Millions of Iranians have been severely affected by the coronavirus pandemic and an economy strained by sanctions, but the political elite in Tehran have other priorities.

The power base of Iran’s theocratic velayat-e faqih regime—a labyrinth of elected and unelected institutions directed from above by religious experts—is in the middle of a seismic shift. Once the process is complete in around the middle of next year, the country’s governance system will essentially be a totalitarian military dictatorship run by a powerful ideological elite, the Islamic Revolutionary Guards Corps.

Over the past couple of years, an alliance forged between the IRGC and Iran’s Supreme Leader Ali Khamenei has gradually assumed near total control of all branches of the regime.

The IRGC has always been a powerful political force in Iran. While most modern states have an army that is subordinate to the political class, the IRGC is a revolutionary army running a state. It is a huge enterprise—200,000 personnel, plus hundreds of thousands of volunteers in the Basij, a domestic paramilitary organisation in charge of suppressing internal dissent. The IRGC’s Quds Force trains and advises proxies that are engaged in terrorism and regime destablisation across the Middle East—such as Lebanon’s Hezbollah and Yemen’s Houthis—as part of its mission to ‘export the revolution’. These activities led the US to list the IRGC as a terrorist entity in 2019.

Financially, the IRGC is a mega-conglomerate that owns a variety of industries amounting to around half of Iran’s economy. This includes the most prestigious military projects, especially the flagship nuclear-weapon and ballistic-missile development programs. Much of the IRGC’s enormous budget is off the books, as money flows to it through funds directly under the control of Khamenei, free from any public scrutiny.

Two main factors are driving the consolidation of the IRGC’s power: the supreme leader’s desire to secure his legacy and the IRGC’s access to the spoils of the Iranian economy. The 81-year-old Khamenei wants to ensure his ideology and his radical allies survive after his time in office. Exploiting the ruling ayatollahs’ fear of growing internal instability, the IRGC promises to brutally safeguard their ongoing rule in exchange for greater control over Iran’s resources.

Khamenei set out the ideological justification for his deal with the IRGC in a February 2019 speech  on the regime’s future trajectory, titled ‘The second Phase of the Revolution’. On the ground, the deal translates to the insertion of IRGC-affiliated ‘securocrats’ into key positions across the government by the supreme leader.

In return, the IRGC ensures that revolutionary Khomeinist policies are implemented and opposition at any level is crushed. Both sides benefit by preserving unfettered access to the immense wealth in Iran’s religious trusts.

The judiciary was the first institution conquered by this coalition, with the appointment in March 2019 of Ebrahim Raisi as chief justice. His affiliation with the IRGC originates from his time as head of one of the IRGC-related financial funds. An ideological zealot, Raisi continues to oversee the execution of dissidents, just as he did in the late 1980s. He is tipped as the leading candidate to replace Khamenei when he becomes incapacitated or passes away.

In the February 2020 election, the coalition consolidated its control over the legislative branch. The Guardianship Council—half of whose 12 members are nominated by Khamenei and the rest by the judiciary—exercised its authority and systematically disqualified from running anyone not aligned with the conservative ideological position set by Khamenei.

Only IRGC affiliates were allowed on the political playing field and, unsurprisingly, they now fill 200 of the 290 seats in the parliament. Spearheaded by the powerful speaker of the parliament, former top IRGC general and mayor of Tehran, Mohammad Baqer Qalibaf, the IRGC securocrats hold key positions in the major committees and dominate the presidium, which is in charge of setting the parliament’s agenda.

Ensuring that a like-minded ally wins the presidential elections scheduled for next year would be the final step. The Guardianship Council is expected to veto candidates not approved by the Khamenei–IRGC coalition, erasing any remnants of the real or imagined ‘reformist’ or ‘centrist’ spirit affiliated with outgoing President Hassan Rouhani. Khamenei will only allow the next president to come from the ranks of the right-wing, fundamentalist osoulgarayan (principalist) camp.

An Iran controlled by the IRGC will likely pursue an even more aggressive interventionist foreign policy vis-à-vis the Middle East. It would strive to remove hurdles slowing down its nuclear program and veto any nuclear negotiations, unless it gets major concessions from the West. Internally, an IRGC Iran is likely to be even more repressive and kleptocratic.

One should not assume, however, that such an Iran would be an irrational player. Khamenei and the IRGC have shown over the years that they never take their eyes off their goals and cleverly manoeuvre in agitating their rivals, while being careful not to cross red lines that would lead to all-out conflict. It’s unlikely that an IRGC-controlled Iran would follow the North Korean model—by kicking out UN inspectors, for example. Tehran is more likely to keep carefully building the elements of an indigenous nuclear weapons capability while only selectively cooperating with IAEA inspections.

Anyone devising an Iran policy needs to know that there is no longer any serious political competition in Tehran between ‘hardliners’ and ‘reformists’. Given the power shift to hardliners in Tehran and the scuttling of the JCPOA by the US, it may be time for Australia to reconsider its thinking on Iran.

Although several Western nations were critical of Donald Trump’s withdrawal from the 2015 nuclear deal, restoring it now is most likely impossible. If Australia were to follow the US’s lead in designating the IRGC as a terrorist organisation, Canberra would be able expand its bilateral sanctions on Iran to include IRGC-related activities, institutions and personnel. Washington’s ‘maximum pressure’ strategy is one of the important ways to contain Tehran’s nuclear ambitions and destabilising regional operations and provide the regime with a strong negative incentive to come back to the negotiating table.