Jessica Mendoza (3:47)

Iran's current financial crisis has its roots in 2018 during President Trump's first term.

Donald Trump (3:54)

I am announcing today that the United States will withdraw from the Iran nuclear deal.

Jessica Mendoza (4:04)

The Iran Nuclear deal brokered by the Obama administration was meant to curb the country's nuclear program in exchange for sanctions relief. Trump reversed course and took a hard line against Iran.

Donald Trump (4:18)

We will be instituting the highest level of economic sanction. Any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States.

Jason Bellini (4:35)

That cut off Iran from the world financial system and made it this kind of closed system, almost where it was very, very isolated, and it put its financial system under a lot of strain.

Jessica Mendoza (4:49)

The renewed sanctions meant that Iran's banks couldn't do business with the outside world.

Jason Bellini (4:55)

For example, it is cut off from the swift payment system. The central bank is under sanctions. Several other Iranian banks are under sanctions. So this is a country that cannot borrow internationally, it cannot do trade normally, it cannot sell its oil freely, and it is deeply, deeply isolated.

Jessica Mendoza (5:19)

To put it simply, money stopped flowing into Iran's banks. In the years that followed, the Iranian government came up with workarounds to try to keep its economy afloat. For example, Iran's oil industry has had to increasingly rely on a so called shadow fleet of tankers to export oil abroad. That kept some money flowing to the state's coffers. Iran also used a workaround for its banks, turning to banks in Iraq for access to cash. But that practice became a lot tougher after a US crackdown in 2023. These pressures forced Iranian banks to rely more on its own government.

Jason Bellini (6:00)

And that created a situation where you have the central bank propping up this entire system. Something like 70% of Iran's banks were government controlled to some degree. That's according to an analysis by a former IMF official that I spoke to. By 2019, which is when things started to come apart at the seams, Iran's.

Jessica Mendoza (6:26)

Central bank used an emergency loan program to support the country's banking system. The loans charged high interest rates, but didn't require banks to provide any collateral. In order to fund these loans, Iran's central bank printed money which raised concerns about inflation and the weakening of Iran's currency, the rial. And the lender that became an emblem of this risky system was called Ayande Bank.

Jason Bellini (6:53)

Right. So Allende bank is a microcosm of these compound economic problems. It is a bank that was formed in 2013 by a guy named Ali Ansari, who is from what's believed to be one of Iran's richest families. He's close to the conservative establishment and he founded this bank that offered the highest interest rates on the market. And it was also heavily dependent on the Central Bank.

Jessica Mendoza (7:26)

So Allende borrows all this money from the central Bank. What does it do with it?

Jason Bellini (7:31)

Well, what the bank was doing is that it was basically acting as a kind of piggy bank for these lavish real estate projects, especially malls.

Jessica Mendoza (7:42)

Malls, like shopping malls?

Jason Bellini (7:44)

That's right. In particular, this one huge mall called the Iran Mall, which is in northwest Tehran and is believed to be one of the largest shopping complexes in the world. It has a hall of mirrors that is modeled after a Persian imperial palace. It has a car showroom, it has movie theaters, it has a library, you know, so it has like, you know, sports complexes. It's sort of like a city within a city.

Jessica Mendoza (8:14)

But here's the thing. The Iran Mall was built by the same guy who founded Ayanda Bank, Ali Ansari. So by investing in the Iran Mall, Ansari's bank was effectively lending money to his own company, money that came from the Iranian government.

Jason Bellini (8:30)

You have this bank that's like acting almost like a slush fund to fund this kind of garish shopping center that was a symbol of how these regime connected elites are just moving this money around to enrich themselves. What one of the senior officials at the Iranian Central bank said last year is that Allende bank was operating a Ponzi scheme. That is to say they were loaning out more money than they could possibly repay. And that's what you have in a Ponzi scheme, where you have a bank that is giving out loans that it cannot repay essentially and playing a shell game by moving that money around.

Jessica Mendoza (9:17)

The whole system started to unravel last year when Iran was hit with another major crisis.

Jason Bellini (9:24)

We start with the breaking news at this hour as Israel has carried out strikes on Iran's nuclear program.

Jessica Mendoza (9:32)

Last June, Israel bombed military facilities in Iran and kicked off a 12 day war. Iranian missiles targeted multiple cities in Israel overnight. With bat yam hit the hardest.

Donald Trump (9:42)

Last night, a fleet of American warplanes flew halfway around the and dropped more than a dozen 30,000 pound bombs on Iran's main nuclear facilities.

Jessica Mendoza (9:55)

While the conflict was short lived, it was a huge blow to Iran's economy. The Iranian government had to increase its military spending to rebuild destroyed air defenses and stock up on missiles, which added to the strain on the country's funds. And the war also had an impact on Iranians themselves. It made them really anxious, anxious that there could be more attacks and that the economy would tank.

Jason Bellini (10:22)

Money was leaving the country and Iranians themselves were taking their money out of the national currency, the rial. They're dumping the rial they're putting it in gold, in dollars, in euros. One economist that I spoke to estimated that between 10 and $20 billion in capital flight took place last year. And it triggered this currency crisis. The rial fell roughly 84% over the course of the year. So it just heaped more pressure on a system that was already under a lot of stress.

