Explained: What is next for Iran’s battered regime after devastating war

Dubai (AP): The bombing has quieted in Iran's 12-day conflict with Israel. Now its battered theocracy and 86-year-old Supreme Leader Ayatollah Ali Khamenei must regroup and rebuild in a changed landscape.

Israeli airstrikes decimated the upper ranks of Iran's powerful Revolutionary Guard and depleted its arsenal of ballistic missiles. Israeli missiles and American bunker buster bombs damaged the nuclear programme — though how much remains disputed. Khamenei went into deep isolation in an undisclosed location, appearing only twice in videos as the Israelis had free rein over the country's skies.

Iran's self-described "Axis of Resistance," a group of allied countries and militias in the Mideast, has been mauled by the Israelis since Hamas' Oct 7, 2023, attack. Foreign support Tehran may have expected from China and Russia never materialised. At home, old problems remain, particularly an economy wrecked by international sanctions, corruption and mismanagement.

"Iran's leadership has been dealt a heavy blow and will be conscious of preserving the ceasefire, which gives the regime breathing room and allows space to focus on internal security and reconstruction," the Eurasia Group said in an analysis Wednesday.

Shoring up loyalty

One thing Israel's campaign showed was how much its intelligence agencies have infiltrated Iran — particularly its swift pinpointing of military and Guard commanders and top nuclear scientists for strikes.

The No. 1 task for Khamenei may be to root out any suspected disloyalty in the ranks.

"There must be some sort of purge. But who will implement it? That is the question," said Hamidreza Azizi, a visiting fellow at the German Institute for International and Security Affairs.

"This level of distrust that apparently exists now is going to paralyse any effective planning or security overhaul," he said.

In that atmosphere, rebuilding Iran's military, particularly its Revolutionary Guard, will be a challenge. But the forces have a deep bench of officers. One top survivor of the war, Gen Esmail Qaani, in charge of the Guard's expeditionary Quds Force, was seen in videos of a pro-government demonstration in Tehran on Tuesday.

On the civilian side, Foreign Minister Abbas Araghchi found himself empowered to the level of almost a de facto prime minister, publishing announcements on even the ceasefire while others in Tehran remained silent.

Khamenei also has to rethink the security policy he wove together over the past two decades. The "Axis of Resistance" alliances allowed Iran to project its power across the Mideast but also was seen as a defensive buffer, intended to keep conflict away from Iranian borders. That buffer has now been shown to be a failure.

Race for a bomb?

After Israel's campaign exposed Iran's vulnerabilities, Khamenei might conclude that his country can only protect itself by turning its nuclear capability into an actual bomb, as North Korea did.

Iran has always said its nuclear programme is peaceful. But it is the only non-nuclear armed state to have enriched uranium to 60 per cent, a short step from weapons-grade.

Many observers believe Khamenei opposed taking that step to a weapon to avoid a war, Azizi said.

But now voices within the system demanding a bomb are likely growing, he said. "We might have already passed that threshold for Khamenei's viewpoint to change."

Still, any drive for a nuclear weapon would be a major gamble. The extent of damage from the US and Israeli barrages remains unclear, but Iran certainly needs to rebuild its nuclear facilities and centrifuge infrastructure, whether that takes months or years.

And it would have to do all that in extreme secrecy, concealed from Israeli and US intelligence. Were Israel to catch wind, it could resume strikes.

Khamenei could also take the opposite path, resuming talks with the United States in hopes of winning sanctions relief.

US Mideast envoy Steve Witkoff, appearing Tuesday night on Fox News' "The Ingraham Angle," called the chance for future negotiations "promising."

"We're already talking to each other," he said. "We are hopeful we can have a long-term peace agreement that resurrects Iran."

Challenges at home

Many also fear an intensified crackdown on dissent, as a leadership battered by war regroups amid mounting problems at home. Iran's frail economy has been wrecked by international sanctions, corruption and years of mismanagement.

For months, the ailing power grid has been plagued by hourslong, rolling blackouts. The flight of much of Tehran's population during the war temporarily eased the strain. But as they return, even longer blackouts are likely to come roaring back during the worst of the summer months, disrupting everything from bakeries to factories.

The war also shut down Tehran's stock market and currency exchange shops, pausing a collapse of Iran's riyal currency.

Back in 2015 when Iran reached its nuclear deal with world powers, the rial traded at 32,000 to USD1. Today, it is near 1 million rials to the dollar. Once businesses reopen in force, the plunge could resume.

The economy has sparked unrest in the past. After state-set gasoline prices rose in 2019, protests spread across some 100 cities and towns, with gas stations and banks burned down. In the ensuing crackdown, at least 321 people were killed and thousands detained, according to Amnesty International.