'We thought things would get better': A year after the nuclear deal, Iranians await economic recovery

By Shashank Bengali, Ramin Mostaghim

Aug. 29, 2016 3 AM PT

Reporting from Tehran — Eight months after international sanctions were lifted in exchange for curbs on its nuclear program, Iran’s long-suffering people are still waiting for change.

President Hassan Rouhani’s promises of new jobs and greater incomes haven’t been met. Foreign investment has been slow to materialize. Prices of basic goods continue to rise, a reliable marker of misery in an economy struggling to reconnect to the outside world.

Under the arched, sky-lit passageways of Tehran’s centuries-old grand bazaar, where shoppers lingered at display windows and laborers pushed handcarts piled high with Iranian-made shoes and housewares, many shared a similar lament.

“Since the sanctions were lifted, things have become even worse,” Behnaz Abbasi, a 26-year-old accountant, said while browsing a cramped shop stacked with dusty local carpets.

"Since the sanctions were lifted, things have become even worse," said Behnaz Abbasi, a 26-year-old accountant with her finace at Tehran’s Grand Bazaar.

Abbasi and her fiancé, an electrical contractor, said prices for meat and some vegetables had doubled over the last two years. Even with both their salaries, they could barely afford the $300 monthly rent in the small apartment they will share in blue-collar east Tehran.

“We thought things would get better,” she said, “but for us it’s as if the deal never happened.”

Many blame the United States, which has lifted nuclear-related sanctions but left in place other financial restrictions on Iran due to its support for terrorism and development of ballistic missiles. That has scared away foreign investors, including many European and Asian companies wary of running afoul of U.S. laws, leading Tehran to accuse Washington of violating the spirit of the nuclear deal.

Iran is still barred from the U.S. financial system, meaning it cannot do business in dollars — the primary currency for oil sales and most other international trade. The Obama administration has been weighing whether to allow Iran limited access to dollars, a move that Republicans and some Democrats in Congress oppose.

A briefcase is used to store money for currency exchange. Despite the lifting of some U.S. sanctions on Iran, the banking sector is still stifled. Western credit cards are not accepted.

Across the drab concrete sprawl of Tehran, there is little sign of the tens of millions of dollars in Iranian oil revenue that were due to be released after being frozen in overseas banks due to sanctions. Nor have Iranian officials disclosed what they did with a planeload of $400 million in cash the U.S. delivered in January — part of $1.7 billion Washington owes Tehran for canceling an arms sale following the 1979 Islamic revolution.

Some analysts in Tehran believe the government spent a substantial portion of the funds to pay down debt, particularly in the overheated construction sector where elites stashed their wealth.

In any case, visible investment is scant. Some Iranians fault Rouhani’s government for raising unrealistic expectations that the economy could be turned around quickly; others blame hard-liners who control major industries and want the agreement to collapse.

Amir Khaledi, who owns a kiosk selling Iranian-made shoes and sandals, said he supported Rouhani’s nuclear diplomacy as a way to avert conflict with the United States and end Iran’s long estrangement with the West.

At the Grand Bazaar, Amir Khaledi, right, who owns a kiosk selling Iranian-made shoes and sandals, said he overwhelmingly supported President Hassan Rouhani's nuclear diplomacy as a way to end Iran's long estrangement with the West.

After the deal was struck in July 2015, he eagerly followed the news as foreign delegations swept into Tehran and pledged to invest. He began to imagine American- and European-made goods lining his shelves.

Since sanctions were formally lifted in January, those hopes have dimmed.

“The White House always said, ‘If Iran cooperates…’” said Khaledi, 40. “Well, Iran has done everything and the commitments have not been fulfilled.”

The most powerful figure in Iran’s theocracy, Ayatollah Ali Khamenei, has begun to distance himself from the agreement.

Known as the supreme leader, Khamenei surprised followers when he endorsed negotiations with the United States and five other countries to end Iran’s uranium enrichment program, which the West feared could be a precursor to a nuclear weapon.

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Men gather at Tehran’s Grand Bazaar to play chess. The unemployment rate is at 11%, and it’s even higher for the educated class. Despite the lifting of U.S. sanctions on Iran, many Iranians are frustrated that they haven’t seen any economic change over the last year.