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In 1925, a young military officer, Reza Khan, led a coup that deposed the 131 year old Qajar dynasty and founded the Pahlavi dynasty. After being named shah, Reza Khan pursued relations with Germany, angering Britain and Russia, and prompting those powers to invade. British and Soviet troops left in 1946, but foreign influence only intensified with the advent of the Cold War. Nationalists, led by Mohammad Mossadeq, rose to power in 1951. But the CIA and British intelligence colluded to topple him two years later, restoring the exiled Pahlavi dynasty to power in the form of Reza Khan's son, Mohammad Reza Shah Pahlavi. The shah repressed Iran's Islamists and his restoration fostered anger among the general population. By 1979, this discontent boiled over into outright revolution, forcing the shah to flee. On February 1, 1979, Ayatollah Ruhollah Musavi Khomeini returned to Iran from exile in France - though most of his fourteen year absence was spent in the Shia holy city of Najaf, Iraq. He then proceeded to muscle aside the Communists and secular parties that had worked with the Islamists to overthrow the shah and assumed the levers of power thus ending Iran's monarchy.

Under Khomeini the Iranian religious and political landscapes were dramatically transformed, making Shia Islam an inseparable element of the country's political structure. Khomeini ushered in a new form of government anchored by the concept of rule of the Islamic jurist. In his 1970 book, Hokumat-e Islami: Velayat-e faqih, Khomeini argued that government should be run in accordance to sharia, or Islamic law. For that to happen, an Islamic jurist—or faqih—must oversee the country's political structure. Constitutional changes following the revolution established a system of government based on three pillars of power—the executive, judicial, and legislative branches. But sitting atop the Islamic Republic's power structure was Khomeini.

The stated aim of the Iranian Revolution was to upend the reign of the shah and restore Islamic ideology to Iranian society. Khomeini did this by turning Shia Islam on its head. In a series of lectures delivered from exile in the early 1970s, Khomeini began arguing that in the absence of the Imam Mahdi—also known as the Hidden Imam or the twelfth imam of the Shia faith—that governments should be run by those with a higher rank among clergies. It was a revolutionary concept in Shia clerical thought and as such, was rejected by the majority of senior ayatollahs in Iran. But the concept found an audience among young revolutionaries in Qom, Iran's religious center, and formed the theoretical backbone of the movement that would later demand the overthrow of the Pahlavi regime. By the end of the decade Khomeini had succeeded in instituting his ideas by the sheer force of his will as an uncompromising revolutionary.

Today, Khomeini's teachings and precedents have evolved into a system of government that combines elements of Islamic theocracy with bits of democracy. In theory, the Iranian power structure appears akin to Western frameworks, with clear demarcations of power. But in practice the Iranian system is dominated by a small group of religious clerics and revolutionary forefathers. While Iran's massive clerical establishment may hold religious sway, their political influence is contained to a few and of the over five thousand ayatollahs in Iran only about eighty participate in government.

The government can be broken down into the following structure.
  • Supreme Leader. At the top of Iran's political and religious pecking order is the supreme leader. The leader oversees the military; appoints military and judicial leaders; supervises the constitution; and sets general state policy. The supreme leader also appoints senior commanders of the Revolutionary Guards. Ayatollah Ali Khamenei, Iran's second supreme leader, assumed office in June 1989 after eight years as Iran's president.
  • Assembly of Experts. An eighty-six-member body of senior clergymen, the assembly elects the supreme leader. Appointed by popular vote, the assembly is charged with reviewing the leader's work; it can, in principle, dismiss the leader, but never has.
  • President. Officially sitting atop the executive branch, the president is in practice second to the supreme leader. Nationally elected to four-year terms, Iran's president is constitutional mandated to be a Shiite Muslim. The power of the president has varied historically and the office's fortunes are closely tied to the political whims of the supreme leader.
  • Majlis, or parliament. A 290-member body of deputies representing all thirty of Iran's provinces, the Majlis introduces and passes legislation. Members are elected to four-year terms. Five seats are reserved for religious minorities. The approval of candidates, however, requires the blessing of the Council of Guardians, the most influential body in Iran. The clerical makeup of the Majlis has also changed in the last two decades. In the early 1980s, 51 percent of the Majlis were clerics. By 2002 they made up just 12 percent of the body.
  • Council of Guardians. Twelve members—six theologians appointed by the supreme leader, and six jurists approved by the Majlis—that review legislation and election candidates for consistency with Islamic law.
  • Expediency Council. Created by constitutional revision in 1988, the administrative body of clerics, scholars, and intellectuals was formed to resolve disputes between the Majlis and the Council of Guardians.
  • Supreme Court. The highest judicial body in Iran, its members are chosen by the head of the judiciary, who is appointed by the supreme leader. With thirty-three branches—all but two in Tehran—the court sets judicial precedent and serves as a court of appeals.
  • Special Clerical Court. Overseen by the supreme leader, the clerical court is used for trying members of the clergy for crimes, including "ideological offenses."

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