Ann Arbor (Informed Comment) – Tuesday’s protests at the Grand Bazaar in Tehran were in many ways the opposite of the small-town clashes that broke out last January. These were rallies of the economically privileged, such as people who sell foreign smartphones to Iran’s middle classes, and members of those middle classes themselves.
Neither protest is a sign of imminent revolution. Why can’t Iran just have protests like other countries (does anyone but me read French news?), without that sectorial turmoil always being taken by pundits in Washington as a sign that the government is on its last legs? None of us likes the Iranian regime, but analysis is different from advocacy (yes). I know that in the age of Trump, wishful thinking is the new policy analysis among his circles in Washington. But the rest of us don’t have to drink that Kool-Aid.
Since 2014, when President Hassan Rouhani was elected, Iran’s economy has improved in general. The rial recovered some of its value against the dollar, often trading at 40,000 to the dollar.
Last year, 2017, Iran had a healthy surplus, The Guardian reports, quoting economist Bijan Khajehpour as saying, “Iran had a $17bn currency surplus last year, when its non-oil exports reached $47bn and it sold $55bn worth of oil.”
The collapse of the Iranian currency against the dollar in the past few months is political, not economic. There is no objective reason for which a rial is worth half as many dollars today as it was a year ago.
It is likely related to the United Arab Emirates and Saudi banking squeeze on Iran and to Trump’s violation of the 2015 UN nuclear deal. Trump’s plan to reimpose unilateral American sanctions by early November has caused a lot of bigger firms to pull out from planned investments, including France’s Total, SA, and Russia’s Lukoil. China is rushing in to fill the vacuum, but nevertheless, the prospect of renewed sanctions has created enormous uncertainty.
People in Iran are therefore doing their best to trade in rials for dollars and to send capital abroad to dollar accounts where it will be safe from Iranian currency depreciation that the new sanctions will cause. Ironically, this activity is a self-fulfilling prophecy, since capital flight of this sort weakens the rial against the dollar, and impels more capital flight.
And, again, the irony here is that much of the supposed capital flight might not even really be taking place. But rumors are circulating that $30 billion went out this spring, with no obvious evidence being given for that massive figure. It may be based on a misunderstanding of an IMF estimate that is outside the country because it takes a while for oil to get paid for, and which is coming back in. The crisis might be being impelled in part by a misunderstanding.
Eminent economist Djavad Salehi-Esfahani complains that Iran allows free export of capital abroad in a way not permitted, e.g., by India (which is nevertheless much more integrated into the world economy). So Iran’s laxness (i.e. too much economic freedom for those with capital) contributes to this problem.
Anyway, since you don’t buy eggs in dollars in Iran, the doubling of the dollar against the rial in just a few months doesn’t hurt most people. But merchants in the grand bazaar who buy smartphones abroad and sell them in the Iranian market are taking a bath unless they want to double their rial prices and risk hurting business. Hence the protests, which the government quelled by promising to make the phone importers whole.
The protests were also marked by chants against Iran’s Syria policy and the government’s spending money on Syria rather than spending it domestically.
It was a serious protest. It wasn’t revolutionary.
——
Bonus video:
RFE/RL: “Protests And Tear Gas In Tehran After Currency Plunges”
© 2025 All Rights Reserved