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Iran after Ahmadinejad: rising inequality and crippling sanctions
Inflation has made a monthly government payout relied on by the poor almost worthless, but demand for luxury cars is soaring
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Tehran bazaar
Iranians at Tehran's old bazaar. The proportion living below the poverty line has almost doubled under Mahmoud Ahmadinejad. Photograph: Atta Kenare/AFP/Getty Images
Ghorban Ali lived in the shantytowns of Shahr-e Rey, just south of the Tehran city line. He was a metal worker and a staunch supporter of Mahmoud Ahmadinejad to the very end. He felt a close bond with this president who was the son of an ironsmith and seemed to live a life almost as simple as his own, and who was an unreserved advocate for the poor. For the first time, Ghorban Ali felt there was a voice for him and his concerns in the highest ranks of government.
By the time Ahmadinejad stood for re-election in 2009, the metal workshop where Ghorban Ali was employed had shut down and the few jobs he subsequently found were either short-term or paid too little to feed him, his wife, their two children and his elderly mother.
During Ahmadinejad's second term, the government started to pay out a sum originally equivalent to £25 a person each month to more than 80% of all Iranians. Ghorban Ali was quite happy at first about this small yet reliable source of income, but soaring inflation drastically reduced the value of the fixed payouts.
Increasingly desperate for the means with which to feed his family, Ghorban Ali decided to sell one of his kidneys. A saturated market, however, meant that the price of a fresh human kidney had fallen unacceptably low. So he did the next thing that came to mind: he jumped in front of a car in the hope of collecting diyya, the compensation paid to an injured person by the responsible party (usually covered by insurance in the case of a motor vehicle accident). He did not foresee that the driver of the car would race away from the scene, leaving him paraplegic and virtually penniless and his family in a more dire situation than ever.
This was Ghorban Ali's state when I met him. I belonged to a charitable group that was visiting houses in his neighbourhood, offering food and clothing. As a doctor, I conducted free examinations and gave out a few basic medical items, from permethrin shampoo for the children with head lice, to blood pressure medication for the elderly. Ghorban Ali had pneumonia and an ulcerating bedsore. We sat down, listened, and were crushed by his sad tale. We managed to gather some funds for his and his family's assistance, but there was only so much we could do.
Not long afterwards, Ghorban Ali died.
Tehran's new wealth
I wander into a majestic dining room. From a window with a panoramic view, I see Tehran stretching towards every horizon, leaving me in awe of how vast the city has become. I stroll to the kitchen, almost as large as some apartments. I am wary of touching the gold-plated Italian taps. The entire apartment is elegantly furnished with luxury-brand items. The tiles, I am told, are also Italian, the chandeliers Czech, the fridge American, the stove German. And the list goes on.
An old acquaintance of mine, who I will call Saeed, is the real estate agent flogging the place. He is very happy. The commission will be the biggest in his career. Located in the Gheytarieh neighbourhood of north-east Tehran, the apartment has 600 sq metres of floor space, plus a 120-metre balcony. It is served by a private lift and features an infinity pool sanitised with "molecular oxygen", Saeed explains.
He has been giving me a tour of the most elite properties in his agency's portfolio. Having dropped out of medical school to focus on real estate, this is his way of establishing bragging rights. He tells me that he hopes to have a deluxe apartment of his own in 10 years. I calculate that on my current salary, saving every penny I can, it would still be decades before I could come up with this property's asking price of 110bn rials (£5.5m at the official rate of exchange).
All the extravagance is making me dizzy and I ask Saeed whether we can leave. With a big grin, he nods. We take the lift down to the garage where he has parked his Mercedes. He tells me that the car is crucial to his image – without it, the customers won't take him seriously. Over the past week, he says, he has shown the place to 16 potential customers and received two firm bids.
Before Ahmadinejad took office eight years ago, foreign cars were still fairly uncommon in Tehran. But the northern part of the city, where the nouveau riche are clustered, is now full of vehicles from abroad, high-end ones: Porsches, Maseratis, Mercs, BMWs, the occasional Ferrari or Lamborghini. Iranian tariffs mean they cost twice as much as they do in other countries, but the demand seems only to grow.
Nor do international sanctions appear to be cramping the style of the status-car set. The many measures enacted by the US and EU have driven the Iranian economy into the shadows, where seemingly any and all shortcuts and black market deals are countenanced by the regime.
If oil cannot be sold through the usual channels, then there are back channels through which it can trickle out – not enough to fund the obligations of the state, but sufficient to keep the gatekeepers in their mansions. The sanctions and the rampant illegal commerce they have spurred, along with the mismanaged economy, hyperinflation, and the ever-growing money supply have enabled the well-connected elites to plunder the wealth of a nation.
Take a certain colleague of mine. Through connections long cultivated, he learned of a spike in the price of Iran's fabled pistachios days before it hit and arranged to purchase and then export a large amount at just the right moment. With his returns from the deal, he bought thousands of acres of agricultural land in Kazakhstan. He barters the wheat he grows there at a price much higher than the global average for Iranian oil at an artificially low price, which he then sells in east Asia, generating a huge profit. In four years, he has built an economic empire and a palatial estate for himself in north Tehran. Though he has not practised medicine in all that time, he still enjoys being addressed by the title "doctor".
