By Jim Geraghty
Friday, January 02, 2026
Back in November, Saeed Ghasseminejad, a senior Iran and
financial economics adviser over at the Foundation for Defense of Democracies,
wrote what I figure had to be an insufficiently read report about the crumbling state of the
Iranian economy:
Despite the export
windfall, the Iranian economy is not just stalling; it is entering a dangerous
phase of stagflation and free fall. The regime has managed to secure its
revenue streams, but it has utterly failed to secure the livelihoods of its
people. This divergence, between a wealthy regime and an impoverished nation,
exposes the fundamental rot at the heart of Iran’s economic governance.
The most visceral
indicator of this failure is the currency. When Ruhollah Khomeini swept to
power in 1979, one US dollar traded for 70 rials. Today, that same dollar
commands a staggering 1,130,000 rials, more than 16,000-fold its price in 1979.
In the last year alone, the rial has lost 50 percent of its value. This isn’t
just a monetary statistic; it is the erasure of the Iranian middle class’s
savings and dignity.
In a country with
abundant fossil fuel resources, Iranians face electricity and natural gas
shortages, which make both hot and cold seasons unbearable. To add insult to
injury, decades of mismanagement and corruption have eroded the country’s water
supplies, and Iranians across the country are now struggling with drinking
water shortages.
As of December, United Nations
figures indicate that more than 5 million Iranians are registered refugees
or asylum seekers since 1980, with millions more leaving legally — meaning that
about one out of every 15 Iranians now lives abroad. It is likely that in those
ranks are some of Iran’s smartest, most driven, most creative, and least
capable of assimilating to the strict rule of the mullahs. The Iranian regime,
knowingly or not, is a system designed to drive out the most innovative and
productive.
Fast forward to late December, and every economic crack
in Iran’s economic foundation that Ghasseminejad warned about is splitting open
wider and deeper:
Fresh central bank
data showed gross domestic product shrank by 0.6 percent including oil and by
0.8 percent excluding oil in the first six months of the year 1404 (started on
March 21), reflecting weak demand, falling investment and heightened uncertainty
across the real economy, Tasnim reported.
(Note from Jim: The Tehran-based Tasnim News Agency is affiliated with Iran’s Islamic Revolutionary Guard Corps.
If a news institution connected to the IRGC can’t or won’t sugarcoat the latest
round of economic numbers, it means the problems are so visibly and
indisputably bad, they don’t see any point in trying to spin them. Or perhaps
the state of the Iranian economy is so spectacularly dire that these are
the positive-spun numbers.)
Agriculture
contracted by 2.9 percent and industry and mining by 3.4 percent, while
construction suffered a sharp 12.9 percent slump, the central bank said,
pointing to a deepening recession in a sector that is a key engine of
employment and related industries.
At the same time,
inflation pressures intensified. The statistics center said point-to-point
inflation rose to 52.6 percent in the month to late December, up 3.2 percentage
points from the previous month, while average annual inflation climbed to 42.2
percent.
Food inflation was
far higher, with prices of food, beverages and tobacco up 72 percent
year-on-year, compared with 43 percent for non-food goods and services. Monthly
inflation reached 4.2 percent, led by sharp increases in staples such as dairy
and bread.
The deteriorating
data frame a contentious budget debate in parliament, where [President Masoud]
Pezeshkian has warned that the state lacks the resources to cushion households
fully from price rises.
As you look at those inflation numbers, keep in mind the
worst U.S. inflation rate since 1960 has been 13.5 percent, in 1980.
Note that the Iranian sanction-dodging oil-smuggling
business, operating in cooperation with the regime of Venezuelan dictator
Nicolás Maduro, is not looking as secure and prosperous as it was just a few
months ago.
There are many reasons why the world’s autocratic,
brutal, dictatorial, and totalitarian regimes are a menace and a plague upon
the earth, foremost their torture and execution of innocent people. But one of
the lesser-discussed ones is that you usually don’t find many economic savants
among the ranks of autocrats, brutes, and madmen. Dictators care about power
and control, and figure they’ll always be able to seize enough resources to
take care of themselves. But if you seize the crops often enough, farmers lose
interest in farming. The early Soviets learned the hard way that if you steal
the fruit of a man’s labor in the name of the state and collectivization, that
man becomes much, much less motivated to labor. (Actually, they didn’t “learn,”
they just kept making various attempts to do the same thing over the span of the
Soviet Union.) Autocratic regimes tend to immiserate and impoverish their
people, wasting enormous resources and running their countries into the ground.
