This week, Iran implemented an overhaul of its national subsidy system, in effect cutting billions of dollars worth of subsidies for daily consumer use, especially fuel and electricity. Though cushioned by transfer payments to low-income households, it is akin to a major austerity move. While the economic impact is clear, many outsiders remain baffled how a regime ridden with internal factionalism (and widespread unpopularity) can manage such radical reforms. The past few weeks have seen rumors of a looming impeachment trial of President Mahmoud Ahmadinejad, followed by his humiliating dismissal of Foreign Minister Mottaki. These are hardly the signs of calm leadership steering through an economic crisis.

But narratives grabbed from the headlines can be misleading, and longer-term developments in Tehran point in a surprising direction. Today, the Islamic Republic is set to become more politically stable, and may even offer the chance for improved US-Iranian relations under what Secretary of State Hillary Clinton has called an emerging "military dictatorship."

Although this development was well under way at from at least the mid-1990s, the 2009 post-election fiasco was the ultimate coming-out party of the security apparatus, notably the Revolutionary Guards. Observers have termed it a ‘praetorian takeover,' borrowing the name from ancient Rome's Praetorian Guard, the feared imperial bodyguard of the Caesar who used their proximity to power to eventually become kingmakers themselves.

In the early 1960s, political scientist David Rapoport pioneered the study of praetorianism, examining the core features of newly militarized regimes, mainly in Latin America and the Middle East. He found that praetorian states grew weak for three reasons. First, a state with poisoned civil-military relations leads to a breakdown of mutual trust, making the country prone to military intervention. Second, the threat of martial takeover ignites a cycle of corruption, as the military extracts more and more "bribes" to remain in the barracks. And third, this culture of corruption gradually diminishes war-fighting capabilities, in turn alienating members of the military as well as the general public, who reject military rule as illegitimate.

Looking at Iran as a praetorian state, however, yields a very different conclusion. Praetorian Iran appears to have overcome these three obstacles, at least for the foreseeable future. On civil-military relations, the Islamic Republic's unique hybrid system of elected republican elements, combined with appointed theocratic leaders, allowed for a triangular relationship; with an alliance of the clerical elite and the Revolutionary Guards emerging to counter the elected reformists-figures such as reformist President Mohammad Khatami, and presidential candidate and Green Movement figure Mir-Hossein Mousavi. This clergy-military alliance still remains in the aftermath of the June 2009 elections: the clergy needs the muscle of the Guards, and the praetorians need the legitimacy that comes with clerical rule. But the balance of power is shifting, and the Guards are becoming the stronger partner.

In terms of cycles of bribery, the Revolutionary Guards in Iran have actually become an independent economic player in their own right, distinguishing themselves from traditional praetorian entities. The Guards run a vast industrial complex, as well as illicit smuggling cartels, and thus do not need to please any other interest group.

Finally, while the Guards have moved into other arenas as large commercial players, they have also raised their level of professionalism as a military force in charge of domestic security, asymmetric warfare, the country's sophisticated ballistic missile arsenal, and a presumed nuclear weapons program. While praetorian militaries eventually lose the capacity to effectively fight interstate wars, Iran only seems to be getting stronger in this arena.

None of this suggests, however, that a praetorian takeover is complete. Having relied on the Guards to crush the reformist threat, Supreme Leader Ali Khamenei is still an independent force within Iran. He played a role, for example, in torpedoing the October 2009 agreement for a nuclear fuel swap that Ahmadinejad had championed. The ultimate test of the Guards' power, then, will come after Khamenei's death, when the praetorians will be in place to crown the clerical Caesar of their choosing.

Meanwhile, the economy remains a potential Achilles' heel for the emerging military establishment. In the past, the Guards have benefited from Iran's international isolation as the gatekeepers to an increasingly closed economy, but the recent wave of sanctions also has the short-term effect of triggering factional tensions both within the Guards corps, as well as with other regime figures. The latest sanctions, particularly by the EU and the United States, have undermined economic stability by further reducing foreign investment, limiting access to the global banking system, and raising transaction costs for Iranian businesses.

Together, these pressures have made the recent subsidy reforms a top priority, as the state needs to adjust expenditures to a declining revenue base. But politically, the subsidy reforms on their own are not necessarily bad for the Guards. The replacement of broad subsidies with targeted cash transfers is another tool to control the economy and channel wealth to preferred constituencies. Nonetheless, Iran's praetorians ultimately cannot afford wholesale economic failure, and the subsidy reforms may pose a major challenge on their road to consolidating power.

So what does this all mean for America? Unfortunately, many in the U.S. foreign policy establishment continue to bank their hopes on the victory of the reformist opposition - an unlikely prospect in the near term. Despite the tragic repression of pro-democracy groups, the militarization of Iran may provide an opening for the United States. After all, internal fights in Iran tend to radicalize the regime, and the more stable the country is, the easier it will be to deal with Tehran.

The Revolutionary Guards may achieve what has until now remained an elusive feat in Iran: a monopoly of political power. A strong, consolidated praetorian state may become a more predictable actor. It will no longer feel the need to pander to extreme anti-American ideology to placate domestic factions and it could be more responsive to engagement or coercive initiatives. While this would come at the expense of human rights and freedom inside Iran, it may portend a better future for Iran's relations with the international community.

Elliot Hen-Tov is a doctoral candidate at Princeton University's Department of Near Eastern Studies and a Truman National Security Fellow. Nathan Gonzalez is the author of ‘Engaging Iran' (Praeger, 2007) and a Truman National Security Fellow. For more on Iran's post-praetorianism, see "The Militarization of Post-Khomeini Iran: Praetorianism 2.0." The Washington Quarterly, Winter 2011