How the Iranian Economy Actually Works

After the Iranian Revolution of 1979, the country's new leaders — religious and political — promised to redistribute the country's wealth and made moves to make Iran independent from western influence and business interests. In the decades since, Iran's economy completely transformed, and it is closer to what Yeganeh Torbati and Bozorgmehr Sharafedin describe as a "mafia state," where fealty to various factions is baked into the country's political economy. In their new book Stolen Revolution: Betrayal and Hope in Modern Iran they trace the massive changes Iran's political economy has undergone since the revolution, and they speak to us today about this history, how average Iranians navigate everyday cronyism, how Iranian leaders treated the country's burgeoning tech sector, and why the recent peace talks might not change all that much about how the country's economy currently operates. Read more: A New Age of Missiles Reshapes Battlefields Around The World https://www.bloomberg.com/news/articles/2026-07-29/a-new-dawn-of-missiles-shapes-battlefields-from-ukraine-to-iran?utm_medium=referral&utm_source=podcast&utm_campaign=odd_lots&utm_content=article US War With Iran Set to Drag On for Months Over Hormuz Deadlock https://www.bloomberg.com/news/articles/2026-07-29/us-war-with-iran-looks-set-to-drag-on-for-months-over-hormuz-deadlock?utm_medium=referral&utm_source=podcast&utm_campaign=odd_lots&utm_content=article Only http://Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots https://www.bloomberg.com/subscriptions/oddlots?in_source=oddlotspodcast Subscribe to the Odd Lots Newsletter http://bloomberg.com/subscriptions/oddlots Join the conversation: discord.gg/oddlots https://discord.gg/oddlots See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

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• 0:00Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused, and brief. Search Barclays Brief wherever you get your podcasts.

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• 2:02Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 2:07Tracy Alloway?

  And I'm Tracy Alloway.

• 2:08Joe Weisenthal?

  Tracy, it's now July 28th, and the Iran war continues to go on. And it's sort of extraordinary, the fact that, you know, in the beginning, here was this thing that was going to be, if it persisted, sort of cataclysmic perhaps for the global economy, and particularly with related to oil prices. And yet, on a sort of day-to-day basis, it's not even necessarily the biggest headline news that most people are talking about.

• 2:34Tracy Alloway?

  People get used to a lot of things very quickly. I mean, it still has the potential to be catastrophic at some point in time. But you're absolutely right. We've gone months now since, when did this start? In March, right?

• 2:44Joe Weisenthal?

  Yeah, the very beginning of March.

• 2:46Tracy Alloway?

  Yeah, months now with a war, which technically hasn't even been declared a war. It's an operation, is that what they're calling it?

• 2:53Joe Weisenthal?

  I believe so.

• 2:53Tracy Alloway?

  Military operation.

• 2:55Joe Weisenthal?

  I think it's been a long, people talk about, you know, the forever war. I think the last, it's been a long time since America actually ever acknowledged that it was in a capital W war.

• 3:05Tracy Alloway?

  Very true. But it does kind of beg the question about what happens when all of this is over, right?

• 3:11Joe Weisenthal?

  Yeah, right. I mean, hopefully it ends one day. And I have to say, so obviously, we talk about oil a lot when we talk in terms of economics. I have to admit, you know, it's funny. We've done multiple episodes about the Iranian stock market, which is a fascinating topic. But other than the fact that obviously Iran produces a lot of oil, I actually like basically know nothing about the Iranian economy. Like the day-to-day, what a typical middle-class family.

• 3:38Tracy Alloway?

  There's some things I know, so there's oil.

• 3:40Joe Weisenthal?

  Yes.

• 3:41Tracy Alloway?

  There's Iranian cars, famously, which I would be interested in experiencing one day. Not necessarily buying, but experiencing pistachios.

• 3:49Joe Weisenthal?

  I was going to say, so like pistachios, like nuts, I imagine. But like what the sort of job market is, what a day-to-day, what's out there and, you know, whatever the Iranian equivalent of LinkedIn or Indeed.com is, like what people do, what people, what people want career-wise, all of these things. Because there's an Iranian stock market, obviously, you know, presumably there are like startups and companies that one day want to list, but I don't know what any of them do. I have so many questions, I guess, about like, what a quote, "normal Iranian," let's imagine the war ends and also there aren't sanctions, right? What would an Iranian?

• 4:29Tracy Alloway?

  Well, this is my point, because at various points in time previously, you have had these bursts of optimism about the opening up of the Iranian economy, the lifting of sanctions. It's one other thing I know, again, not much, but one thing I know is it's a huge economy, right? With our previous Iranian stock market guest, the size of Turkey, right? Something like that.

• 4:49Joe Weisenthal?

  It's a really big economy.

• 4:50Tracy Alloway?

  It's a big economy. And so what happens if that starts to open up? Can it open up? Are we going to see what happened previously, where it kind of starts to open up and then it shuts down again? I don't know.

• 5:00Joe Weisenthal?

  Several months ago, like, there was like some random night where I was clicking on random Wikipedia links. And I was like, I wonder what Ahmadinejad's economic policy platform was when he ran for president for the first time. I like started clicking on his campaign. I was like, I wonder, and it was like, seemed kind of vague. And he had some, I wish I could remember the slogan. It was really good. It was something like, "If we imagine it, we can do it." It was like, you know, the most inoffensive sort of like domestic policy agenda slogan. And I couldn't really find that more specifics. But, you know, you have elections, et cetera. What do they run on? What do they, you know, where do they stand on tactics? All these questions about sort of like, quote, "normal," unquote, economic life in Iran.

• 5:40Tracy Alloway?

  Is that your way of saying that you want to talk about the political economy of Iran?

• 5:43Joe Weisenthal?

  I want to talk about the political economy and the even regular economy of Iran. Anyway, I'm very excited to say, we do in fact have two perfect guests on who will teach us much more about this. We're going to be speaking with Yegana Torbadi, Iran correspondent for The New York Times, as well as Bezorgamir Sheriff Fadin. He's the head of digital at Iran International. So both of you, thank you so much for coming on Odd Lots.

• 6:06Speaker 05

  Thank you so much for having me.

