The Bank Collapse Behind Iran's Protests
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What led to the protests in Iran?
— Iran is facing a kind of revolutionary situation. This is the most significant challenge that the regime in Iran has faced since it came into existence after its last revolution in 1979.
— Our colleague Jared Malson covers the Middle East, and he's been following the unrest in Iran for the past two weeks.
There have been enormous protests throughout the country, and there's been a very severe crackdown in which hundreds, if not thousands, of people appear to have been killed in the last few days. And you're seeing a very real risk that the regime could fall out of power. And everyone is holding their breath to see what's going to happen next.
Unlike other flashpoints in the country's history, the biggest factor in the unraveling situation in Iran today isn't political instability or demands for more personal freedom. Instead, the unrest stems mainly from a major financial crisis.
How did Iran's financial crisis begin?
Iran has obviously been under international U.S.-led sanctions for many years, which means its economy is under severe strain. That totally isolates Iran, cuts off the banking system from the rest of the world, and has put it in this very unstable situation to begin with.
And the first sign that Iran had reached a turning point was the failure of a bank.
One of the largest banks in Iran collapsed. And that was a warning sign that the entire financial system was in crisis.
Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Thursday, January 15th.
Coming up on the show, how the collapse of a bank sent Iran into a tailspin.
Iran's current financial crisis has its roots in 2018, during President Trump's first term.
I am announcing today that the United States will withdraw from the Iran nuclear deal.
The Iran nuclear deal, brokered by the Obama administration, was meant to curb the country's nuclear program in exchange for sanctions relief. Trump reversed course and took a hard line against Iran.
We will be instituting the highest level of economic sanction. Any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States.
That cut off Iran from the world financial system and made it this kind of closed system almost, where it was very, very isolated, and it put its financial system under a lot of strain.
The renewed sanctions meant that Iran's banks couldn't do business with the outside world.
— For example, it is cut off from the SWIFT payment system. The central bank is under sanctions. Several other Iranian banks are under sanctions. So this is a country that cannot borrow internationally. It cannot do trade normally.
What role did Ayandeh Bank play in Iran's economic collapse?
It cannot sell its oil freely. And it is deeply, deeply isolated.
To put it simply, money stopped flowing into Iran's banks. In the years that followed, the Iranian government came up with workarounds to try to keep its economy afloat. For example, Iran's oil industry has had to increasingly rely on a so-called shadow fleet of tankers to export oil abroad. That kept some money flowing to the state's coffers. Iran also used a workaround for its banks, turning to banks in Iraq for access to cash. But that practice became a lot tougher after a U.S. crackdown in 2023. These pressures forced Iranian banks to rely more on its own government.
And that created a situation where you have the central bank propping up this entire system. Something like 70% of Iran's banks were government-controlled to some degree. That's according to an analysis by a former IMF official that I spoke to by 2019, which is when things started to come apart at the seams.
Iran's central bank used an emergency loan program to support the country's banking system. The loans charged high interest rates, but didn't require banks to provide any collateral. In order to fund these loans, Iran's central bank printed money, which raised concerns about inflation and the weakening of Iran's currency, the rial. And the lender that became an emblem of this risky system was called Ayandeh Bank.
Right, so Ayande Bank is a microcosm of these compound economic problems.
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Chapters
8 chapters
1
What led to the protests in Iran?
0:13–1:29
2
How did Iran's financial crisis begin?
1:29–4:01
3
What role did Ayandeh Bank play in Iran's economic collapse?
4:01–6:04
4
What were the consequences of the Ayandeh Bank failure?
6:04–9:56
5
How did the Iranian government respond to the financial crisis?
9:56–12:27
6
What triggered the recent protests in Iran?
12:27–14:58
7
How has the Iranian government reacted to the protests?
14:58–17:15
8
What are the implications of the protests for Iran's future?
17:15–17:51