It’s miserable this time of year in Tehran. The short days are darkened further by the annual submersion of the city under a thick layer of exhaust and smoke. With the surrounding mountains and weak wind and winter sun, the pollution hovers for days, prompting the government to issue regular warnings to the elderly, pregnant and those with heart conditions not to go outside.

Domestic production has nearly disappeared and imports are getting tougher to come by. Credit: Kamshots/CC By 2.0

But their declining health is not what is on the minds of most Tehran residents today. Rather it’s their deteriorating standard of living and the unshakable feeling that the world is conspiring against them which has Iranians most vexed.

With the double threat of a military attack by the U.S. or Israel or both, and the increasing instability of the Iranian economy as witnessed last month in the currency crisis that continues to grip the capital, the feeling of hope that once pumped through the city in the days before the 2009 election, and arguably even in the weeks that followed, is nowhere to be found.

The reality is that the situation is not that bad, yet. Most signs point to a financial well-being at its lowest levels for average citizens than at any point since Iran’s eight-year war with Iraq, when shortages were the norm.

While Iranians have complained about their lot for years, statistics simply have not matched up with the population’s level of economic discontent. Heavily subsidised fuel and utilities, access to basic necessities and a decent education never seemed to register for a population who wanted to have their cake and eat it, too.

Until last year, Tehran consistently ranked as one of the cheapest major cities in the world for its residents.

Some of these things are still available, albeit in rapidly diminishing fashion, and for the first time it seems there is a growing awareness that things could become drastically worse in short order.

The currency crisis is the most recent sign of what may lie ahead and one that poignantly affects the lives of millions of Iranians, as this has become a conspicuously consumptive society that can’t keep up with its own demands. Domestic production has nearly disappeared and imports are getting tougher to come by, with ever tightening trade sanctions placed on Iran by Western powers by the day.

This is affecting all aspects of daily life.

According to young mothers, “Pampers”, as all foreign diapers in this brand-conscious society have come to be known, are becoming nearly impossible to find, and when they are available the cost is a prohibitive one dollar per diaper.

For a society where the average monthly income hovers around 500 dollars this is very steep, but as 26-year-old Samaneh explained, “The domestically produced diapers give my baby a rash that is even more expensive to treat than buying Pampers.”

Near a major local hospital in the Tavanir neighbourhood of Tehran, the walls of apartment buildings are plastered with a photocopied message: “URGENT: due to desperate financial situation I am selling one of my kidneys. Type 0+ blood. Please call.”

The private sale of organs in Iran has long been legal, and the health ministry touts the fact that there is no waiting list for kidney transplants inside the Islamic Republic, but currently the supply seems much greater than the demand.

Still, there are some in Tehran doing extremely well. In the northern part of the city, long considered to be the Westernised quarter of money and liberalism, many residents seem to be doing better than ever.

These people have often mistakenly been identified as the primary engine of domestic opposition to the regime, but with the influx of luxury cars and expensive bags bloating the area, there is clearly a segment of the society that is thriving in the current environment of currency and land speculation. While they may not be ardent supporters of the regime, they have remained quietly complicit as long as their interests are intact.

Not too far away, in most of the major squares of northern and central Tehran, the morality police emerge daily, with their chador- covered female officers and green and white vans, waiting patiently to pick up hejab (Islamic dress code) offenders seemingly at random. While the arrests have decreased in recent years and the punishments are less severe, average citizens are more disdainful than ever about the stifling rules.

“As if we don’t have enough problems already,” says 28-year-old office worker Taraneh, who was arrested recently along with a mother and her five-year-old daughter for wearing jackets deemed too short.

“I think they just send these people out to keep them employed,” said 35-year-old Hassan, as he watched the arrests. “What they don’t realise though, is that everyone that sees this harassment, religious or not, simply curses the system.”

Indeed, even President Mahmoud Ahmadinejad has said it’s not the government’s business to police what Iranians wear. Apparently, though, there are some in positions of power who still consider this an issue of national security.

Some residents are starting to see little distinction between these defenders of the system and those driving Porsches that cost over 300,000 dollars in northern Tehran.

“They all represent the hypocrisy that we’ve lived with for centuries,” says history teacher Nima. “Unfortunately, this is a part of this 2,500-year-old culture we’re all so proud of.”

