From the largest uprising in modern Iranian history in January to more than a month of relentless American and Israeli strikes, the past three months have put the Iranian regime under extraordinary pressure. But even as many top leaders were assassinated, the regime did not fall, and there’s an important, underdiscussed reason why: oil.

The regime in Iran earned $43 billion in revenue from crude oil exports and sales in 2024 and billions more from petrochemicals and other adjacent industries. Up to one-third of the state budget comes from oil revenue (significantly down from previous years), and over half of Iran’s total oil proceeds are allocated to its armed forces. Billions of dollars per year more fund regional terror groups including Hamas, Hezbollah, and the Houthis, and these groups also work in conjunction with Iran’s armed forces to smuggle oil to international buyers so they can fund weapons and terrorist activity with the proceeds.

A clean energy transition alone would not solve the Middle East. But even if oil didn’t create the Islamic Republic, it has repeatedly enabled the regime to project power globally, fund terror proxies across the region, and brutally repress its own people. That is why moving away from oil isn’t just a climate solution, or a solution for today’s volatile gas prices. It’s also a way to cut off the easy money that has made the Iranian regime so dangerous and durable.

Social scientists often reference the “resource curse,” describing a pattern in which countries rich in highly lucrative, easily captured resources often wind up with weaker institutions, more corruption, more political repression, and greater economic volatility. The resource curse has been a hot debate among social scientists for decades, but according to a 2015 literature review, the resource most aligned with the theory is petroleum. Evidence across many studies shows that petroleum wealth tends to make authoritarian regimes more durable, heighten corruption, and in some cases help trigger violent conflict. The review found these regimes may use this revenue to lower taxes and evade accountability, while other times, regimes invest in repression, foreign influence, and armed forces with the aim of preventing an uprising.

If one were to argue in favor of the resource curse theory, the regime in Iran might well be Exhibit A. When the Islamic Republic took power in 1979, it inherited a state shaped by oil rents. Though Ayatollah Ruhollah Khomeini enjoyed broad public support very early in his tenure, those oil rents meant he did not need to build and maintain legitimacy through broad taxation and public buy-in. He could use that revenue in the early years of his rule to stay in power and impose compulsory hijab, roll back women’s rights, purge universities and schools of opposing voices, censor media, systematically persecute Bahá’ís, and constrain many other religious and political minorities, while empowering revolutionary enforcers to strictly enforce those draconian policies. By 1985, the regime had silenced, imprisoned, or exiled most pre-revolutionary political forces. Without oil revenues providing the regime with easy external cash flow, it is hard to imagine Khomeini could have transformed Iran into a strict Shi’ite theocracy as quickly and forcefully as he did.

In the decades after Ayatollah Ali Khamenei took over, the resource curse continued as the regime made countless destructive decisions yet continued to project power. With the help of Pakistan, China, and Russia, the Islamic Republic revived Iran’s nuclear program in the 1980s, and kept much of it hidden from international inspectors until dissidents exposed major facilities in 2002. Over the next decade, that project became serious enough that the United States and Europe decided it had to be contained through the 2015 nuclear deal. Oil was what made that kind of long, expensive gamble possible. Bushehr, Iran’s only civilian reactor, took nearly four decades to complete, cost almost $11 billion, and was built despite Iran’s limited uranium resources and the fact that the reactor sits at the intersection of three tectonic plates. The construction of much of the rest of their nuclear program occurs underground and is meant to be undetected by foreign intelligence, so those investments must be massive as well. A regime that had to fund these sorts of projects transparently through taxes might never have sustained it. An oil-funded one could — and by 2015, it had built enough leverage to get a deal to re-enter western markets without needing to halt its ballistic missile program, terrorism financing, or flagrant human rights violations at home.

Unsurprisingly, the nuclear deal did not lead Iran to peace and prosperity. Upon the deal’s signing, the regime gained access to a little over $50 billion in frozen overseas assets, and sanctions relief helped its oil and natural gas export revenue surge from $26.9 billion in FY 2015-2016 to $63.7 billion in FY 2017-2018. The regime quickly put that money to use. In 2017, lawmakers raised military spending from 2% to 5% of the annual budget, including more funding for the long-range missile program. That same year, Iran conducted a 2,000-km-range missile test — just a hair above the distance from Iran to Israel. And the U.S. Treasury later found that in 2017, Iran’s National Development Fund and Central Bank had sent $500 million to the IRGC-Quds Force, the branch responsible for training, funding, and equipping Hamas, Hezbollah, and the Houthis among others. In May 2018, the Treasury also found that Iran’s central bank governor covertly moved millions more directly to Hezbollah. By 2023, the results of that spending were on full display: Hamas’s October 7 attack, Hezbollah’s relentless rocket fire from Lebanon, Houthi strikes from Yemen and attacks on Red Sea shipping, and then Iran’s own barrages of hundreds of drones and ballistic missiles. 

Nor did ordinary Iranians see the promised benefits. Instead, the post-deal years brought repeated nationwide protests to end the Islamic Republic — the Dey protests and Girls of Enghelab protests in 2017-2018, Bloody November in 2019, the oil worker strikes and the Uprising of the Thirsty in 2021, the protests of the death of Mahsa Amini in 2022, and the massive uprising this past January to name a few — each met with arrests, internet blackouts, and increasingly lethal crackdowns, culminating in roughly 1,500 killings in 2019 and credible estimates of more than 30,000 casualties this January. Nearly every year since the deal, brave Iranians have risen against their oil-funded government’s social oppression and economic delinquency. And every time, that oil-rich regime stood strong, and the Iranian people paid a devastating price.

This is what global oil dependence is enabling. It is not just enabling price spikes at the pump or higher utility bills during a war. It is enabling a regime to imprison women of any faith for showing their hair, gun down protesters by the thousands, bankroll terror proxies across the region, repeatedly drag millions of innocent people into conflict, and maintain enough control over global energy markets to keep the rest of the world from stopping them. It is as horrific a case study on the resource curse as one could possibly imagine.

Critics of this resource curse framing sometimes argue that petrostates are prone to conflict due to Western imperialism, rather than their own actions. In Iran, it’s true that the west shaped their early oil industry, particularly in 1953 when the United States and United Kingdom helped orchestrate a coup to remove Iran’s democratically elected prime minister who wanted to nationalize the country’s oil industry instead of leaving it in British control. But as ill-advised as that event was, if imperialism alone explained Iran’s path, we would expect much more similar anti-West outcomes across oil-rich countries shaped by Western intervention. Countries like Nigeria, Angola, Gabon, and Equatorial Guinea all experienced colonization, Western fossil fuel domination, and many of the institutional woes associated with the resource curse. Yet their leaders are not enriching uranium in underground bunkers while chanting “Death to America.” A repressive Islamic theocracy is not the only response to a coup from 73 years ago, and the resource curse literature offers far more substance on how this regime uses oil to maintain power without denying the regime’s ideology and agency that shapes its decisions.

A transition away from oil will not democratize Iran overnight, erase the Islamic Republic’s ideology, or solve every conflict in the Middle East. But unlike the current war which has done everything but stabilize the region and liberate Iranians, a clean energy economy would peacefully cut off the Islamic Republic’s single greatest source of easy money and the leverage that comes with it. The less the world depends on oil, the less power regimes like this one will have to uphold repression at home, finance terror abroad, and economically leverage the rest of the world into turning a blind eye to their brutality.

© The Times of Israel (Blogs)