Growing inequality
On a pleasant spring evening, I take a walk around Vanak Square. One of Tehran's major crossroads, it sits at the juncture of some of the city's more expensive neighbourhoods. At one corner of the square, Hossein, a civil servant by day and taxi driver by night, shouts for passengers to fill up his cab. He and his wife each have to work two shifts to maintain their lower-middle-class lifestyle. He seems tired and out of breath but still manages to shout out his destination to attract potential passengers: "Yousef Abad … Yousef Abad …"
The government payouts that began in October 2010 were linked to economic reforms that saw subsidies on household goods and energy slashed or eliminated entirely. The plan best served Iran's rural regions, where large family sizes meant more payouts per household, but those in urban areas, where families are smaller and energy usage much higher, have been hit hard, especially as the rial's foreign exchange value plummeted, aggravating already intense inflationary pressures. The monthly individual payout, once worth £25, is now worth less than £9 at the "street" exchange rate most ordinary Iranians deal with.
Thus, even as Ahmadinejad proclaimed his devotion to relieving the plight of the common man, income inequality rose. Iran's Gini index – a statistical measure in which 0 equals absolute equality and 100 equals absolute inequality – climbed from 38.3 in January 2005, six months before he first took office, to an estimated 44.5 today. According to one analysis, 40% of Iranians now live below the international poverty line, almost double the proportion of eight years ago.
And while Ahmadinejad's bellicose rhetoric concerning foreign affairs, often plainly conceived to outrage, cannot bear primary responsibility for the severe international sanctions now in place, his antagonistic posturing undoubtedly facilitated their institution. The resulting stranglehold on government income through restrictions on oil exports and access to financial systems has placed enormous strains on the Iranian economy. The oil revenues were a cushion for the government's repeated management blunders; without that cushion, all the pressure is put directly on the people who can least withstand it – those without access to the elites' shadow economy.
I have seen firsthand, for example, how vital medical supplies are increasingly out of reach for the less-than-wealthy. One of my patients is a boy who suffers from the genetic disorder phenylketonuria. The price of the specially formulated milk he requires has quadrupled since last year, so his parents have had to rent out their own home and move into a much smaller, rundown one just to feed their child. No, drugs are not directly sanctioned, but the financial mechanisms for purchasing them are. One can only hope that a new government will inspire the international community to take a fresh look at the real effects of punitive sanctions.
Iran after Ahmadinejad: rising inequality and crippling sanctions
Inflation has made a monthly government payout relied on by the poor almost worthless, but demand for luxury cars is soaring
Share 102
inShare.1
Tehran bazaar
Iranians at Tehran's old bazaar. The proportion living below the poverty line has almost doubled under Mahmoud Ahmadinejad. Photograph: Atta Kenare/AFP/Getty Images
Ghorban Ali lived in the shantytowns of Shahr-e Rey, just south of the Tehran city line. He was a metal worker and a staunch supporter of Mahmoud Ahmadinejad to the very end. He felt a close bond with this president who was the son of an ironsmith and seemed to live a life almost as simple as his own, and who was an unreserved advocate for the poor. For the first time, Ghorban Ali felt there was a voice for him and his concerns in the highest ranks of government.
By the time Ahmadinejad stood for re-election in 2009, the metal workshop where Ghorban Ali was employed had shut down and the few jobs he subsequently found were either short-term or paid too little to feed him, his wife, their two children and his elderly mother.
During Ahmadinejad's second term, the government started to pay out a sum originally equivalent to £25 a person each month to more than 80% of all Iranians. Ghorban Ali was quite happy at first about this small yet reliable source of income, but soaring inflation drastically reduced the value of the fixed payouts.
Increasingly desperate for the means with which to feed his family, Ghorban Ali decided to sell one of his kidneys. A saturated market, however, meant that the price of a fresh human kidney had fallen unacceptably low. So he did the next thing that came to mind: he jumped in front of a car in the hope of collecting diyya, the compensation paid to an injured person by the responsible party (usually covered by insurance in the case of a motor vehicle accident). He did not foresee that the driver of the car would race away from the scene, leaving him paraplegic and virtually penniless and his family in a more dire situation than ever.
This was Ghorban Ali's state when I met him. I belonged to a charitable group that was visiting houses in his neighbourhood, offering food and clothing. As a doctor, I conducted free examinations and gave out a few basic medical items, from permethrin shampoo for the children with head lice, to blood pressure medication for the elderly. Ghorban Ali had pneumonia and an ulcerating bedsore. We sat down, listened, and were crushed by his sad tale. We managed to gather some funds for his and his family's assistance, but there was only so much we could do.
Not long afterwards, Ghorban Ali died.
Tehran's new wealth
I wander into a majestic dining room. From a window with a panoramic view, I see Tehran stretching towards every horizon, leaving me in awe of how vast the city has become. I stroll to the kitchen, almost as large as some apartments. I am wary of touching the gold-plated Italian taps. The entire apartment is elegantly furnished with luxury-brand items. The tiles, I am told, are also Italian, the chandeliers Czech, the fridge American, the stove German. And the list goes on.