• 6:07Speaker 06

  Thanks for having us.

• 6:08Joe Weisenthal?

  Oh, and I should of course have mentioned that they are the co-authors of a brand new book, Stolen Revolution: Betrayal and Hope in Modern Iran. So again, thank you both so much for coming on. Why don't we just start, what is the premise of this book? Why was this an important book to write? Or what endeavor do you to go on this project?

• 6:24Speaker 05

  Yeah, well, thank you so much for having us. I mean, we started on this project around five and a half years ago, so late 2020. And I think our vision was, at first, we were very focused on kind of trying to explain, as you sort of mentioned, Iran's political economy, and in particular, sort of the roots of corruption and sort of state's control and influence over the economy over the past 40, you know, 50 years. And then, of course, as time went on, and since 2020, a lot of things have happened in Iran, and our focus both broadened and I think deepened. But sort of throughout our book is sort of this continuous thread of the promises that the current government, the Islamic government,

• 7:06Speaker 05

  came to power on in 1979, particularly around social justice and how it might redistribute Iran's really immense resources, and sort of what that has actually led to in practice today, which is far from those promises.

• 7:20Tracy Alloway?

  Yeah, so you described the Islamic Republic as evolving into this sort of mafia-like state. And I guess there's a difference between an authoritarian government and a corrupt one, although they often go hand in hand. How did Iran kind of evolve from the authoritarian Islamic Republic to a place that in terms of its economy was actually extracting value from its people?

• 7:49Speaker 06

  Yeah, I think maybe it's good to define what do we mean by a mafia state? And what's the difference between a mafia state and a normal totalitarian government? I think in a, in a normal society, all citizens are equal, and they benefit the same from the government and the wealth of a nation. But in a mafia state, you should imagine a layered society. And citizens are rewarded based on their loyalty to the system. So the more loyal you are to the government and the state, the more you will benefit from the resources. So that's how the Islamic Republic was from the beginning.

• 8:33Speaker 06

  And it excluded its critics, and it rewarded people who were loyal. And it was an ideological government. So people who believed in the values of the Islamic Republic were rewarded. But as we move forward, we see that this trend was reflected more and more in the economy. You see that how evolutionary gods and other religious foundations, they come and take over a big chunks of the economy. And I can say that this mafia state and the layered society is even reflected in Iran's foreign policy. So in the eyes of Iranian states,

• 9:15Speaker 06

  maybe a Hezbollah member in Lebanon or a Houthi militia in Yemen, they are more loyal to the Islamic Republic than, let's say, a professor at Tehran University. So they should benefit more from the wealth of the nation. So that's why we have had all these discussions within the Islamic Republic that while the Iranian government can't afford to provide free milk at schools, it has the money to give to its proxies in the region to kind of reward their loyalty.

• 9:50Tracy Alloway?

  Right. Maybe I should back up even further at this point and ask, the Iranian revolution, how much of that was about economic grievances on the part of the people? The idea that, as so many revolutions are, you know, things need to get better versus just the clergy basically seizing power?

• 10:10Speaker 05

  I think it was sort of a mix of a few different things. The working classes and sort of the lower socioeconomic classes did not really jump in to be part of the revolutionary coalition until quite late in the game, when they really started to suffer from some of the Shah's economic policies kind of towards the very end. Really, at the beginning, it was more kind of like the middle classes and the intellectuals, who were sort of forming this kind of revolutionary coalition from a bunch of different impulses. There were some who wanted kind of an Islamic government. There were others who were communists and were kind of more anti-US, anti-imperialist. And there were others who just wanted kind of a secular liberal democracy and felt that the Shah was trampling on people's rights.

• 10:54Speaker 05

  All of those people kind of joined in. But what we see, especially kind of towards the end of the revolution, as we're getting to 1979, is that the leader of the revolution, Ruhollah Khomeini, who then became the leader of the new government, he wanted to kind of co-opt some of the most effective sort of leftist arguments, because he wanted kind of their young people, their supporters, to sort of also support him. And so, you know, these arguments of kind of the bourgeoisie versus the proletariat, you know, Khomeini kind of adopted some of those terms with an Islamic tinge. And therefore, sort of, he promised, and then in the first few months especially of the revolution, he also promised that, you know, we are going to provide for the

• 11:36Speaker 05

  poor, we're going to provide free electricity, free buses for the poor, we're going to build housing. And I think the government sort of wanted to present itself as being on behalf of some of those, the kind of the lower classes of society, and presented them kind of as its base. As time goes on, what we see, especially kind of in the last 10 to 15 years, it sort of turned its back on a lot of those promises, to where it's not even really even pretending anymore that that is kind of what it's aimed at. And we can kind of talk about sort of some of the turning points there. But it really was kind of a gradual shift over time. And then, especially since 2017, you really see this growing dissatisfaction amongst

• 12:20Speaker 05

  not just middle-class Iranians, but also people who are poor and struggling against what this revolution has brought to them.

• 12:27Joe Weisenthal?

  Okay, everyone's ability to derive wealth or income is somehow linked to where they stand in this hierarchy of supporting the government or supporting the state in some way or another. Let's talk about where the government gets its resources to make these allocations, whether it's housing, whether it's electricity, whether it's obviously munitions for various groups, et cetera. Obviously, we know oil is a big part of it. But what are the main, how would you, big picture, decompose what the Iranian economy sort of basically looks like?

• 13:04Speaker 05

  So I think, of course, yeah, oil's a big one. It has kind of this huge resource that's very valuable and that it can kind of use to fund itself. But also, Iran has a pretty diversified economy in terms of its industrial base. And that is partially as a result of kind of the Shah's own policies, but then also sort of this idea that took root after the revolution, that we need to provide for ourselves, we need to be self-sufficient. This was a very important kind of part of both the ideology of kind of present in that moment in general, this sort of like 20th century, 60s, 70s backlash against interference by world powers in the internal affairs of Iran and of other countries.

