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The Nuclear Deal Was Supposed to Make Life Better for Ordinary Iranians. They Aren’t Seeing It.

Iranian students protest at the University of Tehran during a demonstration driven by anger over economic problems, in the capital Tehran on December 30, 2017.
Students protested in a third day of demonstrations sparked by anger over Iran's economic problems, videos on social media showed, but were outnumbered by counter-demonstrators. / AFP PHOTO / STR        (Photo credit should read STR/AFP/Getty Images)
Iranian students protest at the University of Tehran during a demonstration driven by anger over economic problems on Saturday. STR/Getty Images

While there is no lack of experts speaking confidently this week about the causes of Iran’s widespread anti-government protests, it’s safe to say that few observers outside (or even inside) the country saw this coming.
Unlike the mass protests that followed the disputed election of 2009, there was no immediate precipitating event for this unrest. And while the country has certainly faced some international challenges lately, all indications suggest that most Iranians back their government in recent confrontations with the United States and Saudi Arabia.

The protesters are a diffuse and decentralized group with a variety of grievances. Still, the economic factors that appear to be motivating many of those taking to the streets didn’t pop up in just the past week.

In a poll released this past June by the University of Maryland and Toronto-based research firm IranPoll, two-thirds of Iranians described their country’s economic situation as bad, with 34 percent calling it very bad. Seventy-seven percent said their economic situation had worsened over the past year, and most people thought the overall economic picture for the country was getting worse. During the runup to last year’s presidential election, 63 percent of Iranians said unemployment was the country’s most important challenge.

While a majority of Iranians supported the 2015 nuclear deal, 70 percent said that the lifting of sanctions under the deal hadn’t improved living conditions. Even a majority of those who voted for Hassan Rouhani, who has promised to improve economic conditions by ending the country’s economic isolation, agreed that the deal hadn’t delivered for ordinary people and had mostly benefited those with political connections.

But this pessimism, even if it’s recently worsened, isn’t enough to explain the current explosion of discontent on its own. “The economy is a perennial issue of concern,” says Suzanne Maloney, a senior fellow at the Brookings Institution and author of Iran’s Political Economy Since the Revolution. “I’ve never seen a period when people thought the economy was growing in a way that benefited them.”

Part of the issue may be that Rouhani raised expectations for the deal. “Fundamentally, the issue is a trickle-down problem,” says Maloney. “People thought the nuclear deal was a peace dividend, that there would be jobs and increased opportunities for Iranians of all walks of life.
That was never realistic.”

On paper, the Iranian economy has perked up significantly since the nuclear deal, with a growth rate of 13.4 percent in 2016 compared with a contraction of 1.3 percent in 2015. But most of that growth is concentrated in the oil sector, which doesn’t employ that many people, rather than the wider economy. Unemployment increased to 12.6 percent in the spring of 2017.

Part of the problem is that, despite what many Iranians believed before the deal was signed, the nuclear agreement left many U.S. sanctions in place, and international firms are still cautious about investing in Iran in the current climate.

But many of the problems are also domestic. Iran is facing a serious banking crisis, with many financial institutions undercapitalized after an era of freewheeling lending under former President Mahmoud Ahmadinejad.

The role of powerful state actors in the economy, including the business empire of the Revolutionary Guards, gets a lot of attention in the West, particularly in discussions about sanctions policy, but Maloney suggests that a bigger problem may be the “gray zone of semistate enterprises.”

“You have these periodic gambits of privatization that are essentially passing assets of the state off to semistate enterprises or private individuals who’ve left government and enriched themselves,” she says.
“There’s an enormous amount of corruption.”

On top of that, Rouhani has essentially been running an austerity budget, including cuts to welfare programs and fuel subsidies in order to deal with inflation and currency problems. These policies have disproportionately affected working-class Iranians, who appear to make up the bulk of the protests in many cities. (While it’s a mistake to generalize, the normal stereotype of the Iranian opposition as dominated by educated, middle-class residents in Tehran doesn’t appear to apply here.)

Rouhani appears to be trying to use the unrest to press for more and faster reforms, though the degree to which these are protests against the system as a whole or against him is still unclear. But he has his work cut out for him. The entrenched interests pushing back against reform aren’t going anywhere. Immense political differences with the United States would make full rapprochement difficult, even if Trump weren’t in office. And there is a host of looming challenges from an aging population to growing pollution and water problems that will hamper economic growth going forward. Iran’s leaders will probably survive this political crisis, but worse may still be to come.

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