
Anger over the falling value of the Iranian currency has led to widespread protests
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Rahul Tandon
Hello, this is Business Daily here on the BBC World Service with me, Rahul Tanden. We're asking what's gone wrong with Iran's economy and why has that triggered mass demonstrations across the country?
Mahdi Godsai
I think it's the worst, the most direst condition of Iran in the past 50 years.
Rahul Tandon
We look at the impact that that's having on, on people's lives.
Arash Azizi
People don't eat meat anymore. You know, like most Middle Easterns, we love kebab in Iran, but it's like a luxury now. Chicken also kind of a luxury fish, Forget about it.
Rahul Tandon
And as the protests grow, will the government's promise of direct cash payments ease the crisis?
Negar Motazavi
A little bit of rice, a little bit of bread, a little bit of cash subsidy that can be spent on food. It's just not enough.
Rahul Tandon
That's all coming up on Business Daily from the BBC. Thousands of people have taken to the streets across the country. We know that many people have died. It's difficult to give you an exact number. The Reuters news agency, though, says an Iranian official has told them about 2,000 people have been killed, including security personnel. There are, of course, many different factors, but here on Business Daily, we wanted to look at the economic ones. The collapse of the currency, the impact of sanctions and the effects of corruption are the three areas that we're going to focus on for you. But how did we get here? Let's go back to 1979.
Arash Azizi
At 10 minutes to 10, Khomeini was.
Rahul Tandon
Being held down the steps of his chartered Air France jet to set foot on Iranian ground for the first time.
Arash Azizi
In 15, 15 years.
Rahul Tandon
That was the moment when Ayatollah Khomeini returned to Iran after being in exile for 15 years, the start of the Islamic Revolution in which the Pahlavi dynasty was overthrown. Since then, clerics have run the country, which is one of the world's largest oil producers and home to more than 90 million people. Economically, life has been hard. The Iran Iraq war in the 1980s and more recently, the impact of US imposed sanctions have led to protests. But let's look at what started these latest ones in December. They began in the historic Tehran bazaar as the Iranian currency, the real collapsed, driving up the prices of many of the goods that were sold there. Let's hear from one of the shopkeepers.
Mahdi Godsai
Look at this market. None of the shops have customers. Why? Because people don't have money now. How can anyone buy anything now? I'm ashamed in front of my wife and children. We are barely surviving.
Arash Azizi
The merchants, the classical Iranian merchants of bazaaris did indeed have an important role in the 1979 revolution in igniting it, in keeping it going. So they were a very important part of the revolution. And the fact that the regime had clearly even lost them mattered quite a bit.
Rahul Tandon
Arash Azizi grew up in Iran and his family is still there, but he's now in the us he's the author of what Iranians Want, and he's been telling me about life in Iran.
Arash Azizi
Let's say a teacher or a nurse. I mean, this used to be nice jobs. If you're a teacher or a nurse, you'd be able to afford quite a few things. Now you can barely afford rent. In bigger cities like Tehran, like an entire Monthly salary of a nurse would not pay for a decent apartment. The food cost has just exorbitantly gone up. Inflation is set up 50% at times, but for the food, it's actually closer to like 70% for food items. So what does this mean? It means that people don't eat meat anymore. You know, like most Middle Easterns. You know, we love kebab in Iran, but it's just. It's like a luxury now. Chicken, also kind of a luxury. Fish, forget about it. Fresh fruits, which Iranians love to have. Forget about exorbitant amounts that we like to have.
Rahul Tandon
It's obviously a country you know very well. It's an important part of who you are. Tell me some of the stories you're hearing from people there about how difficult life is, about the frustrations that they have when it comes to just making ends meet.
Arash Azizi
It's very personal. The reality is Iran is doing worse now in almost every way than it was 20 years ago. And we love to be proud of our achievements, of our arts, of our culture. You know, 20 years ago, I mean, I was sure that Iran is going to do better in every way. You know, when I told you about people not being able to sort of afford chicken, I mean, you know, I talk to Iranians, friends, family, my grandmother, you know, people, when you ask, have a casual conversation about, oh, you know, people going over to each other's houses. Well, many people can't afford it anymore, actually, you know, sort of to give this sort of food parties that are very. We call it mahmuni in Persian. You cook for people and they come and they stay. And you have sort of have debates and all that. It's just harder to organize. It's harder to host because people. People can't afford enough food. And then you've seen unbelievable things like there are restaurants in southern Tehran which sell half portions. I mean, that's more normal. But they're serving dishes like, you know, rice with bones of meat or chicken because people can't afford the actual thing. So, you know, they will just get some of the broth and the bones. I mean, they're not just symbolic, but they sort of stand for something broader, which is really sort of economic degradation in Iran.