• 13:48Speaker 05

  So there was kind of this very strong idea, especially among Iranian leftists and including in, you know, some of the clerical class, that we need to kind of establish our own industries and be independent. So Iran has a car industry, Iran has steel plants that were built after the Iran-Iraq war, and it became operational sort of after the Iran-Iraq war, that produce, you know, huge amounts of steel, you know, kind of leading the Middle East in that industry. And these industries are maybe not necessarily the most efficient, and they don't have a ton of foreign investment, but they provide employment. Iran has a huge agricultural sector, which is, which is an enormous source of jobs in Iran, which has been very important as it's been under sanction.

• 14:32Speaker 05

  Of course, the agricultural sector has a lot of other costs, including overuse of water, which Iran has been facing, but it was, it's an important, at least, source of jobs in the economy. So these are all these major industries that kind of first start out after the revolution, being very much under the purview of the formal state, kind of what we in the West would recognize as a government, including a ministry, you know, a ministry that is answerable to parliament, that oversees, for instance, the steel industry or the mines in Iran. Over time, and we can, we should kind of talk about this more, the control over those

• 15:11Speaker 05

  industries moves away from sort of the recognized parts of the state into kind of this shadow state, you know, which is sort of much more linked to the security forces and to these entities that are kind of controlled by the clerics, but aren't really accountable to the rest of the government.

• 15:30Speaker 06

  If I add a bit to that, because if you look at the history of the Islamic Republic, of course, the revolution started with this massive wave of nationalization. The state took control of the major industries, shipping, mining, banking, and many more. But gradually, as we come forward, after a decade or two, the Iranian state decided the privatization of these major industries. But I think the main problem was the corruption, but we didn't see real privatization. So usually, people who were close to centers of power, they came and took over these industries.

• 16:12Speaker 06

  And they, like, they took them over with a very low price, like, imagine factories that were owned by the government. They were taken over by elements very close to the security forces. And so after that, many of these factories, they didn't come back to production. The machinery was sold and the land was turned into maybe a residential place to build apartments in. So we saw that, that level. But still, as Yigun mentioned, we have private sector in Iran. You know, the problem with private sector is that if a business becomes successful

• 16:53Speaker 06

  and it passes a certain threshold, you will see the security forces coming and knocking on your door, and they want their share. And that's, that's again, it's like in mafia state, if you can imagine, if you have a restaurant in, I don't know, in mafia movies, if you have a successful restaurant, they would come and they want their share from these businesses. And as we showed in the book, one of the major new sectors was the startup sector. Of course, this sector was started by many Iranians who came back from abroad to launch this sector, but they saw that how the security forces came and forced them to give up these firms.

• 17:51Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief podcast. Every week, experts from Barclays Markets and Research get you up to speed on what matters and what to watch next, about the time it takes to grab a coffee. So search Barclays Brief wherever you get your podcasts.

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• 19:51Tracy Alloway?

  Just in terms of the state like becoming more intertwined with the private sector, I learned two new words, or I guess terms, from your book. And I'm going to mispronounce the first one because I've only ever read it, I've never said it aloud, but bonyads? Is that right?

• 20:08Speaker 05

  Bonyads, yeah.

• 20:10Tracy Alloway?

  Bonyads, okay, bonyads, and then invisible ports. Can you talk a little bit more about those two things as sort of examples of how the state becomes intertwined with the private sector or the general economy?

• 20:24Speaker 06

  Okay, so again, these religious foundations, they were launched at the beginning of the revolution, and they're very interesting. So like, one of them was this massive foundation that was established to distribute the wealth among the poor. And it seemed quite a noble cause. And of course, we had other foundations to look after the families of martyrs of Iran-Iraq war and the veterans of the war. So these massive foundations, they were established by the order of the founder of the revolution, Ayatollah Khomeini. And the heads of those foundations, they had massive power. So

• 21:09Speaker 06

  We show in the book, for example, that how the head of one of these foundations, he wanted to import some wheelchairs into the country to give it to the veterans of war. But at that time, the Minister of Industries, he was against the import because he believed that the imports of German wheelchairs will be undermining the domestic production. But the head of foundation, he was an MP at that time, member of the parliament. So he went to the parliament and passed the bill to allow the foundation to import anything they want without any government's supervision.

• 21:52Speaker 06

  And he wanted to do that to maintain the revolutionary nature of the foundation. And he didn't want to be constrained by bureaucracy and red tape. It's interesting that the same person, decades later, he becomes the Speaker of the Parliament during the reform movement. And he founds these invisible ports or invisible jetties that, how is that? So we see that these foundations and the Revolutionary Guards, they had massive power to import anything they wanted without audits and without taxation. And this character of the book, decades later, he goes to southern ports of Iran

• 22:33Speaker 06

  and he saw a dedicated port that belonged to the Revolutionary Guards. And they could import anything they wanted without any supervision of the government. So in a way, you see how this mafia state was formed gradually, how the revolutionary nature of the foundation forced them into creating a system which was not transparent from the start. And later on, the same system turned into a mafia state.

• 23:03Speaker 05

  And you sort of see how there is some good intentions, right? Like the idea of importing higher quality wheelchairs from abroad to help veterans of the war who had been injured, you know, that is a laudable intention. But this character, this person that we're talking about, Mehdi Kadri, he sort of in that decision in the 1980s establishes this idea that these foundations, and it wasn't just him, but this was just one example, these foundations are above the law and they get special dispensations and special privileges because they're kind of associated with the revolutionary state. Private companies don't get those rights. Entities, you know, that are disconnected from the government don't get those rights. But he establishes that.

• 23:45Speaker 05

  And that same thinking, you know, as it continues and is not challenged over the years, sort of grows into eventually these invisible ports and many other abuses.

• 23:55Joe Weisenthal?

  It's so striking, like, listening to this because you, I mean, on the one hand, obviously, Iran, very distinct story. But on the other hand, you know, so many of these themes we've already discussed, you see like echoes of them or versions of them in all sorts of developing states or whatever. You know, obviously, when you talk about, oh, here is a steel factory, some industrial facility, and then it's been re-proposed in some way for some non-vital thing, you sort of think about late-era Soviet Union, for example. It's like, here's the company that wants to make bread, but they just sell all their parts abroad for hard cash and then don't actually serve their purpose. Were there ever any forces in government that tried to keep some of these entities in line?

