Report: The Iranian regime and the manufacturing of external conflicts as a mechanism to cover up internal failures

Recent political and economic indicators point to a close relationship between the escalation of the Iranian regime’s confrontational foreign policies and the worsening of its internal crises. These policies are viewed as a tool to redirect domestic public opinion away from accumulated economic and social failures. This behavior reflects a recurring pattern in regimes facing deep internal crises, as they seek to create or amplify external threats to unify the domestic front and justify their shortcomings.

First: A severe economic crisis in numbers

The Iranian economy is experiencing one of its worst crises in recent decades. The annual inflation rate reached approximately 48.6% in October 2025, with high levels continuing through the end of the year. Other data indicate that annual inflation exceeded 60% during certain periods between 2024 and 2025.

The crisis has not stopped there. Food inflation reached around 90% during 2025–2026, placing the country on the brink of “hyperinflation” in essential goods. Estimates also suggest that between 22% and 50% of the population lives below the poverty line, marking a significant increase compared to previous years.

At the currency level, the Iranian rial has collapsed to record lows against the US dollar, losing half of its value in just six months. This collapse is a clear indicator of declining confidence in the domestic economy.

Second: Unemployment and social deterioration

Estimates indicate that the unemployment rate ranges between 7.5% and over 9%, equivalent to approximately 2 to 2.5 million unemployed individuals. However, official figures may not fully reflect reality, as internal reports suggest that around 50% of men aged 25 to 40 are effectively excluded from the labor market.

Official data also show that 57% of Iranians suffer from some form of malnutrition, a serious indicator of deteriorating living conditions. This reflects a widening gap between the regime and society, as well as an unprecedented decline in purchasing power.

Third: Unprecedented popular protests

These conditions have led to widespread protests, considered the largest in decades. Since the end of 2025, the country has witnessed a wave of demonstrations spreading to more than 200 cities, with participation estimated at around 5 million people.

These protests have resulted in shocking figures, with estimates indicating between 7,000 and more than 36,000 deaths, in addition to hundreds of thousands of injuries (up to 360,000), and more than 53,000 arrests.

The protests have evolved from economic demands into direct political slogans against the regime, reflecting the depth of the crisis and the loss of public trust.

Fourth: Linking external escalation to internal crises

Amid this tense domestic situation, a clear escalation in Iranian foreign policy can be observed, whether through regional tensions or involvement in direct and indirect conflicts.

This escalation is seen as a means to achieve several objectives, most notably diverting attention by creating an external enemy to redirect public opinion away from internal crises strengthening internal cohesion through the rhetoric of “external threat” to justify security measures, and postponing domestic obligations such as economic or political reforms.

Recent analyses indicate that declining trust in the state and weakening economic performance following “external failures” have increased internal pressure on the regime.

Fifth: The economy as a victim of foreign policies

Ironically, these same foreign policies further exacerbate the internal crisis. Tensions and conflicts have led to the imposition of international sanctions that have limited oil exports and reduced foreign investment.

The economy has contracted by as much as -0.6% in some periods, while economic growth has remained weak, not exceeding 0.6%, according to estimates by the International Monetary Fund.

These policies have also contributed to Iran’s economic isolation and undermined its integration into the global economy, leading to long-term losses in output and investment.

Conclusion

In light of these indicators, it is clear that the Iranian regime is facing a complex internal crisis encompassing the economy, society, and politics.

Its external escalation cannot be separated from its attempts to contain these crises. However, this approach appears to be counterproductive, as it deepens international isolation and intensifies economic pressures, creating a vicious cycle of internal crises and external tensions.

Accordingly, the continuation of this pattern may threaten the regime’s own stability, especially in light of expanding protests and deteriorating living conditions. This makes the “export of crises” a short-term strategy in confronting deep structural challenges.