Rahul Tandon
Let's pick up on what Arash was saying. We often use GDP to look at the state of a country's economy as it tells us the value of goods and services produced. Iran's GDP was in 2012, $644 billion. It's now projected for 2025 to be just $356.5 billion. Most countries in that period saw their GDP rise, not decline. So let's look at the factors which have led to this economic crisis and start with this issue. In a few moments, I'll be signing an executive order imposing hard hitting sanctions.
Arash Azizi
On the Supreme Leader of Iran and.
Negar Motazavi
The Office of the Supreme Leader of.
Arash Azizi
Iran and many others.
Rahul Tandon
Sanctions were first placed on Iran by the US in 1979 following the seizure of the US embassy in Tehran. It recently lost its title as the most sanctioned country in the world to Russia. But the impact has been crippling. Dr. Sanam Vakil is a senior research fellow at the Chatham House think tank in London and was born in Tehran.
Sanam Vakil
It could impact trade with Turkey, Pakistan, the uae, that are all important players in helping the Iranian economy stay afloat. The idea is to force these countries to make choices and thereby constrain Iran's economic lifelines and engagement further. This will then of course translate into further pressure on the Iranian economy that is already suffering from huge collapse of its currency and inflation.
Rahul Tandon
Yes. And as we've seen, will have a huge impact on the government, but also on people's lives.
Sanam Vakil
Yes, of course. Yes, of course. I mean, there are some workarounds that one can imagine. Barter arrangements and the such can certainly be made in order for Iran to access goods abroad. But at the same time, it's also hard to say how the Trump administration is going to really manage and implement this trade tensions with China are also important to watch. Thus far, the Trump administration has sort of turned a blind eye to Iran's exports of oil to China as well. So it will be important to watch these dynamics play out.
Rahul Tandon
Sanam Vakil there on the latest developments on sanctions and the impact they may have on the Iranian economy. You're listening to Business Daily on the BBC World Service with me, Rahul Tandon. And today we're looking at the state of Iran's economy.
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Rahul Tandon
One of the main factors behind the demonstration has been the collapse of the local currency, the rial. Dr. Madi Godsai is an Iranian economist based in Austria. He's been following this very closely.
Mahdi Godsai
This is a continuous issue which was continuing in the past decade. So I remember a time that US$1 was 1,000 toman or 10,000 rials. Now currently it's 150,000 toman or 1,500,000 riyal. It's a huge devaluation and depreciation of Iranian riyal. It means that people who are dependent on imports of many goods and the country is not self sufficient in even food products, medicine, medical equipment, feed for livestock, all kinds of things that are being imported in Iran. It is continuously becoming more and more expensive. Imagine that a year ago US dollar was half of what it is right now. And that's why I think even the bazaaris have been pushed to the streets for protests.
Rahul Tandon
Why has the currency collapsed so much recently?
Mahdi Godsai
One major factor is actually sanctions and because Iran does not have enough currency Reserves it cannot sustain or it cannot maintain a fixed exchange rate regime. That's one important issue. Lack of currency reserve. Another factor is of course, geopolitical issues, geopolitical tensions and uncertainties that are coming to the financial sector of Iran. And it leads to capital flies. Capital flying in the sense that people cannot sustain their lives, so they tend to change their savings into foreign currencies and it pushes the foreign currency's values.
Rahul Tandon
And a lot of people will have seen and heard about the government scrapping the preferential exchange rate system. What does that mean and what sort of impact did that have?
Mahdi Godsai
So because Iran was under sanctions and because of avoiding fluctuations of exchange rate having effects on imports of foreign goods, the government introduced preferential exchange rate which was much, much lower than the market rate. So the preferential exchange rate was initially used for imports of primary commodities like food, foodstuff, livestock, feed, medicine, etc. So gradually, because of rent seeking behavior of elements of the government itself, the ones who were taking preferential exchange rate for the imports of such products, the, they didn't sell those products to the market with the preferential exchange rate anymore, but they were selling it with the market price.
Rahul Tandon
So they were making lots of money, weren't they?
