- Iran's attack on Israel has raised questions about its military capabilities and readiness for conflict
- The Iranian economy is suffering from high inflation and low growth, with tensions in the region causing the currency to devalue
- The Islamic Revolutionary Guards have significant control over the economy, especially due to sanctions affecting the private sector
- Iran supports anti-US and anti-Israel militant groups, but the financial backing for these proxies is difficult to quantify
- Oil is a crucial source of revenue for Iran, and any damage to its infrastructure for oil exports would have a significant impact on the economy
- The increase in oil exports has contributed to some economic growth, but government expenditures on military activities may not be benefiting the population's living standards

- Iranian living standards have decreased due to sanctions, not the GDP
- Iran is dependent on China for trade and political support
- American sanctions have not achieved their goal of creating a more moderate Iran
- The conflict in the region could disrupt global trade and delay economic development
- Iranian control over groups like the Houthis is limited
- Ordinary people in Iran are struggling and many are seeking opportunities to leave the country.

- The educated young people in Iran may not see a future for themselves in the country
- Iran faces challenges such as sanctions, regional conflict, and social restrictions
- It is difficult to be optimistic about Iran's growth and happiness
- Javad Zalahi, an economics professor, discusses the lost potential in Iran

- Iran's attack on Israel has raised questions about its military capabilities and readiness for conflict
- The Iranian economy is suffering from high inflation and low growth, with tensions in the region causing the currency to devalue
- The Islamic Revolutionary Guards have significant control over the economy, especially due to sanctions affecting the private sector
- Iran supports anti-US and anti-Israel militant groups, but the financial backing for these proxies is difficult to quantify
- Oil is a crucial source of revenue for Iran, and any damage to its infrastructure for oil exports would have a significant impact on the economy
- The increase in oil exports has contributed to some economic growth, but government expenditures on military activities may not be benefiting the population's living standards
- Iranian living standards have decreased due to sanctions, not the GDP
- Iran is dependent on China for trade and political support
- American sanctions have not achieved their goal of creating a more moderate Iran
- The conflict in the region could disrupt global trade and delay economic development
- Iranian control over groups like the Houthis is limited
- Ordinary people in Iran are struggling and many are seeking opportunities to leave the country.
- The educated young people in Iran may not see a future for themselves in the country
- Iran faces challenges such as sanctions, regional conflict, and social restrictions
- It is difficult to be optimistic about Iran's growth and happiness
- Javad Zalahi, an economics professor, discusses the lost potential in Iran

Iran's attack on Israel has raised questions over its military capabilities and its potential readiness for an escalated conflict in the region. The country - which has been under international sanctions for years - has been suffering from high inflation and low growth. 
But over the past few months, it's also been showing increasing readiness to flex its military muscles, carrying out attacks on tankers near the Strait of Hormuz and reinforcing its support for a range of militant groups including Hamas and Hezbollah. 
DW Business speaks with Djavad Salehi-Isfahani, Professor of Economics at Virginia Tech and co-author of the book ‘How Sanctions Work: Iran and the Impact of Economic Warfare.’

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#iran #israel #economy

Iran's attack on Israel has raised questions over its military capabilities and its potential readiness for an escalated conflict in the region.

The country, which has been under international sanctions for years, has been suffering from high inflation and low growth.

But over the past few months, it's also been showing increasing readiness to flex its military muscles, carrying out attacks on tankers near the Strait of Hormuz and reinforcing its support for a range of militant groups, including Hamas and Hezbollah.

To talk more about this, I'm joined now by Javad Salehi-Isfahani, Professor of Economics at Virginia Tech and an expert in Middle East economics.

Javad, perhaps we could begin by looking at the economic backdrop to this latest escalation.

What state is the Iranian economy in right now and how ready is it for a potential military escalation with Israel.

Well generally it's not ready for an extended military conflict which is why they have been very careful to not get too involved in the Gaza war.

