Iran’s Crippled Economy Sustains Protests After Religious Police Lit Flame

“The triangle of women, technology and poverty is the fuel behind the demonstrations,” said Mostafa Pakzad, a Tehran businessman, who advises foreign companies on their Iran business strategy. “Young people feel their lives are being literally wasted by the heavy restraints they are facing,” he said.

The middle class kept Iran stable after its 1979 Islamic revolution and was its economic engine amid sanctions from the U.S. and others over its nuclear technology, ballistic missiles and support for terrorism and militias in the region. Iran’s middle class kept growing over the past four decades to 60% of the population, with a strong education system churning out doctors, lawyers, engineers and traders despite a devastating war and several oil-price crashes.

Now, the middle class is under pressure from 50% inflation and a currency, the rial, that fell to its lowest levels ever this year. Today, more than a third of Iran lives in poverty, compared with 20% in 2015, and the middle class has shrunk to comprise less than half the country.

Iran’s currency slide, high inflation and income inequality worsened after the U.S. reimposed sanctions in 2018.

How many Iranian rials* $1 buys

Aug. 6, 2018

U.S. reimposed

sanctions

Gini coefficients of household-income inequality

Iran’s annual inflation rate

How many Iranian rials* $1 buys

Aug. 6, 2018

U.S. reimposed

sanctions

Gini coefficients of household-income

inequality

Iran’s annual inflation rate

How many Iranian rials* $1 buys

Aug. 6, 2018

U.S. reimposed

sanctions

Gini coefficients of household-income

inequality

Iran’s annual inflation rate

How many Iranian rials* $1 buys

Aug.6, 2018

U.S. reimposed

sanctions

Gini coefficients of household-income

inequality

Iran’s annual inflation rate

How many Iranian rials* $1 buys

Aug. 6, 2018

U.S. reimposed

sanctions

Gini coefficients of household-income

inequality

Iran’s annual inflation rate

Anger has been building for years over the economy and the failure to revive the international agreement that lifted sanctions on Iran in exchange for tight but temporary limits on its nuclear program.

“The root of these protests is the economic problems and you now see the eruption,” said a 52-year-old homemaker who has been protesting on the affluent streets of north Tehran, taking off her hijab and waving it with crowds of other women.

She and her husband, a small food-business owner, have run out of savings and inflation threatens their middle-class lifestyle. They once owned several properties but have sold some to raise cash. She said she used to buy a new car every two years, trading in the old model for a new one, but she recently sold her car for cash to pay off loans.

The homemaker was protesting on Friday when some plainclothes police officers shouted at her for not wearing her headscarf and attacked two female protesters near her, she said. Some officers opened fire, she said, and she was hit by a rubber pellet from the shotgun-like weapon Iranian police use to disperse crowds.

“The shot has a horrible, real-gun sound,” she said. But now that she’s been shot, she said, “I am not afraid of pellets. I would go to protest again.”

At least 50 people have been killed in the Iran protests, with thousands more injured or arrested, according to estimates from human-rights groups.

U.S. sanctions that target Iran’s oil industry and financial sector are the main factor crippling the Iranian economy, cutting the country off from the dollar, most economists agree.

Even so, about 63% of Iranians blame domestic economic mismanagement and corruption, rather than sanctions, for the country’s financial woes, according to a poll of 1,000 respondents carried out a year ago by the University of Maryland’s Center for International and Security Studies at Maryland and IranPoll, a Canada-based opinion-research and polling firm focused on Iran.

Once one of the world’s biggest oil producers, Iran now pumps about 2.5 million barrels a day, down from more than 6 million in the 1970s and 4 million as recently as 2016. Economists say the benefits of any postpandemic growth are partly offset by runaway inflation. Employment for college graduates dropped by 7% in the aftermath of sanctions and wages of male skilled workers by almost 20%, according to an International Monetary Fund study published last week.

A first wave of demonstrations began earlier this year, led by trade unions representing oil-industry workers and teachers who saw their wages fall below the poverty line. Workers say they have trouble affording Iranians staples like spaghetti or hamburger meat.

The unions have called on their members to join the movement to end the enforced headscarf law that Ms. Amini was accused of violating.

In recent days, students at Allameh Tabatabai University in Tehran have picked up the theme, chanting: “Poverty, corruption, tyranny. Death to this dictatorship.”

Farshad Momeni, head of the Institute for Islamic Studies in Humanities, an independent Iranian research center, told the semiofficial ILNA news agency that the scale of Iran’s resurgent poverty is “unprecedented in the last 100 years” and could destabilize the country.

