Four-minute read
Iran’s economy is not just slowing; it is being de-tooled by decree. As international isolation deepens after UN snapback, the state is answering market signals with administrative commands—price caps, currency suppression, forced “unity,” and politically convenient showpieces like zero-removal from the currency. The result is a feedback loop of scarcity, rent-seeking, and public distrust that weakens both firms and households.
When orders replace prices
A business forum in late September 2025 (“Barriers to Enterprise in Iran’s Economy”) put a name to what firms have lived for years: the “price-control trap.” Economist Mousa Ghaninejad argued the policy rests on a basic misunderstanding: “If policymakers understood how a market works, they would never make this mistake; and if they do understand and still continue, that is demagoguery.” He warned that state dictates have even blocked producers from lowering prices, turning a tool claimed to fight inflation into a mechanism that destroys production and breeds rent. Prices, he noted, are information; when the government replaces them with orders, it breaks the economy’s compass.
From the technology sector, Hesam Armandehi (founder of Divar—an Iran-wide online classifieds platform similar to Craiglist) described how start-ups lost a decade to security-state rulemaking: “While the world lets markets set prices, in Iran even online advertising gets a directive that your profit must not exceed 15 percent.” The contrast he drew was stark: peers in the United Arab Emirates became billion-dollar firms, while Iranian founders moved capital and talent abroad to escape a “security-minded, illogical state.”
Another state-affiliated economist, Ali Mirzakhani widened the lens to currency policy: “When the state suppresses the exchange rate to hold down import prices, it hits domestic production and sets up the next inflation jump.” Echoing mainstream monetary theory, he underlined that Iran’s inflation is fundamentally monetary, yet money printing and ad-hoc controls continue—delivering chronic stagflation, not relief.
A Nation on the Brink: #Iran’s Economy Nears Total Breakdownhttps://t.co/vGWSKMuzub
— NCRI-FAC (@iran_policy) June 9, 2025
Data points the system cannot explain away
The macro picture is deteriorating, and officials close to power are saying so. On October 4, 2025, policy veteran Farshad Momeni called the draft 2026 budget “regrettable and shameful,” warning it would deepen poverty rather than ease it. He said the poor swelled from under 10 million to more than 25 million in a decade, with over 7 million in severe or near-famine conditions.
Trade and industry coverage reached the same conclusion from another angle. On September 21, 2025, the business daily Sanat-Maadan-Tejarat (SMT) wrote that “all the engines of growth”—a sound business environment, credible economic governance, technology access, and finance—“are not running.” In its view, the government’s 8 percent growth target is unattainable without structural repairs, from energy balance to banking reform and policy-risk reduction. The Iran Chamber of Commerce added a stress test in late August 2025: in its downside scenario, the dollar jumps to 165,000 tomans and inflation surges to 90 percent, with negative growth in all scenarios. Power rationing is already biting: the chamber warned that steel output could fall 33 percent this year due to electricity cuts.
#Iran's Economy Faces Unprecedented Decline Amid Global Isolation and #Financial Mismanagementhttps://t.co/5Jaf0w1gsp
— NCRI-FAC (@iran_policy) February 6, 2025
Isolation breeds rent—and scandal
Where rules replace markets, rents replace productivity. On September 15, 2025, textile industry adviser Majid Nami said about $1 billion in low-quality fabrics entered Iran over two years using state-subsidized foreign exchange, only to be sold at free-market rates—a pure arbitrage from policy to pocket. The question he posed—who captured the rent?—points back to politically connected networks.
At the household level, the harm reads like a social-policy autopsy. On September 20, 2025, Asr-e Iran detailed an approximately 1 trillion toman real-estate fraud in Pardis (Phase 8) near Tehran: hundreds of families—workers, retirees, and those who sold existing homes—paid 800 million to 2 billion tomans each to a firm boasting official seals, only to find no units and no titles. Arrests followed, but lawyers say seized assets won’t cover losses. The case is not an outlier; it is a symptom of weak rule of law, cheap official endorsements, and a culture of impunity that thrives in opaque, state-managed markets.
The #Iranian Regime's Economic Warfare Creates a Multi-Front Crisis for the Peoplehttps://t.co/KoEgu32dxd
— NCRI-FAC (@iran_policy) July 9, 2025
Cutting zeros, not problems
On October 5, 2025, parliament again approved a bill to remove four zeros from the currency and move toward the toman—a plan first floated in the 1990s, drafted in 2019, passed in 2020, and bounced by the Guardian Council, which now demands nomenclature changes (e.g., “qeran”). Under the latest text, one new rial equals 10,000 current rials (1,000 tomans today). Even if it becomes law, the central bank gets two years to prepare and three years of parallel circulation to swap notes—printing and logistics costs on top of existing cash-handling expenses.
Former central bank chief Tahmasb Mazaheri warned in December 2024: “With current high inflation, removing four zeros will not work; at a minimum six should go.” He added that without large-denomination notes, note value collapses toward the cost of printing—a reminder that cosmetic reform without disinflation is a money-burner, not a confidence builder. History agrees: from Argentina and Romania to Yugoslavia and Zimbabwe, zero-removal rarely fixes fundamentals; Turkey’s 2005 reset succeeded only after sustained disinflation and institutional repair.
#Iran’s Economic Crisis Isn’t a Mystery—It’s the Regime’s Legacyhttps://t.co/yTq2D6gXgt
— NCRI-FAC (@iran_policy) April 21, 2025
Snapback’s multiplier effect
International isolation magnifies every domestic flaw. After snapback, market barometers lurched: by October 2, 2025, the free-market dollar broke 117,000 tomans, more than 1,000 tomans above the day prior; the Emami gold coin hit about 118 million tomans. In this environment, price controls and FX suppression do not calm expectations; they signal scarcity, inviting hoarding and arbitrage. Fiscal gaps widen, and officials telegraph gasoline-price hikes to claw back cash—politically explosive in a society already squeezed.
The state’s answer has been familiar: insist on “unity,” denounce protests as “enemy plans,” and double down on administrative controls. But the week’s facts argue the opposite: the more isolation rises, the more command economics leak power to insiders and middlemen, while ordinary firms and households absorb the shock.
Iran’s crisis is not a mystery of sanctions alone. It is a compound of isolation and interventionism: snapback tightens the vise; decree-driven policy breaks the gears. The forum on price controls named the mechanism; poverty and output data quantify the damage; import and housing scandals expose who profits. Stripping zeros, capping profits, and fixing exchange rates are stagecraft, not strategy. Without credible anchors—monetary restraint, legal predictability, market pricing, and real competition—the economy will keep converting external pressure into internal instability, with ever fewer tools left to manage the fallout.