They attacked, they had on Israel, sounded more symbolic and 1 intended to do harm.

Inflation is very high and is very sensitive to tensions in the region.

So just for the last 2, 3 weeks when people have been expecting tensions to rise, the dollar has appreciated in value by about 15%, is 25% up from a few months ago.

And these inflationary exchange rate devaluation very quickly translates into higher prices because Iran imports a lot of types of commodities, and many of the commodities it produces inside Iran also have an import component.

So I think the country is bracing for higher inflation at this moment.

Last year, which ended on 21st of March, registered inflation of 40 percent, and it has been higher than that before.

And my expectation is that this new round of tensions and the devaluation is going to at least keep the inflation that high, if not raise it some more.

So any shock to world prices or any shock to the ability to import food is going to raise food prices, which is going to have a big impact on the welfare of the poor, because food occupies some half of their expenditures.

I want to learn a little bit more about how Iran's economy works.

It is largely controlled by the Islamic Revolutionary Guards.

They manage everything from oil and banking to health care even.

What is the impact of essentially having the armed forces in charge of the economy.

Well I wouldn't say the armed forces are in charge of the economy.

I think people exaggerate sometimes the influence of the guards.

I don't think it's any more than in Egypt or Pakistan.

When you have an authoritarian state, the armed forces can operate with more freedom.

And on top of that, because of sanctions, The power, economic power has shifted from private sector, especially the smaller producers to bigger producers and from private sector to government entities like the IRGC, which has a big operation in terms of building of dams, roads, ports, and so on.

And also because of sanctions in export of oil.

You know, exporting oil and bringing the money back, given all the restrictions on transfer of money, is very difficult.

So you can't expect private traders to do that.

And it's the revolution guards that control that.

But there is still a very sizable private sector.

The agricultural sector is mostly private distribution.

Maybe 80% of the population or the working force is not working for the IRGC or for the government.

So I think that's something that people don't quite realize that as we speak now, Iran is still is characterized the big influence from the state and the armed forces?

We know that in the past, Iran has been carrying out a lot of its military activities by proxy, in Syria and Iraq as well as Hezbollah, Hamas, and the Houthi rebels in Yemen, for example.

Together, these groups form a powerful network of anti-US and anti-Israel militants.

Jafad, what portion of Iranian state spending goes into this kind of financial backing and what level of support for it is there among the Iranian people.

That's a very good question but also very difficult to answer.

You know these financial transfers are obviously by nature hidden.

The government doesn't publish any numbers.

We do know that of the 50 to $70 billion a year that Iran earns in terms of foreign exchange, a good deal of it goes to import of food and import of other commodities, necessary commodities.

And maybe about 10 billion is exported through various means, which we put under capital flight.

So it's very hard to put a number on what these proxy forces cost Iran.

But again, I suspect that the media numbers exaggerate.

Iran does whatever it does on the cheap, working with Houthis doesn't take a whole lot of money.

Supplying the Hamas with military equipment or military know-how doesn't cost a whole money.

I think Hezbollah at 1 point, either they declared or was in the news that they get $100 million a year.

And if you think of $100 million compared to $50 to $70 billion, which is my estimate of what Iran's earnings are in foreign exchange, is not huge.

There are other countries who spend a lot more in either foreign aid or foreign influence.

I think A lot of Iran's power, if you like, in projecting its power outside, comes from an ideological source.

The fact that it is, especially now, 1 of the very few countries that openly supports the Palestinian cause?

Sure, let's return then to the issue of oil.

It is of course by far the country's most important source of revenue, a commodity that is very vulnerable to geopolitical tensions.

If we look at the past few years, we did see a steep decline in exports after the US pulled out of the Iran nuclear deal and reimposed sanctions in 2018.

But in recent years, we have seen an uptick again.

And that's mainly due to an increase in purchases from China, which have enabled Iran to maintain a positive trade balance.

I'm wondering if you could give some insight into this.