Some Iranian leaders have urged the government to hear the protesters out. Ayatollah Hossein Noori-Hamedani, a cleric known to be close to Supreme Leader

Ayatollah Ali Khamenei,

said on his website last month that “it is necessary that the authorities listen to the people’s demands and solve their problems.”

But in calling for the government’s downfall and an end to the Islamic system, protesters have little room to maneuver with Tehran authorities. Mr. Khamenei this week denounced the protests as riots inspired by foreign enemies such as the U.S. and Israel and praised the authorities’ crackdown.

“This is not about the hijab in Iran,” Mr. Khamenei tweeted on Monday. “It is about Islamic Iran’s independence & resistance.”

For many middle-class Iranians after 1979, the relative freedom to do business and make money helped take the edge off their discontent over political repression and the imposition of conservative Islamic values on a secular society. The government also redistributed oil wealth that had been concentrated among an elite under the shah, offering free health care, schools and family-planning programs.

Iran’s strong educational system gave the country’s rural poor a path to social mobility and homeownership, with a university degree unlocking access to professions such as medicine and law.

By 2015, Iran’s Human Development Index—a United Nations measurement that includes social equality, education levels and life expectancy—ranked above those of Mexico, Ukraine, Brazil and Turkey.

That year, Iranians hoped that an agreement with the U.S., European powers, Russia and China would end years of international isolation over their country’s nuclear program. In exchange for tight but temporary limits on the nuclear work, Iran was freed from most international sanctions and able to do business again with much of the West.

The impact was limited. Many Western companies shied away from deals with the Islamic Republic after the election of President

Donald Trump

in 2016. Since 2018, when Mr. Trump pulled the U.S. out of the nuclear deal and reimposed American sanctions, more middle class Iranians have slipped back into poverty.

Middle-class Iranians once put their faith in reformist political candidates such as

Hassan Rouhani,

who led the country from 2013 to 2021. Polls and interviews suggest the voting bloc has lost hope in political change through the ballot box. Last year, turnout hit a record low after it became clear Mr. Khamenei wouldn’t allow even a token reformist candidate run for president.

Mr. Rouhani’s successor,

Ebrahim Raisi,

who previously headed Iran’s repressive judiciary, has emphasized economic self-sufficiency and trade with Russia and China, rather than with the West.

“In Iran, there is no release valve—no economic opportunities, no social opportunities, no political opportunities, just a cloud of repression,” said Sanam Vakil, the deputy director of the Middle East North Africa program at the U.K.’s Royal Institute of International Affairs.

A 40-year-old businessman in Tehran said inflation and an unstable business environment ruined his plans to open a coffee shop. He also had plans to sell foreign perfume in Tehran, but those talks are over. He has canceled wedding plans, as they are too expensive. The pricey shirts and holidays in Istanbul and Dubai he once could afford are gone.

“My dreams have just evaporated,” he said. “People are tired and hopeless.”

In 2017, and then in 2019, protests flared up across Iran that were rooted in economic discontent. The Iranian authorities violently suppressed both movements, with more than 100 dead in 2019, according to Amnesty International, a nonprofit human-rights organization.

A 2019 report prepared for the U.S. Department of Defense by Boston-based social-sciences consulting firm National Security Innovations said Iranian protesters now “largely come from higher income professions such as trade and transportation” and “are being formed by well-educated and elite Iranians.” The rising role of the Iranian middle class in protests would bring more instability and would be met by mounting repression from the government, the study predicted.

Wealth is now concentrated in fewer hands, fueling resentment against members of the Iranian elite widely suspected of profiteering from sanctions evasion.

Businessmen in Tehran say the economy has increasingly been taken over by state-aligned groups, from public pension funds to religious foundations to entities owned by the Islamic Revolutionary Guard Corps, leaving little breathing space for a genuine private sector.

The top 10% of Iranian households now receives 31% of the total gross national income while the bottom 10% gets about 2%, according to Iran’s welfare ministry. That means the Islamic Republic has economic inequalities as pronounced as in the U.S. and much higher than in other countries in the region such as the United Arab Emirates, Iraq or Israel, according to the World Bank.

As many Iranians cut meat from their diets because of the expense, luxury car showrooms are full. Alireza Ghasemi, 33, a salesman for German luxury brand

Mercedes-Benz,

said he has a waiting list for 160 buyers ready to scoop the vehicles after the government said the imports would be allowed again after a five-year hiatus. The cars go for up to 97,000 euros—half a century of earnings by an Iranian taxi driver.

