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Celebrations' to mark the anniversary of Iran's Islamic revolution on Thursday began early this year as the state closed on dissidents last week, arresting hundreds including 47 Iranian journalists employed by foreign media.

One Revolutionary Guard commander suggested putting the journalists on trial as 'traitors to the nation', as students began receiving telephone threats and opposition websites vanished from the internet.

Dozens of roadblocks sprang up on highways into Tehran and thousands of Basij militia received orders to man pro-government demonstrations.

But even as the state moved to crush protest against the Islamic regime, the government continued to trumpet particularly secular and 'Western' achievements to prove its superiority over enemies at home and abroad.

Iran's pageant of technological advance has in the last few weeks included a satellite launch, missile trials, test-flying a new 'stealth' aircraft and the unveiling of a domestically produced electric car - all to show the world that sanctions have done nothing to dampen Iranian creativity.

The announcement earlier this week that Iran would begin producing of high-grade nuclear fuel - amid increasingly implausible claims by the head of the country's Atomic Energy Authority that a deal to send uranium abroad for enrichment is still on the table - is yet another attempt to signal that Iran is unruffled by Western pressure.

With the United States struggling to overcome Chinese - and until recently, Russian - reluctance to stiffen UN sanctions, Iran's defiance may well continue.

In answer to the regime's bragging, opposition activists are expected to choose Thursday's anniversary for a show of strength. Arrests, torture and hangings have done little to quell the storm of opposition that erupted after disputed elections last June, surprising both the ruling Ayatollahs and the West.

What initially seemed to the regime to be a minor flurry of dissent, expected to die down in a few days, has crystallized into a genuine movement for change. The political rupture has crossed all strata of Iranian society, including senior clerics. Even if the opposition fails to change the face of the regime, Iran's ageing rulers will have no choice but to bow to the demands of a new generation (70 percent of Iranians are younger than 30) and enact reforms.

After 31 years the remaining figureheads of 1979, such as Khamenei and Rafsanjani, can no longer talk credibly of 'exporting the revolution' - and even discussing the position of the Supreme Leader is no longer taboo.

Yet instead of exporting ferment, the Ayatollahs now export policy. Iran has become a significant power with centers of control across the Middle East and beyond.

Thanks to the United States' war in Iraq, Iran has gained influence over the new state emerging on its western border. Iran practically dictates politics in Lebanon through its near-control of Hezbollah; and in Gaza through Hamas. Iranian influence in the Sudan and East Africa is strengthening, are ties with Ankara, Islamabad and Kabul.

Tehran continues to defy Western nuclear diplomacy, all the time sewing fear among its rivals in Cairo and Riyadh. Egypt and Saudi Arabia are terrified not so much by the prospect of an Iranian atom bomb as by the Ahmadinejad government's continual success in subverting Arab policy.

Iran may be a country under sanctions - but it is not isolated. Still, its impressive foreign policy coups cannot hide grave failures at home. The oil-rich state imports 40 percent of its gasoline, which it cannot refine at home, and spends a colossal $68 billion on imported raw materials and machinery each year.

Not only is the government dependant on foreign supplies; as its popular legitimacy declines, the regime is increasingly reliant on the elite Revolutionary Guard, which controls both national security and swathes of the economy. If, as expected, the UN enforces new sanctions in the coming weeks, it is these elites who will be targeted.