By his election, the U.S. was increasingly bogged down in Iraq and Afghanistan, and Israel was contending with the Second Palestinian Intifada. Both were at the nadir of their popularity in the Arab and Muslim world, and Ahmadinejad positioned himself as the leader of Islamic resistance to American and Zionist imperialism. Although he was not in charge of directing Iran’s foreign and military policy, his presidency synched up with Iran taking on a more assertive anti-Western role in the region and building its influence as a counterweight to the U.S. Iran was ascendant in the region during Ahmadinejad’s first term, buoyed by the IRGC-Quds Force’s support to Hezbollah during the 2006 conflict with Israel and to various Iraqi militias that helped bleed the U.S. military presence in Iraq. Iran was increasingly able to dictate events and paralyze politics in neighboring countries, particularly Lebanon and Iraq. Iran and its “resistance axis’” prestige grew among the Muslim public during this time, as Iran was perceived as the only force willing to confront the U.S. and Israel.

Ahmadinejad had been extremely critical of the Khatami administration’s negotiations over Iran’s nuclear program. With the urgency fading due to the U.S.’s increasing entanglement in the region, Khamenei empowered Ahmadinejad to go on the offensive. While he had acquiesced to negotiations under intensifying pressure, Khamenei now freely railed against the process, insisting Iran was not seeking nuclear weapons and that the West, which feared Iran’s scientific progress would help it achieve regional leadership, was using negotiations to dominate and weaken Iran. Khamenei called on Ahmadinejad and the Iranian nation to resist compromising over Iran’s nuclear rights, and Iran subsequently adopted a more defiant tone and began accelerating its nuclear program accordingly.

Following Khatami’s suspension of enrichment activities, the E3 drafted a framework agreement for a permanent resolution to the Iranian nuclear impasse. The E3 presented their draft shortly after Ahmadinejad’s inauguration, and his government promptly rejected it, labeling the proposal an insult. Hassan Rouhani, a moderate cleric head of the Supreme National Security Council (SNSC) and Iran’s chief nuclear negotiator, promptly resigned, recognizing that there would be no diplomacy path under Ahmadinejad. He was replaced by Ali Larijani, a hardline figure who was influential within Khamenei’s inner circle.

Ahmadinejad introduced his incendiary approach to nuclear diplomacy on the world stage just a month into his presidency, making his first address to the U.N. General Assembly in September 2005. While his rhetoric was more fiery than Khamenei's, his ideological and policy commitments accurately represented the Supreme Leader’s will. In his address, Ahmadinejad insisted that Iran did not seek “inhuman” nuclear or Weapons of Mass Destruction (WMD) capabilities and that reactionary global forces were seeking to deprive Iran of peaceful nuclear technology based on false allegations. He railed against the hypocrisy of Israel possessing nuclear weapons. At the same time, international powers sought to restrict Iranian nuclear progress, warning that allowing only powerful nations to monopolize nuclear resources would create a global nuclear apartheid, widening the gap between developed and developing nations such as Iran. He then threatened, "if some try to impose their will on the Iranian people by resorting to a language of force and threat with Iran, we will reconsider our entire approach to the nuclear issue.”

Ahmadinejad followed up his inaugural UNGA address by denouncing EU representatives as U.S. lackeys in a meeting on the sidelines, ruffling feathers with his blunt approach to diplomacy. A month later, he courted further international opprobrium while addressing a Tehran student conference titled “The World Without Zionism” by calling for Israel’s eradication. There, he made remarks that “Anybody who recognizes Israel will burn in the fire of the Islamic nation's fury, [while] any [Islamic leader] who recognizes the Zionist regime means he is acknowledging the surrender and defeat of the Islamic world. … As the Imam said, Israel must be wiped off the map." In December 2005, Ahmadinejad accused Zionist forces of instrumentalizing the Holocaust, which he referred to as a “myth,” as a cudgel to obtain unqualified support by Western governments for the existence and conduct of the state of Israel.

