Iran could be bluffing in the strait of Hormuz

Tehran's vow to stop US warships crossing international waters in the strait of Hormuz, following 10 days of provocative Iranian missile tests and naval exercises, is seen in Washington as evidence that ramped-up western sanctions are finally beginning to bite.

While this conclusion may be correct, there is always the danger of a disastrous miscalculation. Iran could be merely sabre rattling, as American analysts suggest. But what if it is not?

Seen from Tehran, the most serious threat to the survival of the regime led by supreme leader Ayatollah Ali Khamenei comes from within, not without – a consideration not sufficiently understood in the west. The political establishment is riven by deep divisions, principally between economic reformers loyal to President Mahmoud Ahmadinejad, and clerical arch-conservatives backed by the Revolutionary Guards and a wealthy, corrupt merchant class that has grown fat on the 1979 revolution.

Khamenei appears to be trying to hold the line between the two factions. What worries him more than the movements of the USS John C Stennis aircraft carrier group in the Gulf, or even US and EU oil sanctions, is the thought that crucial parliamentary elections due in March could produce a permanent rupture within the Islamic Republic. Such a split could open the way to a second Iranian revolution.

Memories of the mass demonstrations that shook Tehran and other cities in 2009 after rigged presidential elections have not faded. The Green movement's leaders are dispersed, in jail or under house arrest. But their demands for transparent democracy, freedom of expression and an end to misrule by mullahs have not been forgotten. Millions of young Iranians have been watching the Arab spring unfold and they believe Iran's turn will come.

Khamenei is running scared. As Yasmin Alem noted in a recent commentary, the supreme leader views the coming election as a potential "security challenge". The minister of intelligence, Heydar Moslehi, says the polls will be the "most sensitive elections in the history of the Islamic Republic".

Alem continued: "The regime is now in a quandary. While it has traditionally boasted about high voter participation as the symbol of its legitimacy, Tehran is increasingly concerned that an election boycott or turmoil could adversely affect its standing. In the wake of the Arab uprisings the clerical regime is seeking to project an image of its power and popularity. If the election becomes a dismal affair, however, it will have the reverse effect."

There can be little doubt that new US sanctions penalising dealings with Iran's central bank, announced by Barack Obama last month, and a prospective EU ban on Iranian oil, are adding to the internal pressures – even if habitual Iranian customers such as Japan and Turkey succeed in obtaining waivers.

Food prices are soaring, dollars are being hoarded, and Iran's currency, the rial, has fallen in value by 40% in recent weeks. The prospect of sharp falls in oil export earnings – the oil industry accounts for 60% of Iran's economy – is a dire one. Khamenei and other leaders have indicated that such an outcome would amount to a casus belli.

And this is the point that should worry the west's sanctioneers, fixated by Iran's nuclear programme to the exclusion of other considerations. At the moment the regime's deep internal contradictions could be leading towards a revolutionary climax, the US and its allies are giving Khamenei a possible way out by allowing him to externalise the problem and claim that the Iranian nation is under attack from hostile foreign forces, rather than definitively changing from within.

This is the overlooked domestic backdrop to the strait of Hormuz shenanigans and other provocations, such as the alleged plot against the Saudi ambassador in Washington. Iran, for all its aggressive rhetoric over the past few years, has studiously avoided military confrontation. In fact, it has studiously eschewed an open conflict that it would probably lose, relying instead on time-consuming diplomacy and occasional publicity stunts. But with the regime's back to the wall at home, that may be changing.

"The latest warning by Iran that a US aircraft carrier that recently transited through the strait of Hormuz should not do so again is a sign to the west that should be well-observed. It tells us the regime in Tehran is ready for a fight," warned Vali Nasr of Tufts University. "It wasn't preordained that Iran would opt for battle. For much of the past year its leaders have debated how best to deal with Western pressure … [but] subsequent events seem to have settled the policy debate in Tehran. They included the accusations by the US in the Washington plot; a UN report critical of Iran's record on human rights; the IAEA report articulating 'serious concerns' about a possible Iranian nuclear-weapons programme; and the ensuing fresh sanctions."

In other words, confident statements by the White House and state department that Iran is buckling under sanctions pressure appear to blithely ignore the possibility that the regime is being pushed into a corner from which it will come out punching, not negotiating. One result may be an acceleration of its nuclear activities – the opposite of what Obama wants. And then there is the unpredictable Gulf tinderbox. Fearing fatal insurrection at home and with their oil exports blocked, Khamenei and the mullahs, egged on by trigger-happy Revolutionary Guards, may choose to export chaos instead.