Unsurprisingly, the Iranian people are mad as hell and don’t want to take it anymore. And the
Iranian government is responding in its traditional way to Iranians who
publicly express dissatisfaction with the regime’s policies, by shooting them.
The Center for
Human Rights in Iran had tallied six killings by Friday, according to
spokeswoman Bahar Ghandehari, while the Abdorrahman Boroumand Center for Human
Rights in Iran said on social media that “at least five” protesters had
been killed in direct shootings.
The Hengaw
Organization for Human Rights, which focuses on Kurdish human rights issues,
said that eight
people
have been killed so far, including a 15-year-old. Those reported killed were
all male, mostly in their 20s and 30s. . . .
Some videos have shown security forces shooting toward
demonstrators, and such actions fit a documented pattern from past rounds of
protest in Iran, especially in recent years. At least 321 Iranians were killed
by security forces during mass protests in November 2019, according
to Amnesty International. A United Nations fact-finding mission found that authorities had carried out “unnecessary and
disproportionate use of lethal force” in response to protests in 2022 that were
sparked by the killing of a woman in police custody.
Our Noah Rothman has a long memory of Iranian people
protesting their own government, often shaking it, but never quite toppling it:
There was the 2009
“Green Movement” that erupted in response to the disputed reelection of former
Iranian President Mahmoud Ahmadinejad — an outpouring of anti-regime sentiment
Barack Obama could not bring himself to endorse (a hesitancy he later
regretted). There were the “Day of Rage” protests, which lasted for a year
and coincided with the 2011 Arab Spring. There was unrest over growing food
prices in 2017 and 2018. Riots paralyzed the country in 2019 amid a spike in
gasoline prices.
The massive scale of Iran’s economic problems raises the
high-stakes question of whether the Iranian regime can suppress its way out of
this calamity. Sure, you can send thugs into the streets to kill protesters,
but then what? The economic deprivation that triggered the protests are still
there, and it’s not like the average Iranian who is watching his money
not-so-gradually become worthless is going to forget about his problems.
The U.S. bombing of the Iranian nuclear program in June alleviated
one major U.S. foreign policy headache regarding the regime in Tehran, but the
mullahs are the same old mayhem-minded bastards they always were. The Financial Times has a scoop about one way that
the Iranian government is trying to raise a form of cash:
Iran is offering
to sell advanced weapons systems including ballistic missiles, drones and
warships to foreign governments for cryptocurrency, in an attempt to use
digital assets to bypass western financial controls. Iran’s Ministry of Defense
Export Center, known as Mindex, says it is prepared to negotiate military
contracts that allow payment in digital currencies, as well as through barter
arrangements and Iranian rials, according to promotional documents and payment
terms analyzed by the Financial Times.
There are various ways to mitigate the threat from the
Iranian regime in the short term; cyberwarfare along the lines of Stuxnet, sanctions, covert operations like the Israelis’ operations in recent years.
But the only long-term solution is the replacement of the current regime. Iran
goes through the motions of elections, but they are neither free nor fair, and the mullahs will never allow a true threat to their power to win an election.
Someday, perhaps soon, 86-year-old Ayatollah Sayyid Ali Khamenei will kick the
bucket, but it’s not like Iran’s next ayatollah is going to be a nice guy.
Ghasseminejad closed his report with a succinct summary
of how the Iranian revolution has run a once-prosperous country into the
ground: “The tragedy of Iran under the Islamic Republic is not a lack of
wealth, but a surplus of ideology. As long as the Islamic regime exists and
Tehran views its economy as a logistical engine for spreading terrorism and
Islamist ideology rather than a mechanism for national prosperity, the
suffering of the Iranian people will continue in an ancient land blessed by
abundant natural resources.”
At 2:58 a.m. Friday morning, President Trump posted on Truth Social:
If Iran shots
[sic] and violently kills peaceful protesters, which is their custom, the
United States of America will come to their rescue. We are locked and loaded
and ready to go. Thank you for your attention to this matter! President DONALD
J. TRUMP,
One last thought: Not every foreign policy wonk’s report
on some far-off corner of the world important to U.S. interests is going to
read as clairvoyant as Ghasseminejad’s did. But you don’t have to look too hard
to find a dismissive attitude toward Washington’s right-of-center policy wonks
and their white papers. After all, they’re just a bunch of eggheads at “think
tanks” who research the problems facing this country; surely they don’t add
nearly as much value to the conservative movement as, say, a podcaster who warns that if the U.S. ever bombed the Iranian
nuclear program, it would set off World War Three and that the United States
would lose that conflict.
There is great value is studying our problems, in detail,
and developing perspectives based upon that research, as opposed to just going
on “vibes.”
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