Meanwhile: Why Iran’s economy collapsed

Trump once ordered forceful action against Venezuela. Whether he would consider a similar move against Iran remains an open question, one that now hovers over a country already pushed to the brink by economic ruin.

Cho Won-kyeong

The author is a professor of economics at Sejong University.

Egg prices doubled within a single week. For Iran’s working poor, inflation is no longer an abstract statistic but a daily hardship. A plunging currency has pushed the cost of basic necessities beyond control, turning the streets of Tehran into arenas of economic survival. Unlike earlier protests focused on women’s rights or disputed elections, the current unrest has spread across all 31 provinces. It began when even pro-government shopkeepers shut their doors as the exchange rate spiraled, signaling a nationwide economic breakdown rather than a localized uprising.

Women cross a street under a huge banner showing hands firmly holding Iranian flags as a sign of patriotism, as one of them flashes the victory sign, in Tehran, Iran, on Jan. 14. [AP/YONHAP]

How did Iran reach this point? The root cause lies in the cumulative weight of United States sanctions. After the 1979 seizure of the U.S. Embassy in Tehran, sanctions intensified under the Jimmy Carter administration. In the 1980s, Washington imposed arms embargoes. By 1995, sanctions expanded into “secondary boycotts,” penalizing foreign companies that did business with Iran. The 2015 nuclear agreement briefly eased pressure, but the 2018 U.S. withdrawal under U.S. President Donald Trump and the reimposition of sanctions during his first and second terms shattered what remained of Iran’s economic foundation. The rial collapsed, and under Trump 2.0 the exchange rate again surged severalfold.

Iran’s multiple exchange-rate system has compounded the damage. Official rates for essential goods, intermediary rates and market rates for luxury items have distorted prices and fueled black markets. The so-called “resistance economy,” dominated by the Revolutionary Guards, exerts control over an estimated 20 percent of GDP, deepening corruption and inefficiency. Even state coupons intended to cushion households against rising prices fail to keep pace with inflation.

There was a time when Korea and Iran were close enough to name major avenues after each other, Tehran Road in Seoul and Seoul Road in Tehran. That sense of partnership reflected the oil-boom optimism of the 1970s. More than five decades later, Iran’s economy is trapped in a vicious cycle of sanctions, policy failure and currency collapse.

As protests flare across Iranian cities, international attention is turning to Washington’s range of options, including the possibility of military intervention. Trump recently ordered forceful action against Venezuela. Whether he would consider a similar move against Iran remains an open question, one that now hovers over a country already pushed to the brink by economic ruin.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.