• 24:40Joe Weisenthal?

  I assume there must be, like, some conflict or effort to sort of maintain this thing where you have something that resembles industry, has some perverse incentives to maybe like take some shortcut for the personal gain of whoever is the controlling entity. Were there ever attempts to build in mechanisms such that these perhaps public resources couldn't be expropriated in some way?

• 25:06Speaker 05

  For sure. I mean, there were definitely people who, maybe too late, sort of saw the errors of some of the ways that the government had acted, including people who had been part of the problem, you know, earlier on in their career. So like, for example, Mehdi Kadri, who we mentioned, who was a cleric, who, an MP, he led one of these buñiads, but then later on becomes part of the reform movement and rises to great power and tries, when he's in parliament, to establish some standards of transparency for these entities, these buñiads and other institutions that answer directly to Iran's supreme leader. And he's unsuccessful. By that point, which was the late 90s, early 2000s, these entities and the supreme leader

• 25:51Speaker 05

  himself were just far too powerful for the elected government to really put a check on. There's another anecdote that we talk about at length in the book, which was in 2004, when Iran was opening a new airport. And this is, you know, a big moment for Iran. They had been planning this airport actually since before the revolution. Of course, it was delayed, you know, because of that and because of the war. But this was going to be kind of this big moment when Iran was going to have an airport to kind of rival Dubai and Istanbul. On the day that it's being opened, the Revolutionary Guards drive armored land cruisers onto the runway and prevent the first plane from landing. They have to be begged by the Transport Minister before they allow it to land.

• 26:36Speaker 05

  When the second plane wants to come in, they scramble a fighter jet and threaten it, and it has to divert south to Esfahan. And why did this happen? The Transport Minister later revealed in a series of interviews, because the guards had wanted the contract to operate that airport, but they hadn't provided the best price. And so the government had given it to a Turkish Austrian firm. And the airport was shut down. It was basically a no-fly zone for months. And it was reopened with state firms running the airport rather than this foreign contract. And so, you know, our character, Mehdi Kadri, he's a Speaker of Parliament. His MPs write a report about what happened.

• 27:18Speaker 05

  But ultimately, there's no accountability for that action. And as we go on in time, there's, we get to a point where the guards don't even really have to take such a dramatic step. Their dominance in contracting and in, you know, different parts of Iran's economy sort of goes unquestioned. And I think the element of Iran's government that is somewhat unique, at least in its specifics, from, you know, a place like the Soviet Union or other places, is that because all of these institutions answer to someone who's sort of seen as a holy figure and whose power comes from God effectively, it's much more difficult to question both

• 27:59Speaker 05

  his authority and to establish any accountability over institutions that only report to him, which is how Iran's government is structured. Both the military and these big buñiads only report to him. And how can you question someone who's, you know, effectively God's representative?

• 28:18Tracy Alloway?

  I mean, the extraction from the private sector, how much of that is about consolidating political power? And how much of it is about being worried about, I guess, foreign threats that might come in through additional capital in the country? Like, can you kind of decompose or try to maybe psychoanalyze the motivations for, for instance, the Iranian guards wanting to stop a new airport from operating?

• 28:49Speaker 06

  I think the way I see it is the competition of different factions within the same system.

• 28:54Tracy Alloway?

  Yeah.

• 28:54Speaker 06

  It's not that one faction wants to have all the money and the other faction is promoting transparency and is fighting corruption. Usually, you see with a change of government, you see that how the new government tries to empower people and elements close, close to that. And we explain that in the book and how, for example, Ahmadinejad, when he came to power, he tried to empower people close to him. But when next presidents, when they come, including Hassan Rouhani, we see that he also tried to somehow make sure that people close to him can benefit from such resources.

• 29:37Speaker 06

  So I think there is this infighting that you see, that sometimes the Revolutionary Guards, they need to use their military and intelligence power. And sometimes the other faction can take control. But overall, I think there are many elements that have added to this competition. Of course, the sanctions are one of those, like decades of sanctions. They have created this lack of transparency within the state. And each faction, they come and they try to take a part of the business, trying to show themselves essential for the everyday affairs of the country to be handled.

• 30:17Speaker 06

  For example, before that, Iranian Oil Ministry has been in charge of selling goods. That's been the case for decades. But when the sanctions increased in recent decades and the government couldn't pay its debts. To, let's say, Iran's police and their military forces, it gave them access to oil. So a big part of Iranian oil export has been done by the Revolutionary Guards at this stage. Some estimate that half of the Iranian oil is sold by the Revolutionary Guards. So I think the way I see it is just these different factions, they're constantly fighting

• 31:00Speaker 06

  with one another, trying to have a bigger share of the economy.

• 31:04Speaker 05

  Yeah, Tracy, I think your question, like, there's one anecdote that sort of exactly answers it. So I think it's both. I think they came by their suspicion of foreign intervention in Iran's economy, honestly. I mean, if you look at the 20th century history of Iran, it is one of economic exploitation of the country by world powers, US, the British, the Russians, et cetera. And also, they have used that ideology in a way that has benefited themselves. So the one anecdote that kind of gets at this is in 2020, 2021, when COVID is hitting, Iran is one of the worst affected countries by COVID.

• 31:45Speaker 05

  The Supreme Leader decides to bar the import of many Western doses of the COVID vaccine. And kind of almost simultaneously, the Iranian government decides to launch on a project to make its own COVID vaccine. But what's the entity that's given that contract? It's the conglomerate controlled by the Supreme Leader, Ali Khamenei. So he's both deciding a policy that, and I think, you know, if we, he's no longer with us, but if we had given him truth serum, I think he actually was suspicious of the motivations of the US and the British in, you know, making these COVID vaccines. I think, you know, that was probably genuine. But also, with that decision, he creates a shortage, and then his conglomerate that

• 32:30Speaker 05

  would profit from a government contract like this is able to step in and kind of save the day and also make these vaccine doses. So you kind of see in that one example, both the ideology and the self-interest kind of really melding seamlessly in a way that it's just, it's just kind of remarkable to me. So, so I think Buzzword's answer stands, but I also think that it's sort of both of those, those factors that you identified acting at once.