Mahdi Godsai
They were making lots of money out of this corruption. So it means that there was a leakage in the financial system, there was a leakage in the exchange rate and that's why the government wanted to fix it and unify the exchange rate. But because there was a huge gap between preferential exchange rate, which was 28,500 toman, and the one in the market which was 150,000, if they wanted to remove it, many of the essential goods that are being imported, they would become so expensive so that the bazaaris could not sell anymore, could not make profit anymore. So that was another push.
Rahul Tandon
Mahdi touched on our final point, which is the level of corruption in Iran and the impact that has had on its economy. Let's pick up on that with our final guest, Negar Motazavi, the host of the Eye for Iran podcast.
Negar Motazavi
The state has to rely on non state actors or state adjacent private entities, private actors, to essentially sell this very high value national resource into the global market. And that creates a lack of transparency, a black market situation, to the point that even the president is now publicly complaining that some of these actors who work with the government don't even bring the cash that they gain from some of these supposedly state sales inside the country because there's no accountability, there's nothing on paper because they're trying to defy sanctions. So that has created a very huge layer of corruption and there's even a term for that, sanctions profiteers. So it's created this small minority of elite who are benefiting from these economic sanctions. These are people who are either part of the regime, very well connected or state adjacent. And they're profiting and they're essentially getting wealthier and more powerful, even politically, while the average Iranian middle class and working class is bearing the brunt of sanctions and is paying the price for that.
Rahul Tandon
But that is a problem that the Iranian government could tackle very quickly, couldn't they? If they just deal with those corrupt officials, wouldn't that help tackle the problem and keep more money in the economy?
Negar Motazavi
They could and they can't. First of all, these people have become so powerful that it's almost impossible. You don't know who has that kind of power. They've talked about cracking down on this corruption time and time again. But they also rely on this sort of black market or non transparent, non accountable route for international trade. So it's a very tricky balance. And what's really happened over the years is that the Iranian, certain classes of Iran have disappeared. Middle class has been pushed into poverty, the, the more working class has been pushed down. People can afford less and less and less. At the same time they see these profiteers, domestic corruption and also the profiteers of sanctions just getting more powerful and more wealthy.
Rahul Tandon
As we speak, the protests are continuing in Iran. The Iranian government has also said there have been demonstrations in support of its policies and it has recently offered Iranians a seven dollar handout as prices continue to rise. The government is already spending millions of dollars on fuel subsidies. So will that make a difference? Here's Negar again.
Negar Motazavi
Not enough. I think not enough. It's a good start, but it wasn't enough. First of all, is that cash dividend or that subsidy that's injected to the consumer going to respond to the increase in prices? And also is it going to be sustainable? Because they have seen measures like this, this band aid sort of approach in the past, but it hasn't been sustained or down the line it wouldn't work because there's some other glitch with the policy. Especially when they enacted into such a large population. It's a country of almost 90 million people. So the economy is very complex and the problems they're dealing is very complex. There are well intentioned, well meaning economists within the system who have been really wrecking their brain to try to fix it. But every Every solution they come up with down the line also enters a glitch or hits the wall of the massive and very powerful wall of corruption. So there's also sort of this lack of trust of what is this one little injection of cash going to do for me down the line?
Rahul Tandon
Okay, so huge problems economically for Iran. Is there much that the government can do to tackle those problems? What would you advise them to do?
Negar Motazavi
I think just considering right now, the solution right now, which many analysts have been talking about, is to try to come out of this isolation, to try to sort of reconcile the foreign policy, the aggressive foreign policy, adventurous foreign policy that has brought these economic sanctions to begin with. Yes, the west, the US are responsible, but so is the regime. The regime is responsible for this isolation, for this economic policy that has been imposed on them because of their posturing both in the region and towards the world.
Rahul Tandon
Sorry to interrupt you, but that's unlikely to happen, isn't it? Or do you think they could suddenly change some of their policies that could lead to an end of the sanctions?
Negar Motazavi
I don't know. We have to ask the leaders. It has happened in the past. So Iran was engaged in a bloody war with Iraq in the 1980s, and it looked like there's no end to it. And eventually, after eight years, they came to a ceasefire. They were forced to a ceasefire. And back then, the Supreme Leader, the leader of the country, essentially portrayed it as him drinking a chalice of poison. He literally said, okay, I'll take this, but it's a chalice of poison. Until the last minute, it didn't look like they're going to stop or accept that ceasefire. But it came with pressure again. Years of sanctions and pressure from the US brought us to the era of Barack Obama, around 2015, when Iran and the US had historic nuclear negotiations. And eventually Iran did agree to make a deal with the US that looked unlikely a few years before that, but it did happen. And so they made a compromise which seemed like defying their past positions. And so there have been points where with not just pressure, but also sort of an opening and or an off ramp for diplomacy that was provided. They decided to take the off ramp. So I don't want to say it's impossible, but so far it doesn't look like that's the path they want to take.