Jessica Mendoza (11:04)

The currency crisis put a target on Ayanda Bank. Some politicians worried for years that Iran's central bank was printing too much money to support Ayande at a time when inflation was soaring. Now they wanted it closed. In October, the central bank announced that Ayande would be shut down. In a statement, Ayanda Bank's founder, Ali Anzari, blamed the bank's failure on, quote, decisions and policies made beyond the bank's control. Days after the collapse, the United Kingdom sanctioned Ansari, calling him a, quote, corrupt Iranian banker and businessman. Ayanda bank had reached its end, but for the Iranian government, the crisis was just beginning. That's.

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Jessica Mendoza (13:12)

After the collapse of Ayanda at the end of 2025, how bad was the Iranian economy? What did it look like for everyday Iranians?

Jason Bellini (13:20)

It was bad. You know, when you have a currency that loses 84% of its value in one year, your ability to go buy groceries is going to collapse. I mean, one example that someone gave me is that the restaurants and shop that people had no idea how to put prices on their menus. Because when you have a currency that's declining every single day and every single hour, people don't even know how much to charge for things. Like, it's cheaper not to even open your Shop if you're just going to lose money on the energy and on the stocking your shelves and so on.

Jessica Mendoza (14:00)

The collapse of Ayanda bank made things even worse. The bank left behind a massive pile of debt that became the responsibility of the Iranian government, which was already strapped for cash. In December, the government announced that it would be making serious budget cuts.

Jason Bellini (14:18)

The government, led by President Pozoskyan, introduced this budget at the end of December that was essentially going to remove subsidies on bread, for example, on gasoline. And it pointed to the fact that the government was out of money. When you're talking about cuts on subsidies to bread and gasoline, like, those are things that are going to really hit ordinary people hard.

Jessica Mendoza (14:46)

These proposed austerity measures added up to a $10 billion cut in subsidies for many Iranians. This was the last str.

Jason Bellini (15:04)

That was really the immediate trigger of these protests because the government had to come out and say in numbers, okay, we have to cut back. We have no other choice.

Jessica Mendoza (15:15)

Hundreds of merchants who don't typically join mass protests took to the streets of Tehran. In an effort to mollify protesters, the government introduced a monthly cash subsidy of 10 million riyals per person. That's the equivalent of about US$7.

Jason Bellini (15:35)

But it's sort of too little, too late. They're trying to fight a fire that has already consumed them.

Jessica Mendoza (15:48)

Can you talk about the scale of these protests, how they grew in the past few weeks?

Jason Bellini (15:53)

Right. So they have spiraled to pull in a wide cross section of Iranian society. You had protests in cities across the periphery, in all kinds of regions, in Balochistan and the Kurdish areas, into Iran itself. Very importantly, these protests in the city of Mashhad, which is more religious, more conservative, which shows that some of the core constituents that would normally support the system as a whole, support the Islamic Republic, that those people are protesting. That is why it is a situation that is challenging the system as a whole.

Jessica Mendoza (16:33)

And how has the Iranian government responded?

Jason Bellini (16:36)

They have also launched a crackdown. There's been this very deadly, very concerning crackdown on protesters where you've had hundreds, if not thousands of people killed. And you've seen the videos circulating that we've reported also of the bodies piling up in morgues. And that's what our newsroom is focused on now, is trying to figure out how many people were killed, how many people died.

Jessica Mendoza (17:07)

Human rights activists in Iran, a watchdog group, said it confirmed the deaths of more than 2,600 people and more than 18,000 arrests. Officials in the region have said they'd seen A drop in protest activity recently, and residents reported an eerie quiet after days of violence. But it's hard to tell exactly what's happening because the Iran government has imposed a near total communications blackout. There's virtually no Internet access in the country at all.

Jason Bellini (17:35)

We're going to get the story out eventually, and we're going to find out just how many people are dead in what looks to be one of the worst, most lethal acts of political mass killing in recent years.

Jessica Mendoza (17:48)

For days, President Trump has threatened to take action against Iran if it killed protesters. On Wednesday, he said that Iran had stopped killing people. You mentioned several times that a lot of what happened in the last year and what led ultimately to what's going on now and what happened in December. It's a story of what happens when a country is totally isolated, especially financially. Was this inevitable? Was there anything the Iranian government could have done to prevent this from happening?

Jason Bellini (18:26)

That's a great question. I think, you know, what a lot of analysts have said is that Iran's government drove itself into a perfect storm of factors that caused this crisis, where you have this underlying banking crisis and a weak financial system, a war with a more powerful neighbor. And then a lot of Iranians are looking at this situation saying, okay, what was all this money spent on? Like, what was the point of all this?

Jessica Mendoza (18:59)

And meanwhile, Right, they can't afford bread.

Jason Bellini (19:01)

Yeah, exactly. And then, you know, it's just part of how a country like this stays afloat is ordinary people participate in the economy. You know, like you. You go to work every day, you go to school, you open your shop. And if you can't do that anymore, that's when that starts to come apart at the seams. What comes next is completely uncertain and unpredictable.

Jessica Mendoza (19:43)

That's all for today. Thursday, January 15th. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode from David S. Cloud and Benoifah Khan. Thanks for listening. See you tomorrow.