• 32:55Tracy Alloway?

  Yeah, and Joe, I should just say, the one other thing I know about Iran's economy is that it has been the subject of interest, to put it mildly, to many foreign governments over time. And of course, famously, BP, you know this, right? BP has its origins as the Iranian Anglo-Iranian Oil Company.

• 33:16Joe Weisenthal?

  So here, here's one question I have, just again, from a sort of pure economic developmentalist question. Many of the things that you describe, they would call like import substitution in developing economies, et cetera. It's like, okay, like, we don't want to import too much of X because then our sort of nascent company can't compete, et cetera. And in many cases, there could be logic. Has there ever been a figure in modern Iranian history who's sort of like the sort of the export oriented development? Let's build an industry that can compete, is what we always talk about with the, you know, the East Asian countries. Let's build an industry, set aside oil, that, that competes and that we want to thrive,

• 33:59Joe Weisenthal?

  et cetera, and the export market will be the test of whether this is a successful company or not. Has anyone like tried this sort of popular idea?

• 34:08Speaker 06

  I think the closest that comes to my mind was Hashemir Afzaljani, President Hashemir Afzaljani, who was saying that he wants to turn Iran into an Islamic Japan. So he was very fascinated by metro system in Western societies, and he wanted to create the same system. But at the end, I, I think he failed to do that. What do you think, Yvonne?

• 34:35Speaker 05

  Yeah, I mean, I think, you know, I don't know that I would, if anyone should cite me on this, but I, you know, when I'm kind of looking at sort of how Iranian companies compete, I mean, given the fact that the way, the way the direction, the direction the economy has gone in is favoring these entities, these companies that are linked to powerful people in the state. And that's sort of poisonous to competition. And so the idea that even within Iran's domestic economy, the, the most, the really, the truly most talented and meritorious companies are not the ones that rise to the top or are the most successful or get the most market share. It's the ones that are smart enough or able enough to sell enough of their shares to

• 35:18Speaker 05

  some powerful entity, that at least they're then protected from being perhaps raided or shut down. Or maybe they get some sort of like special dispensation from the government. And then the idea that those companies that are themselves maybe not the best are then going to compete externally with like the Siemens of the world or GE just seems a bit, even if we set aside sanctions being a huge barrier, which they are, it seems a bit unrealistic to me that Iran would, would succeed in that kind of market. Although, you know, Iranian steel has, you know, they, they, they get, they used to get a lot of foreign, foreign revenue, foreign currency from exporting steel to various countries. So they are, there is a market for some Iranian goods, but it's, you know, I don't know that

• 36:03Speaker 05

  they would kind of be at the top of any sort of board list.

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• 38:27Tracy Alloway?

  Can we talk about the tech sector specifically? Because again, this was surprising to learn that at one point Iran had a vibrant startup scene, but on the other hand, it kind of makes sense. If you think about a place where because of sanctions, you don't have a lot of Amazons or Ubers around, then maybe that's the perfect, you know.

• 38:47Joe Weisenthal?

  I also just associate Iran with having a lot of young, bright, young, educated, young, educated people.

• 38:53Tracy Alloway?

  Yeah, absolutely. So what did Iran's tech startup scene actually look like?

• 38:58Speaker 05

  Yeah, I mean, this is a fascinating chapter and one that we really dug into. So Iran was the second country in the Middle East after Israel to get access to the internet. So it's a very kind of like tech forward, pioneering country in that way. And towards the ends, the sort of the early 2010s, more and more young people are starting to get online. The Rouhani government, kind of this more moderate government coming in, they enabled access to 3G and 4G internet. So there's suddenly this access to mobile data and to the ability to kind of have apps and stream video, all that, all those sort of things. So it really took off and Iranian users wanted content, they wanted apps.

• 39:40Speaker 05

  And as you mentioned, sanctions meant that even with the nuclear deal, because the nuclear deal, if you remember, did not allow American companies to go into Iran. So the leading tech companies in the world, Amazon, Uber, Lyft, they could not operate. So there's this sort of protected ecosystem of 80 million at that time, 85 million or so population that needed apps and Iranian businesses could suddenly launch and, and serve those people. And so that's really what happened. So you, you kind of start to see the first inklings of this sort of tech industry forming in the early 2010s. You get some very early foreign investment even before the nuclear deal happening and

• 40:23Speaker 05

  some Iranian expats moving back and sort of seeing what's happening and starting venture capital funds. And this really then takes off after the nuclear deal is signed in 2015 and goes into effect in early 2016. And foreign investors are just really intrigued by this idea that we finally have, like, the last sort of green field opportunity is in Iran, and maybe it could be the next Russia, maybe it could be the next China, and we could really get in early on this. And so that, you know, we kind of trace what happens after that.

• 40:55Joe Weisenthal?

  You know, it's great, if you go to the website of the University of Tehran, where I am right now, it's all the cliches of every university. They have a picture of a bunch of happy grads. They have the required photo of a multiracial classroom, whichever university has on their website, all of these people learning. But let's talk a little bit more about what the, okay, you mentioned like the Ubers and Lifts, et cetera. Like, what else were people trying to build? Like, how far did this ecosystem push? And then you mentioned, okay, eventually a company gets to a point, it reached some threshold in which like it is no longer really able to like operate as like a private entity that pursues shareholder value as its mission.

• 41:39Joe Weisenthal?

  What's the second, after all this excitement, like, where does it go?

• 41:43Speaker 05

  Yeah, so I mean, I will say a lot of the startups were kind of familiar. There were sort of like versions of things that we would be familiar with in the US. So there's the Amazon of Iran called Digi Color. There's the Uber of Iran called Snap. There's food delivery apps. There's all sorts of things. There's also things that are kind of more unique. But those, the most successful companies, the ones that kind of right out the gate, are the ones that are sort of taking business models that have been tried and true in the rest of the world and localizing them for Iran. So, you know, they start to really grow. And this kind of takes everyone by surprise, including the government. I think, you know, from interviews I've done, it seemed like the government really sort of thought this stuff was sort of whatever.

