Over 2016, Iran's growth rate did rise as oil left the country and pent-up demand inside Iran was allowed to be fulfilled. The growth rate rose to a respectable 7.4%. But the danger signal here is that the non-oil growth rate was a mere 0.9%. This was an oil-driven recovery and it was dependent on oil prices. Before he came to power in 1979, Ayatollah Khomeini had said, "Economics is for donkeys."
The Islamic Republic -- unlike the Bolivarian government in Venezuela -- made little attempt to diversify the economy and prepare for a post-oil future. Rather it relied upon its oil revenues for both its domestic policy and its foreign policy (including the support to the Lebanese political force -- Hezbollah -- and the Syrian government). Iran remained vulnerable as long as its economic power was dependent on oil. Its vulnerabilities are now on display.
Official unemployment sits at 12.7%, but this is a very inaccurate figure. Sources in Iran say that the youth unemployment rate might even be as high as 50%. To bring down inflation the government has steadily eliminated subsidies on energy and bread. Prices of these goods have gone up -- a decisive factor in the protests. It is important to point out that in anticipation of the end of these subsidies, the government began a universal cash transfer scheme in 2010, which has been attributed to a decline in poverty from 13.1% (2009) to 8.1% (2013). But the fact of a decline in poverty did nothing to the anger at the subsidy cuts that came when prices of basic goods (energy and bread) rose, despite the fact that overall inflation declined. In fact, by 2014, the poverty rate began to rise again -- a sign that Rouhani's policy of inflation control has been a direct attack on the Iranian working-class and lower middle-class.
There is something vulgar about the way Trump and Netanyahu and their ilk are fanning on the protests in Iran. After all, it is the US-Israeli policy to strangle Iran that has created the conditions for these protests. But the end of the sanctions has condensed frustration in the government of Rouhani and in the Islamic Republic itself -- not on the West's continued policies. Politically Trump and Netanyahu benefit from Obama's nuclear deal; it has made it appear as if the West is no longer responsible for the crisis in Iran.
Tens of thousands of people have taken to the streets. But tens of thousands more followed to defend the Islamic Republic. These are tense times for Iran. It is clear that the government is going to have to accede to the pressure from this working-class uprising. It is not enough to describe the protestors as foreign agents.
Even if Trump and Netanyahu, the monarchists and the Mujahideen Khalq try to take credit for the uprising, they are not in charge. The well of Iranian patriotism is deep. The Iranians will not take their orders from the White House. But neither will they sit quietly as their lives fall apart before their eyes.
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