Prices double and factories collapse: Iran’s crisis is at its peak

Iran’s severe economic crisis continues and reaches new heights, forcing it to show political flexibility ahead of Trump’s return to the White House in two weeks. The president-elect does not hide his intention to renew the extensive sanctions regime on Tehran, nor does he hesitate to signal that he will consider attacking Iran’s nuclear facilities, or support an Israeli attack. Iran’s Foreign Minister Abbas Araqchi continues to issue messages calling for the calming of tensions and support for a new nuclear agreement, one that would force Tehran to compromise on its achievements in the nuclear field.Iran’s economy continues to reach new lows with each passing day. The serious energy crisis in the country continues these days as well, and last week Iranian President Massoud Pazkhian gave an example of its depth. Pazkhian recalled moments from his meeting in Supreme Leader Khamenei’s office, and said that “when I discussed the energy issues with him – I noticed that half of the lights in his office were off.”

The energy crisis, which leads to extensive power outages, more and less initiated, imposes severe disruptions on Iran in all areas of life. Government offices and public services are closed at unexpected times, schools and academic institutions have moved at least partially to distance learning, and factories and civil industry bodies are experiencing severe disruptions in production and supply capacity.

“The leadership in Iran is probably facing the most profound challenges since its establishment for years,” Sanam Wakil, an Iran researcher at Chatham House in London, told The Wall Street Journal. Along with the deep economic crisis, the growing dissatisfaction on the part of the citizens, and the severe damage to Iran’s image and security concept – with the damage to Hezbollah, Hamas and the fall of the Assad regime – the question arises as to where the regime is headed. According to some estimates, the new security reality may push Iran to move towards the development of nuclear weapons, and on the other hand, there is an assessment that the totality of variables may actually push it to make substantial concessions in favor of a new nuclear agreement with Trump.

“Iran is ready to resume nuclear talks in exchange for the immediate lifting of sanctions,” Foreign Minister Araqchi said on Friday. Next week, senior Iranian Foreign Ministry officials are expected to meet once again with representatives of European powers to discuss the nuclear talks. In Iran, they are trying to signal the high importance of the talks, but until Trump’s return to the White House and the presentation of a clear American policy on the issue, no progress is expected on the issue. In September, during the presidential election campaign, Trump made it clear that he was interested in obtaining a new nuclear agreement with Iran.

The Rial, the Iranian currency, continues to erode incessantly, and has already reached a value of more than 820,000 Rials to one US dollar – an erosion of 40% from the beginning of 2024 alone. The Wall Street Journal cited World Bank data and reported that the gross domestic product per capita in Iran dropped by 45% compared to its value in 2012, when the sanctions regime against Iran began – and now stands at $4,465.6.

Last week there were unusual scenes in Tehran with a demonstration and protests by traders in the Grand Bazaar against the price increases. “Don’t be afraid, come closer,” we heard in various calls on social networks to join the protest. Despite Iran’s dubious past with protests and demonstrations against the government, it is not impossible that precisely in this case it is convenient for the authorities in Tehran to allow the protest and even encourage it, thus portraying themselves as factors that allow a protest against them, as long as it is kept on a small scale.

Major development in Iran:

Merchants in Tehran ceased work today, rallying with the chant, “Honorable bazaar, support, support,” as they called for a strike.

The country is like a smoldering fire, ready to spark a major uprising against the regime at any moment. pic.twitter.com/v6txkC8fAd

— Navid Mohebbi (@navidmohebbi) December 29, 2024

One of the concerns in Iran is the expansion of the protest, and last week it also appeared in the oil industry – the largest and most important from Tehran’s point of view. Workers at refineries in the city of Abadan started a protest because they have not been paid for three months in a row.

The Wall Street Journal cited the Ministry of Commerce and other government bodies in Iran, which reported that last month the output of factories in the country was only 41%. The main reason is the many power outages and the impairment of work capacity. At the same time, it was reported that meat suppliers threatened that food security in the country was in danger. “Factories in Iran are in the midst of a deep recession,” reported the head of the Chamber of Commerce, which represents many companies. “The company’s activity cannot be profitable in such a situation.”

The energy crisis in Iran affected the operations of 22 cement plants in Iran and slowed down the activity of the pharmaceutical industry in the country. At the same time, power outages and energy cuts are severely affecting the agricultural sector, with the cessation of water pumps and the supply of critical fertilizers to crops.

Alongside the difficulty and the economic crisis, Iran continues to stick to the offensive line against Israel, and tries to return to the lowest common denominator from their point of view. Against the background of the various reports about the possibility of an Israeli attack on Iran, Foreign Minister Arakachi said at the weekend: “We are fully prepared to repel another Israeli attack. I hope that Israel will not make such a crazy move, because as a result, a wide war will break out in the entire region.”