• 42:25Speaker 05

  You know, like, okay, I think they didn't quite realize how quickly this field would grow. And our character that we kind of follow in the book starts its own venture capital fund, first with domestic funding and then brings in a lot of external funding as well, from Europe and Russian investors. This sort of, I think, takes a lot of the conservative kind of established forces by surprise. And what we very quickly see is a backlash. And first, it kind of takes the form of sort of hidden kind of whispers. There's like a mysterious Telegram channel that forms that starts making accusations against some of the startup founders and, you know, sort of people around that sector. The startups are very much associated.

• 43:09Speaker 05

  In some cases, they did not mean to be, but in some cases, they did, they did sort of form an alliance. They're associated with the elected government of Hassan Rouhani. And, you know, there were already these factions kind of developing that were very against Rouhani, particularly in the Revolutionary Guards and sort of saw him and his diplomats as being too conciliatory towards the US. So this backlash from the security state is kind of forming. People are being interrogated. They're being, you know, sometimes arrested. Even their offices are being raided. And at the same time, what we document is that people, kind of middlemen, with a foot in the security state and a foot in the private sector, people who have been, you know, Ministry of Defense officials

• 43:53Speaker 05

  or who had served on the boards of some of these bouniads, et cetera, they start to make an offer to some of the startups. And basically, the offer is, give us like 5% of your shares and we will help protect you from these accusations and from the risks that you're facing. And some of the startup founders take that deal. You know, we really tried to get into their mindset and we interviewed over 70 people for this section of the book. And I think they, some of them didn't understand really what was happening. They felt beleaguered and they felt quite at risk. And they wanted to save their companies. They wanted to do, do what they felt like was good work, employing people, providing middle-class jobs. And so some of them took that deal. And we see, for instance, the Uber of Iran, Snap,

• 44:38Speaker 05

  sold a large portion of its shares to one of the bouniads. There's another kind of ride-share company that launches with Revolutionary Guard financing. And then ultimately, just a couple of years ago, we sort of trace the specifics of this and how much, you know, the company tried to resist. But ultimately, the Amazon of Iran, Digi Color, did sell 40% of its shares to a telecom that is part-owned by one of these bouniads as well. So we really kind of see this, this exciting, vibrant, thriving industry that was not deeply connected to the government over time, then kind of is subdued by those government forces.

• 45:19Joe Weisenthal?

  By the way, Tracy, I just found this very interesting article from 2020, that company Snap, in order to get onto the, there's a story from Rest of World. They got on the Apple App Store by disguising the app as a music streaming app. And then only upon a user logging in with an Iranian IP address, with its full capabilities as a ride-hailing app, emerge. And then I guess Apple has since banned that, but some clever ingenuity there.

• 45:46Tracy Alloway?

  Yeah, very smart. So, one thing I'm wondering is, at the time of this tech boom, such as it was, there were some Iranian officials that seemed to be supportive of it. I can't remember his exact name, but there was someone in the ministry who was like actually actively promoting tech. At the same time that you had other actors in the government who are starting like disinformation campaigns to smear these companies and making, you know, not-so-subtle threats and things like that. Again, I'm fascinated by the coordination problem or lack of coordination here because it really seems like people are like off doing different things.

• 46:28Tracy Alloway?

  And if you're a business owner, how are you supposed to respond to all these competing interests?

• 46:33Speaker 06

  Yeah.

• 46:34Tracy Alloway?

  It's not a question, I guess, it's a statement.

• 46:36Speaker 05

  I can add a little bit to this. I think that that is the huge challenge that, like, Iran's not just, for instance, a corrupt state or just an authoritarian state. It's also sort of chaotic. And I think that is what is poisonous to business, almost more than any other part of it. You know, I'm not a China expert, but my sense is that, you know, when it comes to China, if you have an understanding with the Communist Party, then you're good to go. In Iran, even if you do end up making a deal with, you know, some bouniads, selling your shares, whatever it might be, it's, it's a mafia structure, but there's also all these underbosses and they all kind of compete with each other. And their power sways from day to day.

• 47:18Speaker 05

  So, yes, one entity within the government was really supporting these startups and wanted them to succeed. And his administration was sort of hated by the more powerful security forces. So for the startup guys, a lot of whom were coming, you know, they were expats, they were kind of coming back to Iran, they were bewildered by this. And as you both know, I mean, business requires certainty. And that has been, I think, more detrimental, the uncertainty in Iran, the instability of the actual government structure and figuring out what it wants from day to day. That's been more poisonous almost than the actual fact of like, okay, I gotta make a deal with like such and such entity and, you know, be able to continue my, my work safely.

• 47:59Speaker 06

  You know, the, the closest comparison that comes to my mind is like Greek mythology. I'm reading Odysseus.

• 48:06Joe Weisenthal?

  Oh, yeah.

• 48:06Speaker 06

  And I realized that Zeus doesn't have the absolute power. So Iran's supreme leader didn't have the absolute power. He, he needs to manage between all different gods and goddesses. And in the, in the case of Odysseus, you see that he is supported by some gods to go back home, but some angry gods are trying to block his return to back home. So, yeah, I think a businessman in Iran is just like, it's, it's, it's a real Odysseus.

• 48:35Joe Weisenthal?

  I love this analogy because it's like, what was the breakthrough of monotheism? Was it part to solve this problem of different people petitioning different gods, et cetera? So you want to like establish, you know, there's like one set of rules. So I think that's that. But also, that sort of actually brings me to another question, which came up a little bit earlier. But, you know, when we, when we talk about some of these things, we can draw these analogies. Oh, there's maybe comparisons to late Soviet Union. There may be comparisons to the oligarchs extracting the resources after the collapse of the Soviet Union. There may be analogies to a country like Venezuela, which of course people have also likened to a mafia state. There are analogies to China with the difference between the CCP and the government itself.

• 49:20Joe Weisenthal?

