In our Third-Quarter Forecast, we discussed how Iran would begin experiencing increasing economic strain as U.S. sanctions pressure rose. This would, in turn, nudge Tehran to walk back its commitments to the Iran nuclear deal, as political hard-liners gain more influence and moderates run into barriers.
Iran has been experiencing localized protests in response to the country's growing economic crisis. On June 24, there were two protests at malls in Tehran against telecom retailers that have been hoarding phones and electronics in order to sell them at higher profit margins as the Iranian rial decreases in value. Then on June 25, several shopkeepers in Tehran's Grand Bazaar closed their businesses to protest the declining currency, and many demonstrators eventually marched to Tehran's parliament building.
Now, on June 27, 187 members — nearly two-thirds — of the parliament signed a statement demanding that the country's three branches of government work together to deal with the protests and the struggling economy. Some legislators have even said that if President Hassan Rouhani fails to reshuffle his economic team and collaborate with the judiciary and parliament, they will support beginning the impeachment process.
As the United States increases its sanctions pressure and demands that its allies stop importing Iranian oil, Iran's economy has been suffering tremendously. The Rouhani government is hoping that by trying to remain transparent, by blaming the United States and by blaming individual shopkeepers, it can deflect some of the criticism toward its handling of the situation. But it can only do so much as the economic situation worsens. Iran's oil exports will be curtailed more over the coming year, which will further exacerbate economic pain and contribute to more protests.
So far, these demonstrations appear to be driven by the urban and suburban middle class, a group that typically backs moderates like Rouhani and that largely stayed out of protests earlier this year, which were driven more by poorer, rural Iranians. But the upper-class involvement means that if unrest escalates, demonstrations could cross class lines and threaten government stability.
As long as the protests remain manageable and geographically limited, hard-liners within the government will continue using the unrest to try to weaken Rouhani's administration, as they have done with the latest parliamentary statement. There is considerable conflict between political factions, and a prolonged economic downturn could lead hard-liners, who control more of the government than Rouhani's moderates, to try to exert more control over all of the country's affairs. They could attempt to involve themselves in domestic economic policy, something that the president typically handles.
In their efforts to stabilize the unrest and quell any spontaneous economic protests, hard-liners are not above resorting to heavy-handed techniques. On June 26, Sadeq Larijani, the chief of the country's judiciary, threatened protesters, whom he described as seeking to "betray" and "disrupt" the economy through corrupt means, with death by hanging.
There are also reports that hard-line groups such as the Islamic Revolutionary Guard Corps and the clerical establishment initially supported the protests. Indeed, media outlets tied to these organizations were providing significant coverage. But this is more likely another sign that they are attempting to weaken Rouhani's power and discredit his administration, rather than actually encourage the demonstrations, knowing that no matter how it starts, unrest over time risks destabilizing the political ground they stand on too.