Observers estimate that Iran might have lost $1.5 billion due to the week-long blackout.
On November 15, Iran’s President Hassan Rouhani announced that subsidies on petrol prices would be immediately reduced. This meant there would now be a 50 per cent hike in prices for the first 60 litres purchased in the month and a 200 per cent increase for purchases above this rationed quantity.
This announcement convulsed Iran in week-long riots that brought to the streets 200,000 people from 29 of the country’s 31 provinces. Fired with frustration, rage and destructive zeal, they attacked military bases, banks, religious centres and petrol stations, and destroyed a few hundred motor vehicles. In this din, the government’s claim that it would use the financial resources so generated to increase cash handouts to the very poor remained unheard.
The government unleashed its security forces upon the demonstrators — Amnesty International has claimed that 206 persons were killed in this orgy of violence, while several thousand were injured, and about 7,000 were arrested. On December 3, Iranian state television accepted that some rioters had been killed, describing them as those who had attacked military bases or other sensitive centres with lethal weapons or had taken hostages.
Throughout the week of violence, the country experienced an unprecedented Internet blackout, so that Internet use was reduced to five per cent of normal use during November 16-21. This was a particularly onerous burden in a country that has 71 million Internet subscribers and 47 million social media users out of a population of 83 million. Observers estimate that Iran might have lost $1.5 billion due to the week-long blackout.
Later reports suggest that Iran took this draconian measure to combat American efforts to provide dissidents the technology to bypass state restrictions and use social media for local communications and coordination of confrontations against the state authorities.
Despite the Internet clampdown, US secretary of state Mike Pompeo claimed that the United States still received several thousand messages from the protesters in Iran. This could be a dubious claim, because there are other reports that US officials were, in fact, surprised at the total shutdown of Internet services in the country.
Commentators believe that, given Iran’s parlous economic situation, reducing energy subsidies makes eminent economic sense. The Iranian authorities viewed this measure as a means to reduce cross-border smuggling of its low-priced fuel to neighbouring countries, reduce local consumption and thus yield more quantities for export, and, above all, provide additional financial resources to meet welfare needs and other state expenses.
It is expected that the reduced subsidies will annually yield an additional $2.6 billion for the treasury, while reduced consumption and smuggling will give another $5.5 billion to the state’s coffers.
What went wrong with the initiative was that the government failed to prepare its people for this measure and also failed to convey convincingly that it would use the resources so generated for enhanced handouts to the poor.
Hence, the very people who were to benefit from the reduced subsidies rose in anger against the government that they viewed as extortionate, imposing upon them additional burdens when about half the population lives around the poverty line and the nation is living with high youth unemployment and food prices, low wages and rampant corruption.
The American sanctions have played a major role in hurting Iran’s economy. Iran’s oil exports have gone from two million barrels per day before the US pulled out of the nuclear agreement in 2018 to about half a million barrels per day today. Observers note that the recent rise in petrol prices was in fact due to the US sanctions and that, before the embargo on oil sales was imposed, the Iranian economy had been doing well.
Again, the secondary US sanctions have ensured no major international companies are willing to provide it with fresh investments and technologies. Hence, its economy has contracted 8.7 per cent this year over the previous year. As US President Donald Trump has often gloated, Iran is truly a “different country” after the reinstatement of the US sanctions.
Iran is witnessing two competing narratives — one blames the theocratic regime for the economic malaise. In this view, the nation’s economy is in the hands of a privileged conglomerate of religious institutions and their adherents that controls all levers of the economy for personal advantage. Thus, Suzanne Maloney of the Brookings Institution sees these riots as “the latest salvo in the Iranian struggle for accountable government”.
Rahman Bouzari goes further and asserts that Iran is experiencing an “organic crisis” where the ruling elite, a politico-economic oligarchy, has lost all popular support. He sees the recent agitations as a continuation of Iran’s revolutionary process, with the lower classes ranged against the theocratic order, seeking transparency and freedom.
The other view is that Iran is facing an existential threat from the United States and its allies. IRGC commander Hossein Salami has said that Iran is engaged in a “great war” and was the victim of an “international plot” from which it was emerging victorious. Naming the US, Britain and Saudi Arabia, he said “we will destroy you” if they crossed certain “red lines”. The IRGC chief also spoke of “psychological warfare” and the use of “local mercenaries” by the US to back the protests.
This suspicion has many takers in Iran — that the demonstrations were consistently backed by Mr Pompeo, who promised to sanction Iranian officials “responsible for human rights abuses”, and robustly blamed “poor economic management” by the country’s leaders for the popular grievances.
Observers have also noted that many rioters appeared to be “professionals” who were equipped with blowtorches, bolt cutters and even handguns when they attacked banks and official facilities. This view led Supreme Leader Ali Khamenei to assert that Iran had successfully foiled “a deep, extensive and very dangerous plot”.
The central cause for concern is that, beyond regularly imposing fresh sanctions on Iran and its leaders, the US has no clarity about the next stage. Exerting “maximum pressure” on Iran is self-defeating — Iran believes the principal US preoccupation is regime change and, hence, sees no reason to interact with Washington lest this be seen as a sign of weakness.