Write to Benoit Faucon at [email protected]

“The triangle of women, technology and poverty is the fuel behind the demonstrations,” said Mostafa Pakzad, a Tehran businessman, who advises foreign companies on their Iran business strategy. “Young people feel their lives are being literally wasted by the heavy restraints they are facing,” he said.

The middle class kept Iran stable after its 1979 Islamic revolution and was its economic engine amid sanctions from the U.S. and others over its nuclear technology, ballistic missiles and support for terrorism and militias in the region. Iran’s middle class kept growing over the past four decades to 60% of the population, with a strong education system churning out doctors, lawyers, engineers and traders despite a devastating war and several oil-price crashes.

Now, the middle class is under pressure from 50% inflation and a currency, the rial, that fell to its lowest levels ever this year. Today, more than a third of Iran lives in poverty, compared with 20% in 2015, and the middle class has shrunk to comprise less than half the country.

Iran’s currency slide, high inflation and income inequality worsened after the U.S. reimposed sanctions in 2018.

How many Iranian rials* $1 buys

Aug. 6, 2018

U.S. reimposed

sanctions

Gini coefficients of household-income inequality

Iran’s annual inflation rate

How many Iranian rials* $1 buys

Aug. 6, 2018

U.S. reimposed

sanctions

Gini coefficients of household-income

inequality

Iran’s annual inflation rate

How many Iranian rials* $1 buys

Aug. 6, 2018

U.S. reimposed

sanctions

Gini coefficients of household-income

inequality

Iran’s annual inflation rate

How many Iranian rials* $1 buys

Aug.6, 2018

U.S. reimposed

sanctions

Gini coefficients of household-income

inequality

Iran’s annual inflation rate

How many Iranian rials* $1 buys

Aug. 6, 2018

U.S. reimposed

sanctions

Gini coefficients of household-income

inequality

Iran’s annual inflation rate

Anger has been building for years over the economy and the failure to revive the international agreement that lifted sanctions on Iran in exchange for tight but temporary limits on its nuclear program.

“The root of these protests is the economic problems and you now see the eruption,” said a 52-year-old homemaker who has been protesting on the affluent streets of north Tehran, taking off her hijab and waving it with crowds of other women.

She and her husband, a small food-business owner, have run out of savings and inflation threatens their middle-class lifestyle. They once owned several properties but have sold some to raise cash. She said she used to buy a new car every two years, trading in the old model for a new one, but she recently sold her car for cash to pay off loans.

The homemaker was protesting on Friday when some plainclothes police officers shouted at her for not wearing her headscarf and attacked two female protesters near her, she said. Some officers opened fire, she said, and she was hit by a rubber pellet from the shotgun-like weapon Iranian police use to disperse crowds.

“The shot has a horrible, real-gun sound,” she said. But now that she’s been shot, she said, “I am not afraid of pellets. I would go to protest again.”

At least 50 people have been killed in the Iran protests, with thousands more injured or arrested, according to estimates from human-rights groups.

U.S. sanctions that target Iran’s oil industry and financial sector are the main factor crippling the Iranian economy, cutting the country off from the dollar, most economists agree.

Even so, about 63% of Iranians blame domestic economic mismanagement and corruption, rather than sanctions, for the country’s financial woes, according to a poll of 1,000 respondents carried out a year ago by the University of Maryland’s Center for International and Security Studies at Maryland and IranPoll, a Canada-based opinion-research and polling firm focused on Iran.

Once one of the world’s biggest oil producers, Iran now pumps about 2.5 million barrels a day, down from more than 6 million in the 1970s and 4 million as recently as 2016. Economists say the benefits of any postpandemic growth are partly offset by runaway inflation. Employment for college graduates dropped by 7% in the aftermath of sanctions and wages of male skilled workers by almost 20%, according to an International Monetary Fund study published last week.

A first wave of demonstrations began earlier this year, led by trade unions representing oil-industry workers and teachers who saw their wages fall below the poverty line. Workers say they have trouble affording Iranians staples like spaghetti or hamburger meat.

The unions have called on their members to join the movement to end the enforced headscarf law that Ms. Amini was accused of violating.

In recent days, students at Allameh Tabatabai University in Tehran have picked up the theme, chanting: “Poverty, corruption, tyranny. Death to this dictatorship.”

Farshad Momeni, head of the Institute for Islamic Studies in Humanities, an independent Iranian research center, told the semiofficial ILNA news agency that the scale of Iran’s resurgent poverty is “unprecedented in the last 100 years” and could destabilize the country.