Oil prices did initially rise after the Iranian attack on Israel, but they've since stabilized again amid a lot of talk of de-escalation.

To what extent is Iran factoring in its heavy dependence on oil as it assesses its next move?

I'm sure they are very worried that if the war damages the infrastructure to export oil that that would take, that would hit a hard blow to the economy.

I must say that your chart was very, very good, very informative, you know, especially the fact that Iran has been able to recover like 80 percent of its oil exports.

And most people attributed that to a softening of the sanctions since Biden has been in power.

Iran's economy in fact has been growing partly as a result of this increase in oil exports.

Not all of that increase in GDP, which is about 5 percent per year, which is not bad compared to what's happening in the region overall after COVID.

Not all of that has translated into higher living standards by the population because I think the government has been building up its military.

We do see in the GDP data a more vibrant economy than we see in household expenditures for which we have data with a year of back.

But if there is any decrease in oil prices or in oil exports, that will have an impact similar to the tensions that have raised the exchange rate, devalued the real Iranian currency, and it will again translate into inflation.

Then with some delay, it will affect people's living standards.

We will see food prices rising, people buying less food.

We looked very carefully into the household budgets in a book that recently published on how sanctions work.

And Iranian living standards are back to 20 years ago because of sanctions, not the GDP.

The GDP is about the same level or maybe a couple of percent higher than that.

But I would say that the economy is very sensitive to any further declines.

So I don't know what is going to be the balance between tensions or military conflict, reducing the oil output and raising the oil price.

Clearly, there's a place where you lose 20 percent of your oil exports and prices go up by 20 percent and you come out even.

Oil that Iran sells now is going to be delivered in 2 months, 3 months, and the money is probably going to come back a couple of months later.

So Iran is looking into an economic shock, a negative economic shock, if there is a military conflict.

I want to talk to you about the role of China as well, because it is, of course, is the biggest buyer of Iranian oil.

Talk to me about the importance of that relationship.

Well it's very important because what happened with sanctions is that Iran shifted its imports from Europe.

Iran's economy has been very close was very closely integrated into Western Europe.

But in the last decade, Iran has slowly shifted its connections, trade connections to the East, especially to China.

China is able to provide Iran with a variety of goods that Iran needs.

It hasn't been as active in investing in Iran.

There's been much talk, but not much action.

So it can't help the economy grow, but it can buy the oil and send back commodities in exchange.

Iran is also depending more and more on Chinese political support globally.

You know, China was instrumental in getting Iran and Saudi Arabia together.

That has been a big boon for Iran's diplomatic power.

Iran was invited again by China into the BRICS, which is an alliance of semi-industrialized or emerging economies.

That has been a big hope, source of hope for Iran, that getting out of the Western orbit there's some other place to go.

And that place is kind of vaguely defined by China, Russia, Brits and others.

We haven't seen actual influence or actually impact from that shift of alliance to China.

All we have now is here's a big country that can buy the oil and can actually ship goods to Iran.

But in terms of generating economic growth, we're not sure.

Would it be fair to say then that 1 effect of the American sanctions is actually to strengthen another regional bloc that has no interest in strengthening.

I think that's again 1 of the messages that we are book emphasizes.

Not only does a shift externally from the West to East and China and Russia in particular, but there's also a shift inside Iran from private sector and the middle class to big state authorities, including the IRGC.

To that extent, then, would you declare those American sanctions a success or a failure?

Well, it's definitely a failure if they wanted to create more moderate Iran, which in some way was the ultimate aim of sanctions, to get Iran to behave more to the liking of Western powers.

Although I must say sanctions were very successful in doing their first job, which was to cripple Iran's economy, bring its growth to a halt, and hurt the ordinary Iranians, hoping that they would then put pressure on their own government to moderate with respect to investment demands.

Has got a big power, the dollar is the king, and if you defy the US, you better be ready for economic contraction, economic crisis.

But can that then translate into a country subjugated, being subjugated, you know, and changing its policies?

