Name: Why is Iran’s economy struggling? | BBC News
Uploaded: 2025-07-17T08:06:05.000Z
Duration: 18 min 10 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

Hello, and welcome to Talking Business, as we join you all around the world.

Transition words & phrases

This week, it's the turn of Iran's economy to be under our microscope, because its status as the world's seventh biggest oil producer should be a source of great wealth.

Adverbs of manner

And in fact, why has it been doing so for years?

As we've recently been reminded, Iran's nuclear programme has been at the centre of that struggle.

It's triggered financial sanctions, as well as the recent war with Israel and fighting with the United States.

It's brought devastating economic sanctions that could yet pose the biggest threat to the survival of the regime that has led the Islamic Republic since 1979.

The BBC isn't often allowed to report from inside Iran, so it isn't easy to get an accurate reflection of how regular citizens feel about the economic situation.

But we did get these thoughts from people in Tehran back in March.

They were filmed by the West Asia News Agency and provided by our trusted partner, Reuters.

Due to the currency and dollar fluctuations, people's economic conditions have become difficult for them, and they cannot get everything they want from the market.

Given the economic conditions we're currently facing, there is some pressure on all segments of society.

We all feel this pressure to a greater or lesser extent.

Given the sanctions, downsizings, and economic conditions, not only the market, but also everything else is in a bad state.

In these financial conditions, people can't afford to buy things.

Look, the economic situation, there are always problems, but I personally am not very ungrateful or unhappy because I believe that sustenance and our ability to survive is in God's hands.

So why are people feeling downbeat about their livelihoods?

Iran's economy is hard to measure, but this graph shows how sanctions in 2011 and 2018 had a big impact on growth, which has only just recovered despite the population growing to 92 million people.

Over time, it has become harder for Iranians to make ends meet.

Household spending in big cities is down 30% since its 2008 peak, and in rural areas, it is down more than 50%.

One reason people have less money to spend is that less people are working.

That's partly because less women are working due to government restrictions.

The latest official numbers show prices for goods and services rising at a yearly rate of a whopping 34.5%, fuelled by mismanagement of the public finances and international isolation.

And in a speech in March, Iran's Supreme Leader, Ali Khamenei, acknowledged as much.

Yes, sanctions are not entirely without effect, but it isn't the case that if our economic situation is bad, it's only due to sanctions.

No, our own negligence sometimes has an effect.

And not just sometimes, most of our problems stem from our own negligence.

And a large part of that is how the huge sums Iran makes from selling oil are used.

Billions are being spent on weapons for itself and regional allies, as well as on Iran's nuclear programme and the government's security forces.

That money has flowed in despite sanctions, as Iran pumped more oil and other energy last year than it had done since before the Islamic Revolution in 1979.

And although export income is nowhere near the pre-sanctions peak, it has risen in recent years and now brings in around $78 billion a year.

Well, the vast majority is going to China, despite Western sanctions that President Trump had considered lifting.

I'm for stopping Iran, very simply, from having a nuclear weapon.

I want Iran to be great and prosperous and terrific.

We did try asking for an interview with Iran's recently appointed finance minister and the governor of the central bank, but we didn't get any response.

And as it's so difficult for anyone inside Iran to speak to the BBC, instead we turned to an Iranian economist who monitors the country closely.

He's at the Vienna Institute for International Economic Studies.

I want to begin by asking you how Iranians are coping day to day with soaring inflation that means goods and services there are costing roughly 40% more each year.

So, since six years ago when President Donald Trump in his first term in office withdrew the US from the Joint Comprehensive Plan of Action and imposed crippling secondary sanctions on the Iranian economy, since then inflation is hovering around 40%.

And it was a very high inflation because prior to that, it was less than 20%.

And since six years ago, unfortunately, because of the austerity measures that were introduced by President Raisi, the real income of employees, public employees, minimum wages in Iran, have decreased by about 50%.

And this is what Iranians are suffering from.