Rahul Tandon
These are uncertain times for Iran. Whatever happens and whoever runs the country, even if sanctions were lifted, the economic crisis that millions of Iranians are facing looks set to continue. You've been listening to Business Daily with me, Rahul Tandon. This program was produced by David Kann and Matt Lynd. You can hear more episodes just search for Business Daily wherever you get your BBC podcasts.
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This episode of Business Daily investigates Iran's deepening economic crisis—what has triggered widespread protests, why life for ordinary Iranians has become so difficult, and whether government measures can stem the tide. Host Rahul Tandon explores the key drivers: currency collapse, runaway inflation, sanctions, and systemic corruption, through candid conversations with Iranian economists, analysts, and first-hand accounts from those living and working in and around Iran.
Quote:
"I think it’s the worst, the most direst condition of Iran in the past 50 years."
— Mahdi Godsai, Iranian economist ([02:31])
Quote:
"People don't eat meat anymore. You know, like most Middle Easterns, we love kebab in Iran, but it’s like a luxury now. Chicken, also kind of a luxury. Fish, forget about it."
— Arash Azizi, author and journalist ([02:41], repeated at [05:39])
Quote:
"There are restaurants in southern Tehran... serving dishes like rice with bones of meat or chicken because people can't afford the actual thing... they will just get some of the broth and the bones."
— Arash Azizi ([06:37])
Quote:
"This will then of course translate into further pressure on the Iranian economy that is already suffering from huge collapse of its currency and inflation."
— Dr. Sanam Vakil, Chatham House ([08:47])
Quote:
"Now, currently it's 150,000 toman or 1,500,000 rial. It's a huge devaluation and depreciation... It is continuously becoming more and more expensive."
— Mahdi Godsai ([13:01])
Quote:
"They were making lots of money out of this corruption... leakage in the financial system, leakage in the exchange rate... essential goods that are being imported, they would become so expensive so that the bazaaris could not sell anymore."
— Mahdi Godsai ([15:26])
Quote:
"There's even a term for that: sanctions profiteers. So it’s created this small minority of elite who are benefiting from these economic sanctions."
— Negar Motazavi, Eye for Iran podcast ([16:15])
Quote:
"It’s a good start, but it wasn’t enough... the economy is very complex and the problems they’re dealing (with) are very complex ... every solution they come up with ... hits the wall of the massive and very powerful wall of corruption."
— Negar Motazavi ([18:38])
Quote:
"Iran was engaged in a bloody war with Iraq in the 1980s, and it looked like there’s no end to it… and eventually, after eight years, they came to a ceasefire ... But so far it doesn’t look like that’s the path they want to take."
— Negar Motazavi ([20:27])
| Speaker | Timestamp | Quote | |----------------|-----------|-------| | Mahdi Godsai | 02:31 | "I think it’s the worst, the most direst condition of Iran in the past 50 years." | | Arash Azizi | 05:39 | "People don't eat meat anymore... kebab in Iran, but it’s like a luxury now. Chicken also kind of a luxury. Fish, forget about it." | | Negar Motazavi | 16:15 | "There’s even a term for that: sanctions profiteers. So it’s created this small minority of elite who are benefiting from these economic sanctions." | | Negar Motazavi | 18:38 | "It’s a good start, but it wasn’t enough... every solution they come up with ... hits the wall of the massive and very powerful wall of corruption." | | Negar Motazavi | 20:27 | "But so far it doesn’t look like that’s the path they want to take." |
This episode is marked by direct personal testimony, frank expert analysis, and a tone of deep concern mixed with realism. Iranian voices express both pride in their culture and mounting frustration, while expert guests explain the mechanics of economic decline in accessible terms.
This episode offers a vivid window into Iran’s ongoing economic collapse—its day-to-day impact, structural causes, and the sense of entrapment felt by ordinary people. Rather than sensationalize, the discussion underscores the complexity of the crisis, the outsized role of sanctions and corruption, and the difficulties in finding any easy solution. You’ll come away with a clear understanding of why the crisis is so deep—and why it’s so hard to fix.