  The thing that feels a little distinct here is the role of religion, which you meant, and the idea that there's maybe this other higher thing that people are told to strive towards. Could you talk a little bit more about like teasing out the effect that that sort of like spiritual element plays in some of this? Which I could imagine, A, creates yet another difficult dimension for businesses to operate in. But then also, when I, especially when I think of the tech sector, like tech fries people's brains. And if I wanted to have a more spiritual society, I don't know how much I want the public to be looking at their phones all day.

• 49:59Speaker 06

  Yeah, I think that's a good point because I think that's been one of the core problems when Western societies have been trying to tackle the Islamic Republic. Look, Obama tried to have a nuclear deal with Iran and Trump is trying to do that. I think one of the reasons that the US and many Western countries tried to do that was their deep belief in market, free market economy and capitalism. I think the underlying assumption was that, given a choice between isolations and sanctions and prosperity, of course, every country will choose the latter.

• 50:41Speaker 06

  Like, in a way, they believe that by integrating the Iranian economy into the world, they will create some political liberalization and some form of democratization. But I think, I mean, Trump also believes that. If you look at Trump's speeches in 2025, he says, oh, I want to make Iran a great nation. We want, I see a bright future for the country. But you see surprisingly that Iran doesn't take that offer. The Islamic Republic, I think that's when this ideological component comes in, that is somehow difficult to explain in, for the Western societies,

• 51:21Speaker 06

  that you see that the, the country is much focused on the ideological aspects of it. And even after the nuclear deal that Obama managed to sign in 2015 and the lifting of sanctions in 2016, the money that came to Iran...

• 51:38Speaker 06

  The incentives that the Western societies offered, it was spent on military development. So the Iranian state has different priorities when it comes to development. They prefer to put the money on military development rather than on tackling unemployment, inflation and things like that. So that's been the challenge, and I think the challenge exists at the moment as well. Like now, the deal, the MOU that was signed between Trump and the Islamic Republic, they offered billions of dollars, even hundreds of billions of dollars. But it seems that some elements, some hardline elements within the Islamic Republic, they didn't want that.

• 52:20Joe Weisenthal?

  Tracy, I think from the perspective of the West, most people, if they're being honest, cannot believe that some people aren't just motivated by money. Like they hear, like, people say, oh, we believe in some higher power or some vision. But I think like, deep down, we all believe that everyone has a price and that everyone actually just wants like, no, they're really, they're saying this, but what they really want is wealth. And so I do think like, there is this disconnect when we encounter, when we have relationships with people who actually may believe in something that is not just accumulating wealth and comfort.

• 52:58Tracy Alloway?

  Some people in the West.

• 52:59Joe Weisenthal?

  I think most people in the West.

• 53:01Tracy Alloway?

  Well, okay, but on this note, what is Iran's political economy? You know, the, the story we just heard about chaos and competing factions and all of that suggest for the future of the Iran-US conflict?

• 53:16Speaker 05

  I mean, we see this, we see this right now, right? There's multiple factions inside Iran. There's kind of this hardline faction that is really harshly attacking the president and the foreign minister for even having the temerity to sort of negotiate this memorandum of understanding. There are people who kind of still want inside Iran for this war to continue because they really believe that Iran kind of had the US on the back, on the back foot. And so I think in terms of like, how Iran's political economy looks going forward, I think it's still quite early to say at this point, just because they're still sort of in the midst of this war, really. And I think no one in Iran right now is looking that far ahead.

• 53:58Speaker 05

  To the extent that they are, it's very much towards China as the future. Mohammad Barghar Ghalibov, the Speaker of Parliament, the guy who's been kind of negotiating with, with JD Vance. He basically said that as well. He said that, you know, we want investment, but they want it from China.

• 54:13Speaker 06

  Yeah, I agree. I think one thing that I want to add is that, again, the different nature of these states, like Trump is fighting at best for his legacy, but the Islamic Republic is fighting for its survival. I think that creates different pain tolerance and pain thresholds in, in, among these two nations. For the US administration, the main problem is now if the Fed would increase the interest rate by 0.25% and the impacts of that on, on mortgage rates and, and other things.

• 54:56Speaker 06

  And of course, people are unhappy with the rise of gasoline prices by a dollar or so. But when you look at the Islamic Republic, you see that the inflation is almost three figures. And they're not that much affected by that. The unemployment rate is very high. And even when you compare the casualties for the US administration, the death of 18 soldiers is a lot, is significant. While for the Islamic Republic, the killing, the death of hundreds of thousands of soldiers is something that can easily absorb. So I think that, that is the nature of the, the conflict that at this stage.

• 55:38Speaker 06

  And I think that the reason that the Islamic Republic has survived the war so far is that its pain threshold is much higher. And I think if it continues like that, I think the US administration, I don't think they will continue the war because of the long-term impacts it will have on the, on the economy. Of course, Trump is trying to keep the price of oil under $100 per barrel. Anytime that it touches 100, there is some talks for negotiations and some positive, true social posts. But I, I think they can manage to do that for a bit, but I don't think it can continue for a long time.

• 56:20Speaker 05

  I think the pattern that we saw kind of throughout reporting this book and that we really see now is that for the Islamic Republic, the economy has never been an end goal in and of itself. It's focused on it to the extent that it's a means to a broader end goal of self-sufficiency or, you know, some kind of like drawing some sort of ideological strength from it. But in terms of actually focusing on the economy at the expense of, for instance, some of its ideological goals, that has never been in its pattern of behavior. And there are former officials, like, don't, you don't have to take it from us. There are former officials who have said, you know, it's time to set aside our ideology and our foreign policy and focus on the economy,

• 57:03Speaker 05

  which would mean bringing in foreign investment, which would mean coming to some final accord with the US that would really lift sanctions that we can actually move on and grow the economy. And whoever's been in power at any point, mostly Ali Khamenei for 37 years, but before that, Khomeini, of course, has not taken that bet. For them, the important thing has always been Iran's ideology. And I think unless there's some drastic change, I don't necessarily expect that to change. I would need to see a lot more evidence of that actually, you know, shifting before I would kind of change my assessment on that.

• 57:36Joe Weisenthal?

  All right, Yagan and Bodzorg, thank you both so much for coming on the podcast. Absolutely fascinating discussion. Yeah, really appreciate you taking your time.

