The Islamic Republic is now a regional power, thanks to three decades of social, economic, diplomatic, and military advancements. But not all of these successes are clear-cut. Many of Iran's achievements actually created new challenges or even led to political and diplomatic failures.

Society

One of Iran's greatest successes is the dramatic expansion of its middle class. Many professionals, white collar workers, and skilled laborers from modest backgrounds entered the middle class during the 1980-1988 war with Iraq, when the country faced growing international isolation. The distribution of oil wealth helped spur along this process.

The state's health, education and welfare initiatives also played a major role in expanding the middle class. Iran dramatically lowered its fertility rate with a progressive family planning program. The rate dropped from 6.6 births per woman in 1977 to 2 births per woman in 2000. The government expanded higher education and significantly increased literacy rates, especially among women. In 1998, two decades after the Islamic Revolution, Iran was cited as one of the top ten countries worldwide that had closed the gender gap in education.

Economy

Iran has also achieved some economic success over the last three decades. The Islamic Republic managed to pay off its various loans to American banks within two years of the 1979 revolution. The government used oil revenues to build highways, railways, factories, power plants, airports and other infrastructure.

In 2010, President Mahmoud Ahmadinejad launched a phased reform plan designed to cut back government subsidies of basic commodities dating back to the 1980s. It was the most extensive economic reform since the 2007 gas rationing plan. Subsidies have been a constant drain on the economy-accounting for about 25 percent of Iran's gross domestic product (GDP). The government reportedly reformed 30 percent of subsidies before parliament suspended the second phase of reforms in November 2012.

Despite declines in oil exports and tightened international sanctions, Iran ranked 18th worldwide by GDP (purchasing power parity adjusted) in 2012.



Foreign Relations

The United States and its Western allies have isolated Iran economically and diplomatically. But this isolation has encouraged Tehran to pursue a pragmatic diplomatic strategy that has somewhat mitigated the impact of international sanctions.

Iran has built economic, trade and business relationships with non-Western powers such as China and Russia. Tehran has also sought ties with regional powers such as Brazil and Nigeria, and authoritarian states including North Korea, Syria and Venezuela. Iran has forged trade and financial links with Iraq, India, Malaysia, and even Thailand, to advance what it calls an "Eastern Policy." The Islamic Republic now considers itself a leading non-Western power. In 2012, Tehran hosted the Non-Aligned Movement Summit, viewing it as an indicator of successful foreign policy.

Military and Security

Iran has emerged as a formidable military power in the Gulf. Even some key Arab Gulf states prefer to accommodate Tehran rather than support policies that could risk a military confrontation. The Islamic Republic's regular military and non-conventional forces cannot match U.S. capabilities. But Iran has some deterrents, including a large stock of missiles and the ability to launch asymmetric attacks.