have been at political loggerheads for decades and divided by different interpretations of Islam for centuries. In a joint statement by China, Iran, and Saudi Arabia on March 10, Iran and Saudi Arabia said they would open embassies in each other’s country within two months.

However, China and Saudi Arabia must take into account the possibility of the Iranian government changing in the near future. China’s official policy is to deal with whatever government is in charge and not interfere in other countries’ internal affairs.