Iranian Protests: A Republic Divided

On 28 December 2017, anti-government protests broke out in Mashhad, a key site of pilgrimage for Shiite Muslims and Iran’s second largest city. The ongoing wave of protests across the country represent the largest show of public discontent against the Iranian regime since the Green Movement in 2009, when millions of Iranians took to the streets to protest against the re-election of former President Mahmoud Ahmadinejad. The current demonstrations, in which at least 21 people have been killed and over 1,000 arrested, are led by a different demographic and highlight the economic woes suffered by a traditionally marginalised group of Iranians: the working classes.

The precise origin of the protests, which initially focused on rising prices and President Rouhani’s failure to rejuvenate the economy, is unclear. One credible interpretation suggests that religious hardliners in the conservative city of Mashhad tolerated, or even instigated, the anti-regime demonstrations in an attempt to undermine Rouhani’s leadership. Mashhad is a stronghold of Ebrahim Raesi, a prominent hardliner who stood against Rouhani in the presidential election in May 2017.

However, of greater importance is that unlike in the Green Movement of 2009 and the widespread student protests in 1999, these recent demonstrations did not begin in Tehran and have not been dominated by reformists and the affluent middle classes. Instead, the protests started in a provincial city, Mashhad, and comprised working class Iranians, who have been economically and socially marginalised under the Islamic Republic and many have traditionally stayed out of politics.

The increased use of social media and smart phones in Iran has helped organise further protests in other smaller cities, such as Karaj and Zanjan, and spread videos and images of the unrest at home and abroad. This led the government to block access to Telegram, a messaging app, and Instagram, a photo-sharing app widely used in Iran. Approximately 2 percent of households in Iran were estimated to have access to at least one smart phone in 2009 – this figure had risen to 41 percent in 2016, representing an underlying threat to government control.

So what made this constituency, long marginalised and customarily
apolitical, change their tune?

On 10 December 2017, Rouhani announced the draft of an austere budget proposal for Nowruz, Iranian New Year, which starts in March. The proposed budget will hit low-income families hard, including increasing the price of petrol by 50 percent and withdrawing a popular cash subsidy, received by 77 million Iranians, from individuals who earn over USD 200 per month. This subsidy amounts to USD 13 per month per person and is relied upon by low-income households; cutting it by the anticipated USD 5.3 billion is expected to impact 30 million Iranians. In the face of ongoing unrest and in order to gain ratification for the budget in parliament, Rouhani may be forced to modify its terms.

Rouhani’s budget is set against the backdrop of long-term structural issues, which must be solved if the reformist regime is to avoid recurrent protests not only from low-income households, but also millennials and their natural constituency, the middle classes. The easing of nuclear-related sanctions in January 2016, which were imposed on Iran during the 2000s by several governments and international organisations, has not resulted in a flood of foreign investment and economic progress. Currency depreciation, inflation, poor living standards and unemployment are rife. The price of basic foodstuffs, such as eggs, increased by approximately 40 percent in 2017; the consumption of red meat, bread and milk has fallen by 30-50 percent over the past decade; and, in some areas the unemployment rate sits at over 60 percent. University students’ participation in the protests, such as at Tehran University, a leading higher education institution, highlights the dissatisfaction of Iran’s millennials with their future economic prospects. Up to 40 percent of 15-24 year olds are unemployed and 830,000 Iranians are predicted to enter the job market in March 2018, of which 70 percent are university graduates – a figure which is steadily increasing year on year.

The draft budget has shown working class Iranians and millennials that their economic suffering comes second to the growth of religious and revolutionary institutions. For example, the High Council of Religious Seminaries, an institution which oversees seminaries and issues permits for new schools, will receive USD 110 million under the new budget – a greater than 16 percent increase in its government funding. The growth of these institutions means that government mismanagement, corruption and the consolidation of clerical power are expected to continue. For foreign companies looking to operate in Iran or to partner with Iranian counter parties, this will make due diligence, compliance and source of wealth investigations even more critical. We have worked on multiple such investigations, and continue to provide this for a number of international companies, including in the extractives, manufacturing and financial sectors.

In spite of these issues, in 2017 Iran’s economy enjoyed several quiet success stories, which over time could provide the foundation for economic recovery and increased foreign investment. In May, Rouhani was re-elected on a manifesto of economic reform and the hope of eventually reaping the benefits of the so-called Iran nuclear deal of July 2015. In December, the International Monetary Fund forecast that gross domestic product would increase by 4.2 percent in the 2017/2018 fiscal year and announced that economic growth has started to include the non-oil sector. In mid-January US President Donald Trump extended nuclear sanctions waivers, but warned that this was for the last time unless a harder line is taken against Iran’s weapons development. This will have an important impact on the future of foreign investment in Iran and the country’s economic record in 2018 and beyond.

However, the protests are symptomatic of deeper divisions in Iran. Whilst the protests are not unified and show no clear leadership, they have quickly broadened beyond economic concerns. A number of protestors attacked the regime in a personal and direct way, at odds with previous demonstrations. Protestors called for the resignation of Ayatollah Ali Khamenei, the Supreme Leader, and even burnt a banner with his image on. The demand for an end to Iran’s multi-billion-dollar interventions in Syria, Palestine and Yemen shows that some attitudes have changed. A growing constituency of Iranians no longer support Iran’s foreign policy, which is fundamental to the Islamic Republic’s constitution and ideology, and believe funds used to export the revolution should be redirected to its ailing population.

The ongoing protests are the physical sign of a country divided between Islamic ideology and economic pragmatism and overseen by an aging, clerical elite out of touch with the demands and economic suffering of its population. Rouhani himself hinted at the understandable existence of generational division and the varied demands of protestors in an announcement earlier this week. This admission by the president suggests there is a glimmer of hope for the introduction of economic and social change that meets the demands of Iran’s youth and working classes.