Tehran has thus overcome ethnic and intra-Shia differences to create and lead a largely unified Shia bloc in the Middle East to ensure two things: to fend off Sunni bids to capture political power in Iraq and Syria, and to defend Shia rights in other regional states.

The concept of “resistance economics,” on the other hand, originated from Iran’s efforts to offset the consequences of intrusive Western sanctions, particularly the U.S. and EU sanctions imposed on January 1, 2012, to force Iran to give up its nuclear program. The sanctions package completely cut Iran off from the global financial-transaction system, disconnected Iranian banks from the external world and significantly reduced oil production and exports, setting off negative economic growth rates of –6.6 percent in 2012 and –1.6 percent in 2013, with the Iranian rial losing 56 percent of its value between January 2012 to January 2014.

Former president Mahmoud Ahmadinejad’s mismanagement was also partially responsible for this dire economic situation. Resistance economics was a solution to minimize the effects of existing and future sanctions. It aims to reduce Iran’s vulnerabilities to regional and global economic shockwaves by creating domestic capacities to promote a knowledge-based economy, improve industrial and technological competitiveness, fight back inflation and unemployment, and reduce dependence on oil and gas exports. The idea seems to have produced some positive result recently. In the last Iranian fiscal year (March 2015–March 2016), Iran had a non-oil trade surplus of $916 million.

The Three Challenges

Though Iran’s strategy of Shia empowerment and resistance economics is paying off, there are stiff challenges to its rise and dominance. Until recently, the most formidable challenge was the U.S.-led Western opposition to Iran that attempted to economically damage Iran, politically cut it off from the international community and diplomatically render it a pariah state. The nuclear deal has turned over that page, though tensions are still running high between Tehran and Washington over Iran’s ballistic missile program and the U.S. seizure of Iran’s frozen funds.

The second serious challenge comes from Iran’s neighbors, led by Saudi Arabia. Saudi efforts to check Iran’s rise are more geopolitical in nature and less sectarian in character, despite Riyadh’s strategy to mobilize Sunni Arab and Muslim states to counter Tehran. The Saudis, awash with petrodollars and in the absence of an effective counterweight to Iran, like Saddam Hussein’s Iraq, had hardly any option but to jump into the fray to face the historical competitor. The Saudi-led challenge is unlikely to end soon, but much depends on how Iran reaches out to Saudi Arabia and allays its concerns to initiate dialogues and cooperation. A China-style “peaceful rise” policy may prove more effective for Iran to engage Riyadh and other Muslim states.

The third challenge originates from within Iran itself, and is more threatening to Iran’s regional ambitions and goals. Iranian domestic politics is fissiparous, beset with multiple divides between the three overlapping groups of Islamic conservatives, reformists and pragmatists. Deep rifts characterize their views on core national issues, including relations with the West, development strategy, regional political and strategic issues, and so on. The problem is so serious that the reformist President Rouhani has called for a domestic JCPOA to iron out political differences, building national unity to implement sound policies, spurring economic development. Unless resolved or at least mitigated, domestic political disunity may prove a dreadful obstacle to Iran’s rise to regional power status.

Notwithstanding the regional and domestic challenges, Iran definitely looks poised to rise as a dominant regional power in the Middle East—a goal all Iranian leaders, from Shah Mohammad Reza Pahlavi to Ayatollah Khomeini to Khamenei, have sought to achieve. It is presently much closer to achieving this goal than at any other time in modern history.

Mohammed Nuruzzaman is associate professor of international relations at Gulf University for Science and Technology in West Mishref, Kuwait.

Image: Wikimedia Commons/Shahab-o-Din Vajedi