That pride, though, is eroding for many, and everywhere one goes in the capital, plans to escape the current situation can be overheard at all levels of society. With an epic brain drain that sees 50,000 to 80,000 citizens leave each year, there are plenty of success stories for young Iranians to try and emulate.

Actually going, though, is getting increasingly difficult. It is not that the Islamic Republic is holding them back, but an Iranian passport seems to be one of the least valued on earth. Even tourist visas are hard to come by, as many Western countries worry that Iranians will simply stay in their countries if they are granted short-term entry.

The ever tightening sanctions that the United States continues to implement, as well as the EU’s looming embargo on Iranian oil, are further reminder for Iranians that their friends are few in the world.

Says small business owner Majid, “I never had a bad thing to say about (U.S. President Barack) Obama until he signed that bill (on Dec. 31.) Now I’m really angry with him. Lots of people feel the same here.”

Another sign that U.S. attempts to win over Iranian hearts and minds are failing.

Islamic Republic authorities, meanwhile, remain defiant, ignoring the growing chorus of concerns by the Iranian populace.

“Sanctions will not have any impact on our nuclear course and they (the West) will not achieve their aims,” Foreign Ministry spokesman Ramin Mehmanparast said in his weekly press conference on Tuesday, adding, “Our history has shown that sanctions, which are totally illogical, have accelerated our nation’s progress.”

Massive uncertainty, severe sanctions on its economy and a diminishing supply of hard currency have sent the Iranian currency, the rial, into a tailspin that appears unlikely to stabilise anytime soon.

A spice shop in Tehran. Credit: kamshots/CC BY 2.0

Currently the most often heard phrase in Tehran is “how much is the dollar?” The value of the U.S. dollar has become the barometre by which everything is measured, and as the price of a single dollar hovers around 17,000, the Iranians are feeling the pressures of their currency’s worst state ever.

Local journalist Mohammad quipped recently, “We used to talk about how 70 rials bought you a U.S. dollar” – a popular statistic from the days before Iran became an Islamic Republic in 1979 – “now we’re nostalgic for 15,000-rial dollars.”

The issue of Iran’s foreign exchange rates has become so sensitive in recent days that Farsi language websites posting updated exchange rates have all been filtered, making them inaccessible to web surfers who do not have anti-filtering software or access to a VPN. Text messages containing the word “dollar” written in Farsi were also reportedly blocked for several days.

Many official exchange shops have not been opening for business in the current climate as they were told by government authorities to post rates of approximately 14,000 rials per U.S dollar. Indeed, these rates can be seen on boards throughout the city, but as one exchange shop worker told IPS, “Good luck buying them at those rates. You won’t find a single shop in the country selling them for the posted rates.”

This has placed even greater scrutiny on Iran’s epicentre of unregulated currency trade in downtown Tehran. On Jan. 8, parliament voted to criminalise the unlicensed trade of foreign currency. So far, though, transactions on street corners throughout southern Tehran are continuing as usual.

Having lost over 30 percent of its value against the dollar since September, the purchasing power of the rial, and consequently that of average Iranians, has dwindled.

Changes in the rates used to be gradual and based on easier to define indicators such as the price of oil, ups and downs on Wall Street, or even in Tehran’s own stock exchange. But the new atmosphere defies those usual parametres and seems to be more influenced by rumour, paranoia and manipulation of how much foreign currency is made available from one day to the next, fueling big swings in the price at any given moment.

In Tehran, the results of sanctions along with the slide of the rial have sent shockwaves through a society that has long considered mercantilism essential to its identity. Here transaction is an essential component of life and stripping Iranians of their ability to do so has created growing resentment.

The uncertainty in the currency may have resulted in a lack of confidence in it, but has yet to reduce consumption. People are still buying goods as there is a sense that the rial could go much lower. Furthermore, there no real shortages to be reported yet, as the smuggling ships that have fueled Iran’s gray market economy for decades are still sailing the waters of the Persian Gulf, unloading on Iranian soil.

Prices on most goods, however, are creeping up quickly. As most products available at grocery stores are imported, prices have steadily risen in recent weeks. One example is bottled water, up 25 percent since September. Another is eggs, which now cost approximately 4,000 rials each throughout Tehran.