And this means a huge amount of pressure on their household income, on their costs, so they cannot spend as much as before.

But when we talk about Iranians coping from day to day, how bad is it getting for people in their daily lives?

There is not enough food on the shelves of shops and because of supply shortages that is coming actually because truckers strike about a month ago, about two months ago that it started.

So there is a huge supply bottlenecks and prices are increasing and increasing.

People may wonder why isn't the government though, managing to keep prices, wages and jobs under control with an economy growing at 3% a year?

Yes, the economy is growing, it's still growing.

And so much of this growth is due to increased oil exports that was being facilitated at the time of the Biden administration who turned blind eye on Iran's exports of oil to China, to Malaysia, to India.

So there was some growth, but the growth was not in other sectors of economy.

About 70, 80% of Iran's gross domestic product is going to Iran's public budget.

Iran is dependent on lots of intermediate and primary commodities, foodstuffs, pharmaceuticals that are being imported from outside.

And if Iranian government continues to devalue its own currency, it means that prices of these imported goods would again continue to rise.

Is it not only the lack of both an independent central bank, but also a lack of investment in badly needed infrastructure like electricity and water, which has shortages of both?

Of course, lack of investment in the past, let's say decade or even since 2011, since 2012, when the sanctions intensify, the business environment in Iran has never been good.

And due to that, investment has been declining.

So infrastructure is becoming rusty and the Iranian government does not manage to supply enough utility, energy, electricity, even water in certain periods.

So given all of this lack of private investment, lack of public investment, the situation and the living standards are not being improved.

It's surprising because on the face of it, a country that is the world's seventh biggest oil producer should be wealthy and thriving.

So where is the estimated $78 billion from oil sold abroad last year going?

Because of sanctions, because of mismanagement of the government, because we're dealing here with an autocracy that tries to conceal information that is not transparent.

We don't know exactly how much of it is going through different commodities and products.

So some parts of it, some parts of Iranian export is being transferred to imports of commodities like foodstuffs, like livestock feed, like medicine, pharmaceuticals.

These commodities are not targeted by sanctions.

So that's how Iranian government can still import these goods.

Are there any estimates as to how much of that money would be spent on weapons or Iran's nuclear program?

So there's some estimates that the cost of building the nuclear facilities in Iran in the past decades was reaching more than a trillion dollar, but there's no tacit information.

There's no transparent information regarding these issues.

But what we know that there has been always a covert support of the Iranian regime for proxies, for its nuclear program, for its missile activity.

We believe that a huge amount of Iranian export-driven use are going to these costs.

Iran's supreme leader has suggested that many of the economic problems are homegrown rather than caused by sanctions.

He's urged Iranians to buy more homemade goods to help the economy recover.

But are domestic solutions the answer or are sanctions still the greatest threat that they need to overcome?

A regime that is ruled by ideology, by Islamists in its capital, it does not pursue expertise to provide enough knowledge, technology for its own domestic production.

There is no internal source of growth and development in Iran.

On the other hand, technology that is developed in different parts of the world is heavily needed in Iran.

And because of sanctions, there is no access to such technology.

So both domestic and foreign relationship of Iranian government have led to the situation in which Iran cannot develop.

Finally, Mahdi, is the struggling economy getting so bad, it's becoming the biggest threat to the survival of Ayatollah Ali Khamenei's regime?

So economic conditions are the ones that could push the society to the streets again and they could ask for change.

But I think the Iranian society needs a coalition of leaders to guide them and mobilize them.

And those leaders are within and outside Iran.

Mahdi Ghodsi, it's been great to have you on the program.

So that's the picture of what's happening inside Iran.

But there's pressure coming from the outside too, thanks to financial sanctions.

So to understand more, I've been speaking to a man who has held various US government positions under Presidents Obama and Biden.

He played a large role in drawing up sanctions on Iran and is now at Columbia University in New York.

Subtitles ListPlay Video

Why is Iran’s economy struggling? | BBC News

struggle

significant

situation

infrastructure