And that hasn't happened, if anything, I think Iran has become more aggressive,

the larger ramifications of the conflict and what it could mean for the global economy.

The Strait of Hormuz in particular has become a real flashpoint in this conflict.

Around a fifth of the world's oil passes through here and in recent months we've seen a number of attacks on vessels there.

Just last weekend Iran's Revolutionary Guards seized a cargo ship it said was linked to Israel.

Javad, talk to me about the kind of disruption to global trade that could occur if Iran and the groups it backs were to step up their attacks on the Strait of Hormuz?

Well, I suspect that Iran's greatest strength is in its own neighborhood.

So when push comes to shove, Iran may decide to close the Strait of Hormuz.

It may decide to attack shipping that is closer to the southern shore of Persian Gulf, maybe even attack its newfound allies in terms of Saudi Arabia and UAE.

But the closest target would be to cause a crisis in terms of oil exports, which would primarily hurt China and maybe India, but not necessarily Western Europe or the US, which is now self-sufficient in oil.

So there is some complex calculation that's going on there.

I am not sure Iranians would want to, as first resort, go to closing of the Strait of Hormuz.

But then there are other groups like the Houthis, which have now enough technology to disrupt shipping in the Red Sea.

They could do similar disruptions in the Persian Gulf.

So all in all, I think the region, which is at the cost of becoming much more developed, The flow of oil money is facing a kind of disruption that may delay its economic development by a decade.

You mentioned that Iranian backing of some of these groups isn't as significant as we might assume.

On that, I'm wondering then how much control they really do have over those activities.

If the Houthis choose to carry out attacks and Iran isn't in favor of that, to what extent do they have power over that?

And that means just like Israel has quite a bit of independence from the U.S., Houthis have independence from Iran, but they don't want to completely break relations.

So if Iranians really want to say we don't want any more ships being hit, I'm sure the Houthis will agree.

The only group that Iran has close alliance with, close relationship with, is the Hezbollah.

You know, everybody knows that Hamas is a Sunni organization that has not in times of crisis been allied with Iran.

Now they appear as allies, or recently they have, but they're always side with the general Palestinians are more likely to, like they did with Saddam Hussein when he was fighting Iran.

So Iranians are aware that besides the ideological anti-Israel, anti-U.S.

Alliance they have with some of these groups.

Only the Shia groups can be trusted with reliance when the going gets tough.

I imagine you still have family and friends there.

How are ordinary people faring amid this ongoing tension?

In fact, Most of what our book is about is talking to various people, women, young people, to find out how they imagine their future.

And 1 of the things that sanctions and these kinds of tensions tell young people is that the future is bleak.

I don't blame them to want to study more English so they can immigrate when they get an offer from a university either in the West or India or Singapore or Malaysia, they pack their bags and leave.

If the young people, especially the educated young people, cannot see a future for themselves in the country, the country has a lot of difficulties to grow and to become a normal country.

And I don't know if it's possible for Iranians to feel that way.

They have the looming regional conflict, if not war.

But they also have on top of that a lot of social restrictions that the government of Iran imposes on people, especially women.

So all of this together is very hard to be optimistic about Iran growing, becoming a kind of happier nation for the time being.

Javad Zalahi is Bahani Professor of Economics at Virginia Tech.

Thank you so much for talking to us today.


Speaker 0: Iran's attack on Israel has raised questions over its military capabilities and its potential readiness for an escalated conflict in the region. The country, which has been under international sanctions for years, has been suffering from high inflation and low growth. But over the past few months, it's also been showing increasing readiness to flex its military muscles, carrying out attacks on tankers near the Strait of Hormuz and reinforcing its support for a range of militant groups, including Hamas and Hezbollah. To talk more about this, I'm joined now by Javad Salehi-Isfahani, Professor of Economics at Virginia Tech and an expert in Middle East economics. Javad, perhaps we could begin by looking at the economic backdrop to this latest escalation.

