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Iran’s collapsing currency exposes the profiteers behind the crisis

By Fereshteh Sadeghi | The Cradle | January 5, 2026

In the final days of 2025, as the rial plunged to unprecedented lows, Tehran’s bustling Jomhuri (Republic) Avenue transformed into a corridor of defiance.

‘Bazaaris’ (traditional merchant class with deep political and economic influence) and cellphone shopkeepers, cornered by a collapsing currency and punishing tariffs, shuttered their stores and poured into the streets.

Their outrage ignited a fire that quickly spread to the Grand Bazaar, long considered Iran’s economic barometer. Unlike the 2022 protests over social freedoms or the 2009 unrest sparked by electoral disputes, this wave of demonstrations is driven squarely by economic collapse and long-festering mismanagement.

What began as a merchants’ revolt against an unworkable trade environment soon revealed the deeper rot of decades-long economic mismanagement, institutional corruption, and a sanctions-choked system that punishes the people to sustain itself.

Sanctions, sabotage, and a vanishing economy

Iran, a nation of over 86 million, registered a meager 0.3 percent economic growth in summer 2025, while inflation soared past 42 percent by December. Labor force participation remains abysmally low, trailing nearly 20 points behind the global average. These dire metrics have steadily worsened under the weight of relentless US sanctions, first re-imposed by President Donald Trump in 2018 during his first term, and have intensified through two presidential terms.

The rial’s spectacular collapse – breaking the 1,445,000 mark against the US dollar – did not occur in a vacuum. It marked a 47.8 percent surge in just six months.

The higher the rate was going up, the angrier were businesses whose sales are directly dependent on the dollar-rial change rate. The first spark of protests was ignited by the shopkeepers at two cellphone shopping malls in downtown Tehran. They started a strike, saying they were unable to do business because they were struggling with a new cellphone registry tariff the government had imposed on devices priced at $600 and more.

The next day, shopkeepers did not just close their shops but took to the famous Republic Avenue, protesting against the situation. The dollar dealers at Ferdowsi Avenue joined the protests too, and in the Grand Bazaar, gold and silversmiths brought their shutters down in fear of chaos.

A shopkeeper at Lalezar Street tells The Cradle that, “we were forced to close our shops as some protesters attacked us verbally and threatened to ransack our shops by hurling stones at our windows.”

In addition to sanctioning traditional routes such as banks, firms and individuals, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC), has been targeting digital currency addresses it accuses of being used by a financial network to transfer Iran’s oil and non-oil money.

According to Gholma-Reza Taj Gardoun, chairman of the parliamentary budget committee, “the Iranian government only received 13 out of $21 billion oil revenues in the last eight months”. He added that “the remaining $8 billion is the cause of the current turmoil, the shortage of dollar bills in the market and the rising exchange rate.”

A rigged system of profiteers

Taj Gardoun is not alone in exposing how oil and non-oil export revenues have failed to return to Iran. At the heart of the crisis lies a parasitic class of semi-governmental enterprises and politically-connected traders who profit from Iran’s fiscal dysfunction.

Former finance minister and current lawmaker Hussein Samsami estimates that “117 out of $335 billion non-oil export revenues have not returned to the country, since the US re-imposed sanctions in 2018.” Much of this capital, he says, was siphoned off by ‘khosulati’ entities – quasi-governmental firms benefiting from state ownership yet operating without transparency or oversight.

Equally troubling is the shadowy role of “trustees” – a secretive network tasked with circumventing sanctions to sell Iranian oil.

Former Central Bank of Iran (CBI) Governor Valiollah Seif acknowledged “they are trusted people, Iranians and non-Iranians, who transfer money (for Iran),” adding “money transfer is a very risky process and the payment of these so-called trustees and the money changers working with them is high.” Seif revealed “sometimes a trustee siphons off the funds.”

Apart from the trustees, the quasi-governmental entities are also blamed for refusing to give back the non-oil export money to the central bank and sell it at rates higher than the regular CBI-approved rate at the official market.

These companies are owned by various funds affiliated with the Iranian government. The petroleum and the social welfare ministries gained a majority of the shares in these funds through the privatization process in different governments.

The third group that has not returned the export money is individuals or firms with special business permits. A deputy CBI governor reports that “Individuals who own or rented 900 special licenses must return some $16 billion to the central bank, (but they didn’t).”

The result is a liquidity trap in which foreign exchange vanishes from official markets, feeding a vicious cycle of inflation and speculation.

State paralysis and political deflection

For months, the government of Iranian President Masoud Pezeshkian appeared paralyzed, watching as the currency spiralled and public rage mounted. While some suggest the state deliberately allowed the rial to slide to ease its budget deficits, others cite institutional chaos and a lack of cohesive economic policy.

They refer to a confession made by former Iranian president Hassan Rouhani in 2020, “The foreign currency belongs to the government, the price is decided by the government and we can bring it down, if we decide it.”

In reaction to the voices of dissatisfaction, Pezeshkian tasked his interior minister with meeting the representatives of the protesters and listening to their grievances.

He sat with merchants and replaced CBI governor Mohammad-Reza Farzin with former finance minister Abdolnasser Hemmati. Nevertheless, the latter, who was impeached 10 months ago over his mismanagement of the foreign exchange market, said “he has no responsibility regarding the currency market and his task is to control imbalanced banks and reduce inflation.”

Austerity in a powder keg

In the streets, the demonstrations have morphed into sporadic riots, mostly in western provinces, marked by attacks on police stations and arson against state buildings. Casualties have been reported, including among security forces, as the protests shift from organized dissent to expressions of raw frustration.

Demonstrations in Tehran that were not large in essence have subsided, but morphed into sporadic riots. Smaller cities or towns in western Iran are now the scene of riots, with the number of rioters limited to dozens, not even hundreds.

Arson attacks against government buildings or rioters storming police stations to capture their armory have been reported. About a dozen, including police forces, have been killed countrywide, and arrests have been made.

Iran’s leader, Ayatollah Ali Khamenei, on 3 January, admitted that the ‘bazaaris’ have legitimate complaints regarding economic instability. Still, he made it clear that the Islamic Republic “will not yield to the enemy” and will deal seriously with violent protesters; “rioters must be put in their place.”

The Iranian leader’s comments were a response to Trump after he threw his weight behind the protesters, threatening the Islamic Republic with military intervention “if protesters are killed.” The Reformist Front joined in rejecting foreign threats, warning that any interference in the protests would escalate violence and distort the people’s demands.

In a last-ditch bid to regain economic control, an Iranian official from the Budget and Planning Organization says “the Trustees will be asked to return billions of dollars in their overseas accounts to the country.” A lawmaker cautions, “the parliament will question the oil minister over the issue of the Trustees.”

Iran’s minister of economy said that positive results have been achieved from negotiations with several countries, including the release of part of Iran’s financial resources and the opening of funding channels for importing essential goods, along with gradual efforts to unify the exchange rate into a single rate.

Simultaneously, Pezeshkian is pushing ahead with plans to phase out subsidies for essential imports – a move he dubs an “economic surgery” that will be offset by targeted vouchers for lower-income citizens. But austerity in the midst of currency collapse, inflation, and a credibility crisis is a combustible formula.

Iranian officials are closely tracking the situation in Venezuela, where the abduction of President Nicolas Maduro and rising US aggression offer chilling parallels. For now, Tehran’s street protests remain contained. But if the economic pain persists and reforms deepen inequality, the next wave may not be as easily quelled.

January 5, 2026 - Posted by aletho | Economics | Iran, Sanctions against Iran