With the international community increasingly perturbed by Ahmadinejad’s threats and Holocaust denialism, he announced in early 2006 that Iran had begun enriching uranium at Natanz and had now mastered the nuclear fuel cycle indigenously and could enrich at an industrial scale. The U.N. Security Council subsequently demanded that Iran ceased all enrichment and reprocessing activities in July 2006 and, after it failed to comply, passed six resolutions increasingly sanctioning Iran’s nuclear and ballistic missile program and imposing an international arms embargo between December 2006 and June 2011. Khamenei responded defiantly to the international calls for Iran to comply with its nuclear obligations, framing Iran’s nuclear pursuit as part of its revolutionary “resistance” paradigm. “They know that we are not after nuclear weapons. They are unhappy about scientific progress in an Islamic state, a country that has not surrendered to the policies of the United States, a country that has shown it is not afraid of America. They don’t want us to have the most important technology in the world, which is nuclear technology. But we have made our decision and are determined to continue the path of struggle that we opted for twenty-seven years ago,” warned Khamenei in August 2006. Khamenei and Ahmadinejad responded to the imposition of multilateral sanctions by escalating Iran’s illicit nuclear activities, enriching and stockpiling uranium to 20 percent purity by 2008. Like Rouhani before him, chief negotiator Ali Larijani recognized that nuclear diplomacy was futile and resigned in October 2007. He was replaced with the even more radical figure Saeed Jalili, who shared Ahmadinejad’s and Khamenei’s complete resistance to compromising over Iran’s nuclear pursuits.

The imposition of increasingly robust and multilateral sanctions during Ahmadinejad’s tenure further enhanced the economic clout of the IRGC at the expense of ordinary Iranians. While the sanctions caused hardships for legitimate businesses, the IRGC established smuggling networks to circumvent them and sell oil and gas to neighboring countries. As the IRGC’s fortunes rose, Ahmadinejad’s populist economic promises largely fell by the wayside and were exposed as hollow. Rather than systemically increase social spending, Ahmadinejad sought to coopt his poor and working-class base through crude cash handouts and subsidies on staple goods. Although oil revenues increased dramatically in the first years of his presidency before sanctions kicked in, social expenditures on healthcare, education, and housing remained stagnant.

The direct infusion of cash stimulus to the poor created inflationary pressures, which only worsened as sanctions took effect. Also, a housing bubble developed. This benefitted the rich, who were more likely to own homes and shut poor and middle-class Iranians out of the housing market, widening the gap between rich and poor. Living costs outstripped wage growth, and many working Iranians fell below the poverty line while unemployment rose steadily. Further exacerbating matters was Ahmadinejad’s efforts to resurrect Rafsanjani’s privatization program. Para-statal institutions such as the IRGC and bonyads dominated the privatization landscape, ensuring Iran’s resources were transferred to the hands of militant forces aligned with Khamenei. Ahmadinejad had sought to mitigate against this outcome by allocating 40 percent of the assets available for privatization for sale to collectives of qualifying low-income individuals at subsidized rates, a program referred to as “justice shares.” However, the IRGC, bonyads, and other business elites could quickly snap up the bulk of these shares as the low-income recipients were predictably willing to turn a quick profit and sell to well-heeled entities. The factional competition for economic resources was settled during this period, and the IRGC came out as the biggest winner, while the poor and working-class Iranians who had enthusiastically supported Ahmadinejad continued to get squeezed.

The economic and political rise of the IRGC and the failure to deliver material benefits to the working class set the backdrop for the 2009 Iranian presidential election. Rising tensions with the U.S. were another significant factor shaping the election and its aftermath. Throughout the second term of the Bush Administration, speculation persisted that the U.S. sought a military confrontation with Iran as the next major plank of its freedom agenda. Iran became increasingly assertive, attacking U.S. forces in Iraq through its proxies. Iranian-manufactured explosives proliferated as the IRGC-Quds Force entrenched its presence, training, equipping, and directing the battlefield activities of Shi’a militias.

