Iranians tighten belts as economy tanks, protests continue

While shopping at the neighborhood fruit market a few weeks ago, Abbas came to a realization: he couldn’t afford bananas. Since September, they had doubled in price and were now another grocery item that was simply unaffordable on his elementary school teacher’s salary.

“The price of everything doubles – it’s like there’s a drought in the country,” said Abbas, 45, who only gave his first name for security reasons. “We can’t get basics like chicken. Meat is much more expensive.”

The high prices have forced him into the black light as a private tutor, but it’s still barely enough.

In the nearly five months since the death of 22-year-old Mahsa Amini in the custody of Tehran’s vice squad, a tsunami of unrest has swept across Iran, with protests continuing despite official crackdown and threats of execution at protesters. Although women’s rights were the spark, the government now faces broader grievances, particularly long-simmering resentments about the slowing economy and the eroding of people’s finances.

Experts said the grim economic situation has left Iranians all but exhausted after a decade of such challenges. But they doubted the growing discontent would turn into enough popular anger to seize power or even weaken the government’s ability to quell dissent.

Although the protests have not abated, they have decreased in scale and scope – for the simple reason “because the population cannot afford them,” said Ali Vaez, Iran project leader at think tank International Crisis Group. “The focus of the population has shifted to making a living.”

Already gloomy economic indicators have deteriorated further in recent weeks. On the black market, the Iranian rial has tumbled to 443,500 to the dollar, a slight improvement from an all-time low of 450,000 a few weeks ago, but nowhere near the 300,000 mark before protests began in September.

Inflation has passed 50%, the highest rate in decades. Food prices have increased by more than 70%. More than half of young people are unemployed. In early December, local trading apps like Sheypoor and Divar saw people trying to trade kitchen utensils, tools, toys and clothing for groceries.

“When I go shopping, I have to be very selective,” said Negar, a 29-year-old homemaker who works part-time at a daycare center and declined to give her last name. “Forget steaks. I no longer buy olive oil. Iranian rice is much more expensive.”

She and her husband could never hope to own the apartment they live in, which they can only afford to rent because of their father-in-law’s helping hand. She used to love entertaining there and regularly hosted lunches and dinners for friends.

“Now there’s no way,” she said. “You have to give up your entire salary for a month.”

Economic malaise is nothing new in Iran, especially after 2018, when then-President Trump withdrew from the Tehran nuclear deal with world powers and launched a so-called maximum pressure campaign that turned Iran into one of the most heavily sanctioned countries in the world. Hopes that the Biden administration would prove to be a more approachable partner in reviving the nuclear deal and offering sanctions relief have not materialized.

The Iranian government’s brutal response to the protests has only exacerbated economic problems.

When authorities shut down the internet to prevent protesters from posting videos of demonstrations, they vandalized businesses across the country. Digikala, one of Iran’s largest e-commerce companies, has seen a quarter of its traffic since the protests began; The government’s own estimates put losses at small and medium-sized businesses at more than $1 billion.

Also devastated were companies and brands credited with connections to the ruling establishment. Mihan, one of the country’s largest milk producers, whose trucks were filmed transporting riot police to demonstrations, has faced boycotts so harsh that workers have posted videos on social media urging people to end their embargoes before the Companies went bankrupt and they lost their money jobs.

Internationally, Tehran’s isolation has deepened, with the United States and Europe imposing new sanctions and stepping up enforcement of existing ones. The likelihood of a revival of the nuclear deal has further diminished.

“This has led to even more negative forecasts in the business community regarding the country’s economic prospects,” Vaez said.

Pessimism about the economy has spread to the broader population, said Esfandyar Batmanghelidj, founder of the London-based think tank Bourse & Bazaar Foundation.

“People expect the economy to get worse,” he said, adding that the rial’s fall against the dollar reflected the increasingly gloomy outlook. “It’s a barometer of economic sentiment in Iran. When the rial weakens, it’s a sign that people are concerned about inflation, so they flock to a safe haven, usually dollars.”

Yahya, a 72-year-old shopkeeper in the western city of Kermansheh, sees subdued consumer demand every day.

“Companies are begging us to buy products, but we don’t place orders or stock goods because people aren’t buying,” said Yahya, who declined to give his full name. “Staples like rice and chicken just aren’t staples anymore.”

The government is trying to improve the situation. At the end of December, it appointed a new central bank governor. Last week, it began selling gold coins on the stock exchange, pumping $305 million into the so-called NIMA market, an online system in which Iranian exporters sell their foreign exchange earnings to importers at a rate set by the government.

This week, Iranian President Ebrahim Raisi – with the backing of Supreme Leader Ayatollah Ali Khamenei – advanced a privatization plan that would sell state assets to raise 1,080 trillion riyals and help meet the country’s budgetary needs. Critics say the expected proceeds are likely overstated and that the sale of assets would undoubtedly benefit regime cronies.

In a speech last week announcing next year’s budget, Raisi promised that controlling inflation would be a priority. “Do you know that the prices of [foreign] Currencies and gold, as well as the prices of many expensive things in the country, will go down,” he said.

But he gave little detail as to how that would happen. Meanwhile, critics say, the pillars of his economic plan to counter Western sanctions – boosting Iran’s self-sufficiency and seeking investment in Russia and China it can’t get from the West – have proved fruitless.

Despite having a more diversified economy than its equally oil-rich neighbors, Iran relies on imports for staples like wheat. Russia has invested $2.7 billion in oil projects in Iran over the past 15 months, accounting for nearly half of foreign investment, an Iranian official told local media; However, the official said Tehran was unhappy with Chinese investments, which totaled a little less than $185 million during the same period.