How Iran's flagging economy inflamed its protests

0:01NPR.

0:11As we speak, U.S. Navy troops are in a state of waiting. They're telling their husbands, wives, and children that they're going to be away from home for more months. That's because last week, news broke that the U.S. government told a second aircraft carrier group to go to the Middle East. President Trump is imploring Iran to make a deal on its nuclear weapons and missiles programs. Iran's leadership is in a vulnerable position. This comes off the back of massive countrywide protests that swept the nation around New Year's. They've mostly been quelled for now because of a bloody crackdown by the Iranian government.

0:44So far, activists say that at least 7 ,000 protesters were killed. There are many reasons for those huge protests. Censorship, religious discrimination, corruption. But the initial seed of these protests was economic. It started with shopkeepers frustrated with inflation and a currency collapse. This is The Indicator from Planet Money. I'm Waylon Wong. And I'm Darian Woods. Today on the show, the economic roots of Iran's protests. We speak with a small business owner in Tehran, and we learn why Iran is in such an economic mess.

1:23This message comes from the BBC with its new podcast, The Interface. Every Thursday, three leading tech journalists explore how tech is rewiring your week and your world. Listen to The Interface on bbc.com or wherever you get your podcasts. If you were dropped down from the sky onto central Tehran, you might find yourself at the Grand Bazaar. The Grand Bazaar is a gigantic marketplace of interlocking corridors. It's where wholesalers and retailers sell shoes and fabrics and cleaning supplies. And just outside the Grand Bazaar, you might find a workshop owned by Ali and his family. My parents, my grandparents, as much as I know about my background, they were all from Bazaar.

2:08Ali asked NPR not to use his full name because he fears retribution from the Iranian government. And we were actually lucky to be able to speak with him. You might have cut out. Because Iran's internet has been restricted off and on since early January. Hello again. Thank you for your patience. No problem. Ali's family business makes interior decorations that shop owners in the bazaar sell. Ali says business has been bad recently. He traces us back to the 12-day war between Iran, Israel and the U.S. last summer. He told us what his business managers have been telling him. They produce, but it's very difficult for them to sell.

2:45They are only producing, not selling. Inflation in Iran is running at around 50%, 5-0. That means by the time the bizarres, the shopkeepers, buy their products and then go to sell them, they're having to mark up their prices a lot. and then the customers are refusing to pay such high prices. The Iranian currency, the rial, has also lost extraordinary amounts of value. That means it's harder for bazaaris to import their goods from overseas. In late December, a handful of shop owners just outside of the Grand Bazaar had had enough. Arang Kesha Vazian is a Middle Eastern and Islamic Studies professor at New York University.

3:23They simply shut down their shops, closed the metal curtains. Sometimes, in some cases, they stayed inside the store as a kind of a symbol of their unwillingness to open and sell their goods. In other cases, they took to the street. Shop closures, sit-ins and rallies have a historical significance. This is the same sort of repertoire of actions that merchants and bazaris have used for well over 100 years, whether it was the Constitutional Revolution at the beginning of the 20th century or the oil nationalization movement in the 1950s or the 1979 revolution. In fact, Bazaris were a driving force of the 1979 revolution.

4:00They helped fund demonstrations that led to Iran establishing a theocratic-democratic hybrid government, one that's suspicious of Western influence. The humble shopkeeper has a huge amount of political power in Iran. As a general rule, the Bazaris, since 1979, are viewed as a strong pillar of the regime. They're generally socially conservative. And one way to see that is that when these protests started on December 28th, the government was actually quite conciliatory. It acknowledged the legitimacy of the concerns of these shopkeepers and merchants and so forth. And it tried to actually negotiate and sit down with them.

4:36But it was too little, too late. The protests were spreading to bazaars all around the country. All bazaars really have nationwide networks, whether it's lending networks or supply chain networks between wholesalers and retailers and so forth. So part of the reason that protests in the bazaar could actually spread and take on national scope is that if there is a kind of a disruption in the bazaar, that information and that news quickly spreads to shopkeepers and other brokers and intermediaries very quickly. And that's what happened within the first couple of days in December. We saw protests all across the country in other commercial centers and bazaars and other cities and even small towns.

5:20Soon, the discontent was about more than just the exchange rate or inflation. Water supply has been a big issue, for example. Farshid Vahedafad is a professor of civil and environmental engineering at Tufts University. Over the past, I would say past few years, past five, six years, the whole country has been struggling with a severe drought. This has meant power cuts from dry haja power dams and even water restrictions in cities like Tehran. Farshid says the water problem has its roots decades ago, when the new Islamic Republic of Iran got a bit carried away building too many dams. Building new dams kind of become a sign of independence and sign of development.

6:00In fact, Farshid used to design these dams in Iran himself until he moved to the U.S. in 2007. He says they were as big as the Hoover Dam. These dams would extract more and more water from natural sources so that Iran could grow more of its own crops. And after several decades worsened by climate change, access to water started to become a real problem in Iran. Water was just one other pent-up issue. NYU professor Arang Kashavarzian says university students were concerned about civil rights. By the third day, it included universities and university students in Tehran, as well as other major cities, Asfahan and Yazd.

6:37After enormous demonstrations around the country, there was talk that this could be existential for the regime. There could be some sort of new revolution. That's when the government started shooting protesters in the street. The truly brutal crackdown of January obviously has hit Iranians very, very hard. This has kind of reached a scale that I think most Iranians did not expect. In early January, President Trump said he would come to the protesters' rescue. But that hasn't happened. The White House's main focus in negotiations with Iran is still preventing it from acquiring a nuclear bomb. That's one of the big reasons why President Trump put extra sanctions on Iran last year, limiting its oil sales.

7:21This is a major cause of this economic crisis. That said, as much as lifting sanctions would help Iran's economy, the problems go deeper than that. The Iran economy has been basically for the past 10 years, 15 years, been in recession. This is a combination and kind of a vicious cycle combining sanctions as well as mismanagement of the economy, which has generated lots of negative outcomes. Most importantly, from my perspective, a lot of corruption and development of oligarchs and monopolists and so forth. And connected to that is a lot of inequality. So this is in the background. Oring is not optimistic about real change in the short term.

8:01That's because the inflation and currency collapse last year was just the spark. The country had long been sitting on bone-dry tinder. Right now in Tehran, Ali says people aren't buying much of anything at the bazaar, with one exception. The only market which is still working in a normal way is the food industry. People still have to eat. Yes. They think that if I can't buy a new sneaker, why shouldn't I spend it for a good restaurant? Maybe I wouldn't do that, but everyone do that. Thank you.