While much of the region has spent this week preparing for a new year ahead, the mood in Iran has been consumed largely by the problems of the present. Protests have spread across the country about soaring inflation, rising food prices and the country's tumbling currency. Last Sunday, the rial plummeted to 1.42 million to the dollar – in December 2022, the rial was trading at about 430,000 to the dollar. This major decline has compounded inflationary pressures, pushing up the cost of daily necessities and straining Iranians’ household budgets even further.
The fact that the nationwide demonstrations – the biggest since the 2022 street protests over the death of Mahsa Amini – began with shopkeepers and bazaar merchants before drawing in large numbers of students reflects the widespread impact of Iran’s problems. The economy is in chronically poor shape, labouring under the weight of international sanctions and the effects of last year’s war with Israel.
The reimposition of American sanctions in 2018 during US President Donald Trump's first term has limited Iran's oil exports and access to foreign currency. The economy is at risk of recession, with the World Bank forecasting that gross domestic product will shrink by 2.8 per cent this year.
But those taking satisfaction in Tehran’s domestic problems are mistaken. Were internal discontent to spiral further, it could affect Tehran’s foreign policy, its regional choices and its remaining proxy networks. This could have unforeseen consequences at a time when there is acute volatility in parts of the Middle East, such as Yemen. Right now, it is unclear if the government’s immediate response to the protests, such as replacing central bank governor Mohammad Reza Farzin with former economy minister Abdolnaser Hemmati, will mollify an angry public. Reports in official Iranian media that the government is planning to increase taxes in the Iranian new year, which begins on March 21, could escalate a tense situation.
The sight of Iranians on the march should make the government reflect on how it got here. Decades of intransigence and adventurism, from Iran’s controversial nuclear programme to the country’s sponsorship of violent and destabilising militias across the Arab world, have led Iran into isolation. Cut off from most of the global economy, Iranians are feeling the pinch. Although there is no shortage of sympathy for Palestine among ordinary Iranians, most are not willing to be deflected by calls to show revolutionary solidarity at a time when their livelihoods are under threat. Many are questioning how Iranian adventurism in the region even helped the Palestinians, let alone their own country.
An Iran in such dire straits is bad for its neighbours, the wider Middle East and – most importantly – its people. The country’s opponents may welcome the sight of economic grievances evolving into deeper public frustration with Tehran’s ability to govern effectively but the region has much more to gain from an Iran that is stable, prosperous and, yes, even influential.
It is within the Iranian government’s power to make that happen. By putting its people first, directing its resources into mitigating the worst of its economic problems and abandoning the failed expansionist policies of the past, Iran’s leadership can turn this combustible situation around. The Iranian people deserve no less.
