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The revolution against the monarchy (led by the pro-American Shah) in 1979, was quickly followed in 1980 with an Iraqi invasion (to seize oil fields in a largely Arab speaking province on the Iraqi border). Iran, with three times the population of Iraq, and despite the chaos of the revolution, pushed the Iraqis back. But after nine years of bloody fighting, Iran failed to conquer Iraq and depose Saddam Hussein. One casualty of the war was Iranian democracy. The senior religious leaders grabbed more control than was expected. This control was written into the new constitution and is exercised via The Guardians Council. This organization can veto any new law the elected legislature passes. The council consists of twelve clerics who serve six-year terms. Six of the council members are theologians appointed by the supreme leader (a senior religious leader) and six are judges nominated by the judiciary and approved by the Majlis (legislature). Working closely with the Guardians Council is the unelected "supreme leader." who, in addition to appointing six members of the Guardians Council members, appoints the head of the courts, the commanders of all the armed forces, the Friday prayer leaders and the heads of radio and TV systems. He also confirms the election of the president. In other words, anything, or anyone, the supreme leader does not like, cannot play a role in running the country.

The senior religious leaders are conservative Islamic Shia clerics. While not as strict as the conservative Sunni (Wahabi) clerics in Saudi Arabia, the "religious police" (male volunteers who enforce "modesty" with beatings, berating and arrest) are still common, and much resented by the majority of Iranians. In the last decade, national elections have shown that the Islamic conservatives only have the support of about twenty percent of the country. But because the Islamic conservatives control the Guardians Council, they have blocked any attempts at reform. The Islamic conservatives still call for a worldwide Islamic state and still celebrate their seizure, and occupation, of the U.S. embassy in Iran in 1979. This incident, in violation of the international law and practice, saw the embassy staff held prisoner for 444 days. It has poisoned American relations with Iran ever since. The Iranian population, still remembering the suffering of the 1979 revolution and the war with Iraq, are reluctant to try violent revolution again. But this is changing, slowly.

Relations with Afghanistan are damaged by very active drug smuggling from Afghanistan into Iran. Shootouts between Iranian forces and heavily armed smugglers are common. Iran has been seizing some 200 tons of drugs each year. There are also religious disputes, as the mostly Sunni Afghans persecute the Shia (same sect as Iranians) in western Afghanistan. Iran has been supplying weapons, money and advice to Shia tribes in Afghanistan. The conflict between Iran and Afghanistan has increased when the Taliban captured the Shia populated areas in western Afghanistan in 1996. Iran has stationed substantial forces on it's eastern border, at one point several hundred thousand troops. But logistical problems prevented keeping that large a force out there on a regular basis. But the Iranian troops that are on the Afghan border often cross the frontier to fight smugglers or Afghan troops. Tensions have decreased since the Taliban were forced out of power in 2001.