The struggles of the U.S. military in Iraq and Afghanistan dampened public appetite for further military action, but the U.S. Senate gave President Bush tacit approval for potential military action with Iran in the form of an amendment to the 2008 National Defense Authorization Act authored by Sens. John Kyl (R-AZ) and Joseph Lieberman (I-CT). The amendment stated that through the IRGC-Quds Force, Iran was turning “Shia militia extremists in Iraq into a Hezbollah-like force that could serve [Iranian] interests.” To preserve American national security interests, “it should be the policy (of the U.S. government) to combat, contain, and roll back the violent activities and destabilizing influence” of Iran and its proxies in Iraq. The most significant consequence of the amendment was the designation of the IRGC as a terrorist organization, which gave the U.S. Department of the Treasury authority to target the IRGC’s financial holdings outside of Iran.

Khamenei’s suspicions of the U.S. remained heightened during this period, and he used the specter of American hostility to the Islamic Republic to blame Iran’s internal problems on foreign interference. Khamenei saw pro-democracy activism and journalism as part of a U.S.-backed plot to usher in a soft revolution similar to those that had broken out in authoritarian former Soviet republics during the George W. Bush administration. In the months leading up to the 2009 election, Iranian authorities arrested numerous academics and journalists suspected of stoking anti-regime sentiment. Khamenei similarly suspected U.S. intelligence services of backing an uptick in insurgent activity and terrorism by Sunni and Kurdish ethnic separatist movements, believing the U.S. was pursuing a strategy similar to its support of the Northern Alliance against the Taliban in Afghanistan.

In response to the growing paranoia over U.S. interference in Iran, the IRGC chief Mohammad Ali Jafari, who had replaced Yahya Rahim Safavi in 2007, initiated an overhaul of the IRGC’s strategic defense posture, giving the IRGC and basij a more prominent role in internal security. Jafari established separate, largely autonomous commands for each province in Iran, enabling each to respond to internal security challenges without overreliance on centralized planning. The basij were brought under Jafari’s direct command, and their mission was transformed from a primarily military focus to one concentrated on domestic security and political and ideological activism. Battalions of basij were dispatched to each province to act as the shock troops and enforcers of the IRGC’s efforts to maintain domestic stability and ensure the predominance of Khomeinist ideology.

The transition in U.S. administrations from President Bush to Obama, who eschewed the former’s militarism and unilateralism in favor of a diplomacy-centric approach, did little to assuage Khamenei. President Obama’s first outreach to the Islamic Republic came in the form of a Nowruz greeting in March 2009, in which he called for diplomatic engagement grounded in honesty and mutual respect to resolve all outstanding issues between the two countries. Khamenei’s response was instantly dismissive, insisting that change could only be achieved when the U.S. ceased its inherent hostility to the Islamic Republic. In an address to followers in Mashhad, Khamenei said, "They chant the slogan of change but no change is seen in practice. … As long as the U.S. government continues the same policies and directions of the previous 30 years, we will be the same nation of the past 30 years. … He [Obama] insulted the Islamic Republic of Iran from the first day. … Have you released Iranian assets? Have you lifted oppressive sanctions? Have you given up mudslinging and making accusations against the great Iranian nation and its officials? Have you given up your unconditional support for the Zionist regime?”

Despite Khamenei’s clenched fist, Iranians sympathetic to the reformist movement were buoyed by Obama’s ascension and hopeful that his promises for a more diplomatic and conciliatory approach to foreign policy could reverse the enmity that had taken root in U.S.-Iranian relations. Horrified by the increasingly confrontational and repressive trajectory Iran had taken under Ahmadinejad, the reformist movement saw the need to abandon the disunity and disarray that enabled Ahmadinejad's rise and the Iranian neoconservative current.