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Iran's ruling class caught between Trump's repression and an economy in trouble

Iran's clerical leadership may find that engaging the "Great Satan" in order to negotiate a nuclear agreement and ease crippling economic sanctions is the lesser evil.

Four Iranian officials have said that despite its deep mistrust for the United States and in particular President Donald Trump, Tehran is growing increasingly worried about public anger at economic hardships escalating into massive protests.

People said that despite the defiant and unyielding rhetoric of Iran's clerical leadership in public, there was a pragmatic desire within Tehran's power corridors to strike a bargain with Washington.

Tehran's fears were exacerbated when Trump revived his "maximum-pressure" campaign from his first term, which aimed to reduce Iran's oil sales to zero by imposing more sanctions. This would bring Iran's fragile economy to its knees.

Masoud Pezeshkian, the president of the Islamic Republic of Iran, has repeatedly emphasized the severity of its economic situation, saying that it was more difficult than the Iran-Iraq War in the 1980s. He also pointed this month at the latest round U.S. sanction targeting oil tankers transporting Iranian oil.

According to one of the Iranian officials, leaders are concerned that cutting off diplomatic avenues could further fuel discontent in Iran against Ayatollah Ali Khamenei. This is because he is the final decision maker for the Islamic Republic.

Alex Vatanka is the director of the Middle East Institute's Iran Program in Washington. He said that there was no doubt whatsoever that the man, who has been the supreme leader since 1989, and his foreign policies preferences are the most responsible for the current state of affairs.

Iran's poor economy prompted Khamenei, who was then president of Iran, to back the nuclear deal struck in 2015 with major powers. This led to the lifting of Western sanctions as well as an improvement in economic circumstances. Then-President Trump’s renewed attack on Iran after he withdrew from the nuclear agreement in 2018 squeezed life standards again.

The situation is getting worse every day. I cannot afford to pay rent, bills or clothes for my kids," Alireza Yousefi said, 42, an Isfahan teacher. "Now, even more sanctions make it impossible to survive."

The Iranian Foreign Ministry did not reply to a comment request.

"ON EQUAL TERMS"

Trump, while increasing the pressure on Iran through new sanctions and military threats, also opened the doors to negotiations when he sent a letter to Khamenei suggesting nuclear talks.

Khamenei rejected the offer Wednesday, repeatedly saying that Washington had made excessive demands and that Tehran wouldn't be pushed into negotiations.

In an interview published Thursday, Abbas Araqchi, Iran's top diplomatic official said: "If we negotiate while the other party is exerting maximum pressure on us, we will be in a weaker position and achieve nothing."

He said that "the other side must be convinced of the ineffectiveness of the pressure policy - then we can sit down at the table and negotiate on equal terms."

A senior Iranian official stated that there was no other option but to reach a deal, and it was possible. However, the road ahead was bumpy, given Iran's mistrust of Trump following his abandonment of the 2015 agreement.

Iran's economic collapse has been largely prevented by China, its main oil buyer and one of the few countries still trading with Tehran in spite of sanctions.

According to estimates by the U.S. Energy Information Administration, oil exports dropped after Trump abandoned the nuclear deal, but recovered in recent years. They are expected to generate more than $50 billion of revenue between 2022 and 2023, as Iran finds ways to avoid sanctions.

But uncertainty still looms about the future of exports, as Trump's policy of maximum pressure aims to choke off Iran's crude oil sales by imposing multiple rounds of sanctions against tankers and other entities involved in trade.

PUBLIC ANGER SIMMERS

Iran's rulers also face a series of crises: energy and water shortages; a collapsing dollar; military setbacks for regional allies, and growing fear of an Israeli attack on its nuclear facilities. All of these are exacerbated by Trump's hard stance.

Lack of infrastructure investment, excessive consumption driven by subsidies and declining natural gas production, as well as inefficient irrigation are all contributing to the energy and water sector's problems. This leads to blackouts, and water shortages.

According to foreign exchange websites and officials, the Iranian rial's value has dropped by more than 90 percent against the dollar ever since sanctions were reinstated in 2018.

State media reported that Iranians, worried about Trump's harsh approach, have bought dollars, other hard currency, gold, or cryptocurrency, indicating further weakness in the rial.

State media reported that the price of rice had risen 200% in the past year. Media reports indicate that housing and utility costs in Tehran and other major cities have risen sharply in recent months. They climbed roughly 60%, mainly due to the steep decline of the rial and the rising cost of raw materials.

Some Iranian experts claim that the official inflation rate is over 50%, but it hovers at around 40%. The Statistical Center of Iran has reported a dramatic rise in food costs. In January, the prices of a third of the most essential commodities increased by 40%. They were now more than twice as high as they had been in the previous month.

According to the Tasnim News Agency, Ebrahim Sadeghifar, head of Iran's Institute of Labor and Social Welfare (IILSW), 22%-27% of Iranians are now living below the poverty level.

Last week, Iran's Jomhuri-ye Eslami daily reported that the poverty rate was around 50%.

I can't pay the rent on my carpet shop, or my employees' wages. No one can afford to buy carpets. "If this situation continues, I'll have to layoff my staff," Morteza (39), said over the phone, from Tehran's Grand Bazaar. He gave only his first name.

How can they hope to resolve the economic crisis without talking to Trump? Talk to him, and you will reach an agreement. "You cannot afford to be proud on an empty stomach."

NUCLEAR RED LINE

According to Iranian state media, at least 216 protests took place in Iran during February. These included retirees and workers, as well as students, health professionals, merchants, and healthcare professionals. According to reports, the protests were mainly focused on economic hardships such as low wages and unpaid salaries for months.

Officials fear that a decline in living standards, despite the small scale of most protests, could explode.

One of the four officials who was close to the government said, "The country is a powder-keg and any further economic strains could ignite it."

The officials stated that Iran's ruling class is aware of the possibility of a return of unrest, similar to protests from 2022-2023 over the death of Mahsa Amin in custody or nationwide protests of 2019 over the rise in fuel prices.

Senior Iranian officials said that there were several high-level discussions to discuss the potential of new mass demonstrations and possible measures to prevent them.

Iranian officials, however, said that despite concerns about possible unrest, Tehran would only go so far with any discussions with Trump. They stressed that "excessive requests" such as the dismantling of Iran's nuclear program or conventional missile capability were not on the table.

The senior official stated that "yes, there is concern about increased economic pressure and there are concerns regarding the nation's anger growing, but we cannot give up our right to produce nuclear energy just because Trump wants it."

Ali Vaez is the Iran project director for International Crisis Group. He said that Iran's leaders believed that negotiations with Trump would be a sign of weakness and could lead to more pressure rather than less.

He said: "Ayatollah Khmenei appears to believe that surrendering is the only thing more dangerous than sanctions." (Reporting, Writing and Editing by Parisa Hafezi)

(source: Reuters)