For higher priced imports, especially electronics, prices are regularly being quoted by the day rate of the euro or the dollar. On popular products, especially brands like Apple, which only arrive in Iran via smuggling, prices are attached to foreign currency since they have to purchase those products in dollars or euros. An Iphone 4S that cost around 11,500,000 rial in December now costs 15,500,000 – still somewhere between 850-900 dollars when the fluctuation in currency is considered.

In the real estate market, more short-term speculation for an economy that already rewarded a get rich quick mentality has resulted in abnormal windfalls for those in the business of buying and selling property.

A proposed loosening of the regulations on the number of stories a new building can reach have sent real estate prices soaring as land speculation and development is still seen as more stable than bank deposits. Iranian banks offer abnormally high interest rates, but even in double digits, they cannot keep up with the rate of inflation.

Not surprisingly, a good portion of the blame is being pinned on the U.S., by the Iranian government as well as the public.

In a growing sign that the U.S. is losing the battle for the hearts and minds of Iranians, Hassan, a 35-year-old travel agency owner, told IPS this week, “I never had a bad word to say about Obama until he signed these new sanctions. I’m so angry with him. Many people here feel the same way.”

His travel agency now quotes all of its prices in dollars or in euros. “We don’t have any other choice,” he said, “we have to pay for tickets and hotels in dollar and with the fluctuation in the rial, I can’t reliably price things anymore.”

The tourism industry, which has seen rapid growth over the past several years, is one of many that is bracing for even more difficult times ahead. As the Iranian New Year holiday quickly approaches, the currency decline could have a massive effect on his ability to sell tours to Iranians who look forward to the annual break from their tense lives inside Iran.

With 100,000 Iranians traveling during the two-week March holiday, there is the looming specter of a major flight of capital. Citizens had been entitled to an annual one-time purchase of up to 2,000 dollars at a lower official rate. Last week that amount was reduced to 1,000 dollars per traveler and the rate was significantly altered from 10,800 rials per dollar to 13,630 as of Monday.

Despite these measures, the Iranian government has denied that sanctions have played a role in the current rial crisis. On Tuesday, the speaker of Iran’s Foreign Ministry, Rahmin Mehmanparast said, “the decline in the value of Iran’s rial against the dollar has nothing to do with the new sanctions instituted by the U.S. on Iran’s central bank.”

The central bank’s governor, Mahmoud Bahmani, offered an almost identical statement, but added that the reasons for the decline were mainly psychological and inflicted on Iran by its enemies.

While there might not be a single source of the market’s uneasiness, Iran researcher Kevan Harris of Johns Hopkins University agrees that the causes are difficult to measure.

“This is where psychology is more important than economics,” according to Harris, who added, “because there’s no functioning currency market in the traditional sense, the swings in prices become much wider.”

As the Iranian economy struggles under international sanctions intended to halt its nuclear programme, one unofficial indicator that has yet to be rattled is the Islamic Republic’s robust consumer confidence.

Last March, during his annual nationally televised Persian New Year’s address, Iran’s Supreme Leader, Ali Khamenei, dubbed 1390 the year of the “economic jihad”, declaring that, “These sanctions that the enemies of the Iranian nation have planned or implemented are intended to strike a blow to the progress of our country, or impede its accelerating progress.”

Indeed, the sanctions, coupled with high unemployment and inflation, as well as a massive banking scandal, have the populace angered and nervous about what lies ahead, and foreign analysts convinced that Iran will erupt in protest any moment. Iran’s currency, the rial, is trading at all-time lows against all major global currencies and is likely to continue in free-fall in the coming months.

For most countries the succession of bad financial news would have been disastrous, but as we’ve learned time and again, Iran is not most countries. Adjusting spending habits is seemingly out of the question for nearly all Iranians, as commerce is an integral part of their identity and traditions.

An example that may seem trivial to a non-Iranian but remains deeply ingrained in this ancient culture is the importance of gift giving. It is unacceptable in most instances to arrive at someone’s home empty- handed. Thus, florists and confectionaries are thriving, even as even as local dentists struggle to make a living.

Furthermore, as prices on most goods and services have increased more rapidly in the year since subsidy reforms were first implemented, the average Iranian is nowhere near going to bed hungry – a fact that shows just how far off U.S. hawks may be in their assessment of contemporary Iranian life is.

Senator Mark Kirk’s plan to “economically cripple” Iran and his prediction that sanctioning it would make the rial “become like little more than like North Korea’s currency” seem like wishful thinking at this point.

