Iran's self-inflicted economic woes harm not just its people, but the region, too

While much of the region has spent this week preparing for a new year ahead, the mood in Iran has been consumed largely by the problems of the present. Protests have spread across the country about soaring inflation, rising food prices and the country's tumbling currency. Last Sunday, the rial plummeted to 1.42 million to the dollar – in December 2022, the rial was trading at about 430,000 to the dollar. This major decline has compounded inflationary pressures, pushing up the cost of daily necessities and straining Iranians’ household budgets even further.

The fact that the nationwide demonstrations – the biggest since the 2022 street protests over the death of Mahsa Amini – began with shopkeepers and bazaar merchants before drawing in large numbers of students reflects the widespread impact of Iran’s problems. The economy is in chronically poor shape, labouring under the weight of international sanctions and the effects of last year’s war with Israel.

The ⁠reimposition of American sanctions in 2018 during US President Donald Trump's first term ⁠has limited Iran's oil exports ⁠and access to foreign currency. The economy is at risk of recession, with the World Bank forecasting that gross domestic product will shrink by 2.8 per cent this year.

Mass protests across Iranian capital after currency's dismal decline 00:45

But those taking satisfaction in Tehran’s domestic problems are mistaken.