An old acquaintance of mine, who I will call Saeed, is the real estate agent flogging the place. He is very happy. The commission will be the biggest in his career. Located in the Gheytarieh neighbourhood of north-east Tehran, the apartment has 600 sq metres of floor space, plus a 120-metre balcony. It is served by a private lift and features an infinity pool sanitised with "molecular oxygen", Saeed explains.
He has been giving me a tour of the most elite properties in his agency's portfolio. Having dropped out of medical school to focus on real estate, this is his way of establishing bragging rights. He tells me that he hopes to have a deluxe apartment of his own in 10 years. I calculate that on my current salary, saving every penny I can, it would still be decades before I could come up with this property's asking price of 110bn rials (£5.5m at the official rate of exchange).
All the extravagance is making me dizzy and I ask Saeed whether we can leave. With a big grin, he nods. We take the lift down to the garage where he has parked his Mercedes. He tells me that the car is crucial to his image – without it, the customers won't take him seriously. Over the past week, he says, he has shown the place to 16 potential customers and received two firm bids.
Before Ahmadinejad took office eight years ago, foreign cars were still fairly uncommon in Tehran. But the northern part of the city, where the nouveau riche are clustered, is now full of vehicles from abroad, high-end ones: Porsches, Maseratis, Mercs, BMWs, the occasional Ferrari or Lamborghini. Iranian tariffs mean they cost twice as much as they do in other countries, but the demand seems only to grow.
Nor do international sanctions appear to be cramping the style of the status-car set. The many measures enacted by the US and EU have driven the Iranian economy into the shadows, where seemingly any and all shortcuts and black market deals are countenanced by the regime.
If oil cannot be sold through the usual channels, then there are back channels through which it can trickle out – not enough to fund the obligations of the state, but sufficient to keep the gatekeepers in their mansions. The sanctions and the rampant illegal commerce they have spurred, along with the mismanaged economy, hyperinflation, and the ever-growing money supply have enabled the well-connected elites to plunder the wealth of a nation.
Take a certain colleague of mine. Through connections long cultivated, he learned of a spike in the price of Iran's fabled pistachios days before it hit and arranged to purchase and then export a large amount at just the right moment. With his returns from the deal, he bought thousands of acres of agricultural land in Kazakhstan. He barters the wheat he grows there at a price much higher than the global average for Iranian oil at an artificially low price, which he then sells in east Asia, generating a huge profit. In four years, he has built an economic empire and a palatial estate for himself in north Tehran. Though he has not practised medicine in all that time, he still enjoys being addressed by the title "doctor".
Growing inequality
On a pleasant spring evening, I take a walk around Vanak Square. One of Tehran's major crossroads, it sits at the juncture of some of the city's more expensive neighbourhoods. At one corner of the square, Hossein, a civil servant by day and taxi driver by night, shouts for passengers to fill up his cab. He and his wife each have to work two shifts to maintain their lower-middle-class lifestyle. He seems tired and out of breath but still manages to shout out his destination to attract potential passengers: "Yousef Abad … Yousef Abad …"
The government payouts that began in October 2010 were linked to economic reforms that saw subsidies on household goods and energy slashed or eliminated entirely. The plan best served Iran's rural regions, where large family sizes meant more payouts per household, but those in urban areas, where families are smaller and energy usage much higher, have been hit hard, especially as the rial's foreign exchange value plummeted, aggravating already intense inflationary pressures. The monthly individual payout, once worth £25, is now worth less than £9 at the "street" exchange rate most ordinary Iranians deal with.
Thus, even as Ahmadinejad proclaimed his devotion to relieving the plight of the common man, income inequality rose. Iran's Gini index – a statistical measure in which 0 equals absolute equality and 100 equals absolute inequality – climbed from 38.3 in January 2005, six months before he first took office, to an estimated 44.5 today. According to one analysis, 40% of Iranians now live below the international poverty line, almost double the proportion of eight years ago.
And while Ahmadinejad's bellicose rhetoric concerning foreign affairs, often plainly conceived to outrage, cannot bear primary responsibility for the severe international sanctions now in place, his antagonistic posturing undoubtedly facilitated their institution. The resulting stranglehold on government income through restrictions on oil exports and access to financial systems has placed enormous strains on the Iranian economy. The oil revenues were a cushion for the government's repeated management blunders; without that cushion, all the pressure is put directly on the people who can least withstand it – those without access to the elites' shadow economy.
I have seen firsthand, for example, how vital medical supplies are increasingly out of reach for the less-than-wealthy. One of my patients is a boy who suffers from the genetic disorder phenylketonuria. The price of the specially formulated milk he requires has quadrupled since last year, so his parents have had to rent out their own home and move into a much smaller, rundown one just to feed their child. No, drugs are not directly sanctioned, but the financial mechanisms for purchasing them are. One can only hope that a new government will inspire the international community to take a fresh look at the real effects of punitive sanctions.