• 57:45Speaker 06

  Thank you. I really enjoyed it.

• 57:47Speaker 05

  Thank you both so much.

• 58:01Joe Weisenthal?

  Tracy, I really enjoyed that conversation. I learned a lot. I really did mean what I said in the conversation, which is that I do think a lot of American or Western, like negotiators and thinkers just sort of like constitutionally find it hard to believe that people in much of the world actually believe in things and aren't just like going to be transactional at the end of the day.

• 58:25Tracy Alloway?

  That's why my first question was about how much of the Iranian revolution was driven by economic interests versus actual ideology. But yeah, I totally take the point. I also thought it was interesting, you know, when we think about emerging markets, there's plenty of investment that goes into emerging markets, right? But it feels like the stability point definitely stands out. You know, you can, you can invest in an authoritarian regime.

• 58:49Joe Weisenthal?

  Totally.

• 58:50Tracy Alloway?

  If you know you're bribing the right person and you're not going to have all your assets seized in like two weeks or something by a competing faction. But when it comes to Iran, it does seem that factional element, that chaos, as they described it, has been an issue.

• 59:05Joe Weisenthal?

  Yeah, I thought the point about the sort of like, you know, in China, there's the Chinese government and then there's the party, right? And they're not the same thing, but they're closely linked. But the idea that like, okay, what if you have like a more multiplayer element? Where it's like, okay, you have some entities that are like truly like, this is the state and this, there are state interests, and then you have IRGC interests, and then you have religious interests, et cetera. And then you really do get this sort of like potential misalignment. I love the analogy of like the sort of like petitioning the various Greek gods as like a way to think about a sort of like problem of establishing that stability.

• 59:46Joe Weisenthal?

  It's almost like, okay, like a gangster state might not be the worst thing in the world if there were just one gang, right? But, right, if there's just one-

• 59:54Tracy Alloway?

  Producers, clip that.

• 59:55Joe Weisenthal?

  No, yeah, like if there's just one gang. And you think about like, think of like a mafia story, right? Part of the, it's like, okay, I'm going to pay this, this mafia, I don't really need the protection for my store. This guy comes and said, I'll protect your store from damages for some insane amount. I think, I don't need it, but whatever, I'm going to pay it, you know? But then the moment there's three gangs and each of them wants that cut, then it becomes like a seriously unstable thing.

• 1:00:22Tracy Alloway?

  And also they get mad at you for paying one of them versus-

• 1:00:25Joe Weisenthal?

  Yeah.

• 1:00:25Tracy Alloway?

  So like, I prayed at the temple of Zeus and because I sacrificed a goat to Zeus, Poseidon is now upset at me and now I have to appease Poseidon. And then I'm going to appease Poseidon. And then, I don't know, Aphrodite or whoever is going to get mad. It just goes on and on.

• 1:00:38Joe Weisenthal?

  Right. If your only issue was the sacrifice that Zeus demanded, you might not like it, but you could form a business with those expectations. And that would probably be, you'd find a way to survive. But then you have this multi-level thing and you can't form that expectation.

• 1:00:53Tracy Alloway?

  Did I ever tell you about in Tokyo, a friend of mine had a bar, tiny bar, 10 seats at the bar?

• 1:01:00Joe Weisenthal?

  Okay.

• 1:01:01Tracy Alloway?

  And he got extorted by the Yakuza?

• 1:01:03Joe Weisenthal?

  Really?

• 1:01:04Tracy Alloway?

  Yeah. And so what happened is there were only 10 seats at the bar. He noticed, first of all, he got a request for money, for protection money from the Yakuza. And he said, no, I'm not going to pay it. I'm a foreigner. I don't have to, blah, blah, blah. Next night, a single Japanese man comes into the bar, orders one beer, sits at the bar all night, taking up that seat. Not a big deal. Plenty of other people around. Next night, two people come in, two Japanese salarymen, sit there, order one beer, don't leave the entire night. You can see where this is going.

• 1:01:36Joe Weisenthal?

  Yeah, wow.

• 1:01:37Tracy Alloway?

  Within 10 days, all of his seats were being taken up by single customers ordering single beers.

• 1:01:43Joe Weisenthal?

  Wow.

• 1:01:44Tracy Alloway?

  And it didn't happen anymore after that. So you, you know, you, I won't say-

• 1:01:50Joe Weisenthal?

  Infer how the problem was avoided going forward.

• 1:01:52Tracy Alloway?

  Exactly, exactly.

• 1:01:53Joe Weisenthal?

  That's a good story. Anyway, I'm really glad we did that episode. I learned quite a bit.

• 1:01:57Tracy Alloway?

  Absolutely. All right. Shall we leave it there?

• 1:01:59Joe Weisenthal?

  Let's leave it there.

• 1:01:59Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 1:02:04Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at TheStalwart. Follow our producers, Carmen Rodriguez, at Carmen Armin, Dashil Bennett, at Dashbot, Cale Brooks, at Cale Brooks, and Kevin Lozano, at Kevin Lloyd Lozano. And for more Odd Lots content, go to Bloomberg.com/oddlots, where we have a daily newsletter and all of our episodes. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 1:02:26Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we talk about the Iranian economy, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

• 1:03:15Speaker 08

  This is Robert Smith from Business History. If you're listening to this, there's a good chance you're a small business owner. And like every small business owner, you started with a dream, to do what you love and watch it grow. What you probably didn't dream about, keeping up with cyber threats. That's where Mastercard can help with access to tools that help identify cyber threats to better protect your business. Building your dream business, priceless. For cybersecurity in a changing world, there's Mastercard.

• 1:03:42Speaker 08

  Learn more at mastercard.com/smallbusiness.

• 1:03:47Speaker 09

  If you enjoy Bloomberg podcasts, you'll love listening to Bloomberg 991 FM in the DMV. Hi, this is Joe Mathew. Here in the DC area, the story is always changing. From the White House, Capitol Hill, to K Street, Wall Street and the Fed, Bloomberg 991 keeps you connected to the news that's driving decisions in the nation's capital and around the globe. Check us out at 991 FM or stream us anytime on the Bloomberg Business app.