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Economy

Iran's GDP in the Time of Violent Repression

October 8, 2022
Arash Hasan-Nia
4 min read
In the absence of free speech in Iran, we have no reliable facts and figures about the losses suffered by the national economy as a result of protests and the harsh response of security forces
In the absence of free speech in Iran, we have no reliable facts and figures about the losses suffered by the national economy as a result of protests and the harsh response of security forces
The most important part of the losses that we can estimate after any wave of protests in Iran is the losses suffered by businesses that rely on the internet for their operations
The most important part of the losses that we can estimate after any wave of protests in Iran is the losses suffered by businesses that rely on the internet for their operations
TechRasa, a technology and startup news and analysis in Tehran, reports that there are more than 415,000 Iranian storefronts on Instagram
TechRasa, a technology and startup news and analysis in Tehran, reports that there are more than 415,000 Iranian storefronts on Instagram

Three years ago, at the height of the bloody nationwide protests of November 2019 over the sudden and multifold increases in the prices of gas and fuel, Iranian state television aired a report in which a tearful man claimed that the protesters whom the government called “rioters” had set his house on fire, torching the dowry of his marriage-age daughter.

Now, with the new protests raging across Iran, the same pattern is repeating itself. The news channel of the state television has again sent its reporters to the streets and the bazaars, so that business owners can tell them about losses they have suffered because of protests, or about being forced to close shop because they are afraid their businesses would be pillaged.

It cannot be denied that unrests disrupt economic activity. But what has greatly exacerbated losses to the national economy is the response of the government and security forces who use force to deny the right to protest that is enshrined in the constitution of the Islamic Republic and who disrupt and restrict internet service and other communication systems.

It should come as no surprise that, in the absence of free speech in Iran, we have no reliable facts and figures about the losses suffered by the national economy as a result of protests and the harsh response of security forces. Nevertheless, we can arrive at some estimates.

Martial law on the internet

The most important losses we can estimate after any wave of protests are those suffered by businesses that rely on the internet for their operations. These business are the first victims of the government response to protests. In recent years, the government’s customary crackdown on protests has been to disrupt or completely cut off the internet, to narrow the bandwidth and to block social media and various other platforms in cyberspace.

Cutting off mobile phones, and making it impossible to send and receive text messages, was the usual practice in the years before the widespread use of the internet and smartphones.

According to the Statistical Center of Iran, last year around 11 million Iranians made an income through the internet, around nine million or 83 percent of whom had set up shop on Instagram.

TechRasa, a technology and startup news and analysis site in Tehran, reports that there are more than 415,000 Iranian storefronts on Instagram with an annual financial turnover between 18 and 32 trillion tomans ($4.2-7.5 billion in the official exchange rate).

Podro, a platform in Iran that provides logistical and transaction services for ecommerce, reports that the annual volume of ecommerce on Instagram in Iran is 40 trillion tomans ($9.2 billion) and now these businesses are losing around 110 billion tomans (close to $25.4 million) per day as a result of internet service disruptions and the filtering of Instagram.

According to the Statistical Center of Iran, the most popular platforms in Iran are WhatsApp, Instagram and Telegram with, respectively, 57, 44 and 43 million users.

A comparison with domestic copycat apps such as Rubika and Gap that have 10 and four million users, respectively, clearly shows how impractical is the advice of Minister of Information and Communications Technology Isa Zarepour to internet business owners to transfer their businesses to platforms that obey the laws of the Islamic Republic. Most Iranians simply do not trust such platforms because they believe they are monitored by the government.

Losses go beyond ecommerce

The disruption in internet access, however, has consequences that go beyond blocking access to various platforms. One report suggests that the share of digital commerce in Iranian gross domestic product (GDP) is around 7.2 percent, meaning that around 470 trillion tomans (close to $109 billion) of Iran’s economy is threatened by internet cutoffs and restrictions.

Close to 90 percent of economic activity in Iran is dependent on the internet in some form or another, from correspondence, following up on commercial orders and banking transactions, to tracking shipments, managing production lines and other economic activities that require high-quality and reliable internet connections.

And even all this is only part of damage of internet shutdowns that follow unrest, the brutal use of violence and the senseless response to people’s protests and demands. The greater part of these damages is their effect on those who are torn between leaving their country or staying in Iran, and between investing in the Iranian economy or taking their capital abroad.

Each time that protests in Iran leads to violence by the security forces, and to killings and arrests, several scientific and technological experts, technicians, skilled workers and owners of capital, big or small, who are torn between these choices, come to the decision that they must leave. The loss of faith in the possibility of change and the decision to leave Iran is the greatest cost of the government’s insistence on violently suppressing protests of critics and of dissent.

Each year $10 to $12 billion capital is taken out of Iran and Iranians are the top buyers of residential properties in Turkey. The Islamic Republic ranks 24th among countries that send immigrants to the member countries of Organization for Economic Co-operation and Development. But none of these facts – and their causes, namely, violent suppression – are considered when the government tries to calculate the cost to the national economy of protests.

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