To compensate for the increase in prices on formerly subsidised goods and utilities, the government has been making direct cash deposits into the bank accounts of any Iranian who signed up for the programme. According to Kevan Harris, a researcher at Johns Hopkins University and frequent visitor to Iran, these monthly deposits are “adding cash flows to everyone’s lives, not just the wealthy”.

Not only does this make bread riots very unlikely, it has brought Iranians’ already well-known tendency toward conspicuous consumption to new levels in recent months.

Shopping in one of Tehran’s major bazaars, 27-year-old accountant Golnaz hardly flinched at spending six dollars of her 500-dollar monthly salary for a half pound of dried fruit. “This is the price,” she remarked, “We’re used to things getting more expensive. It’s been like this for my generation.”

The proliferation of retail ventures opening in urban centres, especially restaurants, is staggering. For a country supposedly on the verge of bankruptcy, the long cues in front of many urban eateries – where a meal, without alcoholic beverages, can often cost much more than a similar meal in the U.S. or Europe – paint a very different picture than the one currently circulating in Western capitals.

Restaurants serving everything from sushi to burritos are cropping up throughout the capital and their clientele don’t seem overly concerned about spending whatever remains in their pockets despite the uncertain future. In this land where bars and clubs don’t exist, a seven-dollar cappuccino is commonplace, and the increasingly trendy cafes serving them are prospering more than ever before.

One phenomenon that seems to have made its way into the new Iran is the concept of going Dutch.

“At first I didn’t like doing this, because I thought it was stingy,” admits 30-year-old computer engineer, Javid, “But now I realise this makes a lot more sense. Why fight over the bill? It’s silly. We should have been doing this a long time ago.”

With the cost for 10 diners at many of Tehran’s restaurants often equaling a month’s salary for younger members of the workforce, it is easy to see why they would split the bill.

Regardless of who pays, someone is still paying, and no belt tightening seems to be on anyone’s mind.

“There are two things Iranians won’t stop spending on,” says Shabnam, a local journalist. “One is food and the other is luxury items. New clothes, new cell phones, new cars if they can afford it. It may not be wise, but we’re very concerned with what other people think of us.”

A growing problem, however, is that many of the goods fuelling the boom in consumption are not produced domestically. Reliance on imports is increasing. Locally grown meat, for example, costs nearly 20 dollars per kilo, while frozen meat imported from South America (either Brazil or Uruguay) is closer to six dollars.

Contrast this with neighbouring Turkey which, unlike Iran, has worked hard to develop domestic production, simultaneously providing its economy with enough goods to satisfy local needs, as well as creating millions of jobs in export industries. With a reciprocal visa-free policy, Iranian consumers have been flocking to Turkey to take advantage of the lower prices and often higher-quality goods. Turkish exports are also claiming a growing market share in Iran at the expense of domestic producers.

Similarly, China has become Iran’s chief supplier of imported goods, and many Chinese businesses are quietly opening branches within the Islamic Republic.

As Harris points out, “The problem in Iran’s case is not a lack of money, but too much money that is undirected towards productive efforts.”

Along with its exports, the number of Chinese travelers in Iran has risen sharply in recent months. While much of the world has agreed to stop doing business with Iran, China seems eager to fill the void with whatever the voracious market might desire.

The one industry where Iran has had some recent success is automobile manufacturing. Iran is the top producer and exporter of cars in the region.

But that’s not the impression one gets driving in Tehran, where the number of foreign luxury cars has skyrocketed, even in the face of import taxes than can exceed 100 percent. Maseratis, Porsches, BMWs and Mercedes are now common sights in Tehran, where just a few years ago one would have been hard pressed to find any vehicle that was not locally manufactured or assembled.

Despite the nearly four-fold hike in petrol prices since the subsidy reform, Tehran’s legendary traffic jams are as bad as ever.

Given Iran’s millennia-long commercial legacy and the necessity of survival despite the international ostracism it has experienced virtually since its birth, the Islamic Republic has become adept at withstanding punitive measures.

From using third parties to purchase goods it can’t import directly, to paying for airline fuel with suitcases full of cash, the regime has applied the often-byzantine style of doing business preferred inside the country to get what it needs from the outside, diminishing – or at least delaying – the effects of foreign efforts to weaken it.