Expatriate from Iran: “The economy will not collapse from bombs, but from the robbery of the government”

The dollar is traded in Tehran around 2.6 million riyals “at this moment”, and by the time you read this line it has probably already risen by another thousand riyals. A 51% drop in the value of Iran’s national currency in 40 days is just one of the results of the increased economic pressure exerted by the US on Iran, known as “Economic D-Day”. At that time, the Central Bank of Iran announced an official inflation rate of 70%, the highest in the country’s history. Economists, however, estimate that the actual rate exceeds 150%.

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What we see on the streets of Iran these days goes beyond another public outrage. Citizens are constantly encountering astronomical prices that rise day by day. While the average monthly salary is about 400 million riyals, a package of diapers for a baby costs about 8.7 million riyals. In other words, an Iranian can buy only seven packages of diapers with a full month’s salary.

This undeniable reality has led the US Treasury Secretary to promise that Iran’s economy will soon be destroyed. This claim can be challenged with a more complex argument: Iran’s economy will not be “destroyed soon” – it has been on the verge of destruction for a long time. Not because of the Israeli bombings, but because of the robbery committed by the rulers of Tehran.

A state-controlled cartel

During the last four decades, Iran’s economy has been swallowed up by several large state-controlled cartels, a process that reached its peak in the last two decades. According to the former deputy speaker of the parliament, 60% of Iran’s wealth is controlled by four large economic entities belonging to the office of the Supreme Leader: the implementation of Imam Khomeini’s decree, the Moustachafeen Foundation, Estan Quds Razvi and the Khatam al-Anbi Construction Command of the Islamic Revolutionary Guard Corps.

They do not pay taxes, are not accountable to anyone, and control all supervisory institutions, including the judicial system. Their economic model is also based on robbery. They forcibly take over government projects at a price many times higher than their true cost, collect the money and leave the work unfinished.

With such cartels, almost nothing is left of the private sector. Today it is difficult to find a business in Iran with more than 50 employees that remains truly private. One of the 16 economic entities affiliated with the supreme leader’s office will inevitably capture a significant portion of his fortune. In the last five years, even successful startups have had to give away a large part of their ownership just to survive.

Iran’s economy is also under sanctions. However, these institutions were able to take advantage of these unusual circumstances as well. They have entered the illegal trade in Iranian oil and are making billions of dollars from a market whose very nature makes it almost untraceable. The scope of this plunder is estimated at 100 billion dollars a year, while Iran’s gross national product barely reaches 400 billion dollars.

bankruptcy

And we will now return to Washington’s expectations of its policy of maximum pressure. The US expects that increasing this pressure will destroy Iran’s economy and bring the people back to the streets to rebel against the government. This assessment makes sense. But what exists under the name “Iran’s economy” differs considerably from the standards of a normal economy.

According to information from international institutions, Iran’s oil sales have dropped to about 300,000 barrels in the last two months and the passage of Iranian oil through the Strait of Hormuz has dropped to zero. Until mid-October, Iran will not actually have any oil to sell. From a practical point of view, then, Iran’s economy has already gone bankrupt.

But does this mean that an economic operation will bring about the end of the Islamic Republic? Some caution is required here. Over the past two decades, under sanctions ranging from mild to severe, the Iranian regime has devised unconventional ways to survive. The simplest of which is printing money without cover. While this fuels inflation, it also provides artificial lifeblood to Iran’s dying economy.

Meanwhile, Iran’s major economic cartels, the companies owned by the Revolutionary Guards and Khamenei’s office, have spent the past two decades taking over much of the country’s business activity. As a result, they directly and indirectly control the livelihood of about 20 million Iranians. Under pressure, they managed to keep the economy barely alive through temporary means, such as converting accumulated wealth into funds for everyday expenses, albeit modest ones. They then swallow several times the amount they took out of Iran’s oil revenues.

Does this mean America’s policy of economic pressure will fail? Of course it is effective, and it is even possible that it will yield the desired result. Unlike all the previous years, there was one big change in Iran: Ali Khamenei was killed.

extreme poverty

Five years ago, a leaked audio recording of senior IRGC commanders revealed that the military organization stole more than $4 billion from the budget of the Tehran Municipality under the management of Mohammad Bakr Kalibaf. According to one of the commanders heard on the recording, 90% went to the Guards’ Quds Force and the remaining 10% went to the Guards’ corruption network.

In a mafia economy controlled by a political dictator, the elimination of the “Godfather” may bring down the entire network. In this short period alone, decade-old corruption networks in Iran’s economy were exposed and suppressed. Between March 20 and June 20, Iran’s economic growth plummeted and remains at the lowest level in the country’s history. Meanwhile, the pressure from the naval blockade on Iran’s ports and from the American operation reduced the state’s income to zero. These cartels also no longer receive orders from a leader whose very existence is in doubt.

On the streets, prices and inflation have never risen so steeply. These conditions left much of Iranian society poor in the most literal sense. The pressure is at least ten times greater than the one that sparked one of the largest protests against the government in November 2019, after gasoline prices tripled.

It is therefore natural that the Iranian regime is now very concerned about the return of people to the streets under the pressure of the country’s collapsing economy. Until two months ago, Tehran’s rulers expected that closing the Strait of Hormuz would push global oil prices to $200 per barrel and force Trump to accept Iran’s terms. Not only did it not happen, but the strait is now open to everyone, and closed to Iran.

This is an extremely dangerous situation for Tehran and it brought the Iranian regime to take the initiative this time and offer Trump a deal. With each passing day, the boiling cauldron of Iranian society is getting closer to exploding. The American operation proved its effectiveness much faster than the rulers of Iran expected.

Do not sign a deal

The life of Iranians these days is unlike any other period. Bank notes and cash checks of high denominations are becoming obsolete day by day under the influence of inflation, while the value of the national currency has fallen to a low.

Under these conditions, only one development can save the Iranian regime: Trump, under political pressure to achieve quick results, will sign a bad deal. If the US does not hurry, fundamental change in Iran is at hand.

Unlike a military war, which may consolidate the supporters of the system behind the government in the short term, an economic war can break even these loyal cores. Even though they are under enormous pressure, a significant number of Iranians continue to live in hope of this very outcome.