Some Iranian leaders have urged the government to hear the protesters out. Ayatollah Hossein Noori-Hamedani, a cleric known to be close to Supreme Leader

Ayatollah Ali Khamenei,

said on his website last month that “it is necessary that the authorities listen to the people’s demands and solve their problems.”

But in calling for the government’s downfall and an end to the Islamic system, protesters have little room to maneuver with Tehran authorities. Mr. Khamenei this week denounced the protests as riots inspired by foreign enemies such as the U.S. and Israel and praised the authorities’ crackdown.

“This is not about the hijab in Iran,” Mr. Khamenei tweeted on Monday. “It is about Islamic Iran’s independence & resistance.”

For many middle-class Iranians after 1979, the relative freedom to do business and make money helped take the edge off their discontent over political repression and the imposition of conservative Islamic values on a secular society. The government also redistributed oil wealth that had been concentrated among an elite under the shah, offering free health care, schools and family-planning programs.

Iran’s strong educational system gave the country’s rural poor a path to social mobility and homeownership, with a university degree unlocking access to professions such as medicine and law.

By 2015, Iran’s Human Development Index—a United Nations measurement that includes social equality, education levels and life expectancy—ranked above those of Mexico, Ukraine, Brazil and Turkey.

That year, Iranians hoped that an agreement with the U.S., European powers, Russia and China would end years of international isolation over their country’s nuclear program. In exchange for tight but temporary limits on the nuclear work, Iran was freed from most international sanctions and able to do business again with much of the West.

The impact was limited. Many Western companies shied away from deals with the Islamic Republic after the election of President

Donald Trump

in 2016. Since 2018, when Mr. Trump pulled the U.S. out of the nuclear deal and reimposed American sanctions, more middle class Iranians have slipped back into poverty.

Middle-class Iranians once put their faith in reformist political candidates such as

Hassan Rouhani,

who led the country from 2013 to 2021. Polls and interviews suggest the voting bloc has lost hope in political change through the ballot box. Last year, turnout hit a record low after it became clear Mr. Khamenei wouldn’t allow even a token reformist candidate run for president.

Mr. Rouhani’s successor,

Ebrahim Raisi,

who previously headed Iran’s repressive judiciary, has emphasized economic self-sufficiency and trade with Russia and China, rather than with the West.

“In Iran, there is no release valve—no economic opportunities, no social opportunities, no political opportunities, just a cloud of repression,” said Sanam Vakil, the deputy director of the Middle East North Africa program at the U.K.’s Royal Institute of International Affairs.

A 40-year-old businessman in Tehran said inflation and an unstable business environment ruined his plans to open a coffee shop. He also had plans to sell foreign perfume in Tehran, but those talks are over. He has canceled wedding plans, as they are too expensive. The pricey shirts and holidays in Istanbul and Dubai he once could afford are gone.

“My dreams have just evaporated,” he said. “People are tired and hopeless.”

In 2017, and then in 2019, protests flared up across Iran that were rooted in economic discontent. The Iranian authorities violently suppressed both movements, with more than 100 dead in 2019, according to Amnesty International, a nonprofit human-rights organization.

A 2019 report prepared for the U.S. Department of Defense by Boston-based social-sciences consulting firm National Security Innovations said Iranian protesters now “largely come from higher income professions such as trade and transportation” and “are being formed by well-educated and elite Iranians.” The rising role of the Iranian middle class in protests would bring more instability and would be met by mounting repression from the government, the study predicted.

Wealth is now concentrated in fewer hands, fueling resentment against members of the Iranian elite widely suspected of profiteering from sanctions evasion.

Businessmen in Tehran say the economy has increasingly been taken over by state-aligned groups, from public pension funds to religious foundations to entities owned by the Islamic Revolutionary Guard Corps, leaving little breathing space for a genuine private sector.

The top 10% of Iranian households now receives 31% of the total gross national income while the bottom 10% gets about 2%, according to Iran’s welfare ministry. That means the Islamic Republic has economic inequalities as pronounced as in the U.S. and much higher than in other countries in the region such as the United Arab Emirates, Iraq or Israel, according to the World Bank.

As many Iranians cut meat from their diets because of the expense, luxury car showrooms are full. Alireza Ghasemi, 33, a salesman for German luxury brand

Mercedes-Benz,

said he has a waiting list for 160 buyers ready to scoop the vehicles after the government said the imports would be allowed again after a five-year hiatus. The cars go for up to 97,000 euros—half a century of earnings by an Iranian taxi driver.

Write to Benoit Faucon at [email protected]