What state is the Iranian economy in right now and how ready is it for a potential military escalation with Israel.

Speaker 1: Well generally it's not ready for an extended military conflict which is why they have been very careful to not get too involved in the Gaza war. They attacked, they had on Israel, sounded more symbolic and 1 intended to do harm. Inflation is very high and is very sensitive to tensions in the region. So just for the last 2, 3 weeks when people have been expecting tensions to rise, the dollar has appreciated in value by about 15%, is 25% up from a few months ago. And these inflationary exchange rate devaluation very quickly translates into higher prices because Iran imports a lot of types of commodities, and many of the commodities it produces inside Iran also have an import component.

So I think the country is bracing for higher inflation at this moment. Last year, which ended on 21st of March, registered inflation of 40 percent, and it has been higher than that before. And my expectation is that this new round of tensions and the devaluation is going to at least keep the inflation that high, if not raise it some more. Iran is not self-sufficient in food. So any shock to world prices or any shock to the ability to import food is going to raise food prices, which is going to have a big impact on the welfare of the poor, because food occupies some half of their expenditures.

Speaker 0: Right. I want to learn a little bit more about how Iran's economy works. It is largely controlled by the Islamic Revolutionary Guards. They manage everything from oil and banking to health care even. What is the impact of essentially having the armed forces in charge of the economy.

Speaker 1: Well I wouldn't say the armed forces are in charge of the economy. I think people exaggerate sometimes the influence of the guards. I don't think it's any more than in Egypt or Pakistan. When you have an authoritarian state, the armed forces can operate with more freedom. And on top of that, because of sanctions, The power, economic power has shifted from private sector, especially the smaller producers to bigger producers and from private sector to government entities like the IRGC, which has a big operation in terms of building of dams, roads, ports, and so on.

And also because of sanctions in export of oil. You know, exporting oil and bringing the money back, given all the restrictions on transfer of money, is very difficult. So you can't expect private traders to do that. And it's the revolution guards that control that. But there is still a very sizable private sector.

The agricultural sector is mostly private distribution. Maybe 80% of the population or the working force is not working for the IRGC or for the government. So I think that's something that people don't quite realize that as we speak now, Iran is still is characterized the big influence from the state and the armed forces?

Speaker 0: We know that in the past, Iran has been carrying out a lot of its military activities by proxy, in Syria and Iraq as well as Hezbollah, Hamas, and the Houthi rebels in Yemen, for example. Together, these groups form a powerful network of anti-US and anti-Israel militants. Jafad, what portion of Iranian state spending goes into this kind of financial backing and what level of support for it is there among the Iranian people.

Speaker 1: That's a very good question but also very difficult to answer. You know these financial transfers are obviously by nature hidden. The government doesn't publish any numbers. We do know that of the 50 to $70 billion a year that Iran earns in terms of foreign exchange, a good deal of it goes to import of food and import of other commodities, necessary commodities. And maybe about 10 billion is exported through various means, which we put under capital flight.

So it's very hard to put a number on what these proxy forces cost Iran. But again, I suspect that the media numbers exaggerate. Iran does whatever it does on the cheap, working with Houthis doesn't take a whole lot of money. Supplying the Hamas with military equipment or military know-how doesn't cost a whole money. I think Hezbollah at 1 point, either they declared or was in the news that they get $100 million a year.

And if you think of $100 million compared to $50 to $70 billion, which is my estimate of what Iran's earnings are in foreign exchange, is not huge. There are other countries who spend a lot more in either foreign aid or foreign influence. I think A lot of Iran's power, if you like, in projecting its power outside, comes from an ideological source. The fact that it is, especially now, 1 of the very few countries that openly supports the Palestinian cause?

Speaker 0: Sure, let's return then to the issue of oil. It is of course by far the country's most important source of revenue, a commodity that is very vulnerable to geopolitical tensions. If we look at the past few years, we did see a steep decline in exports after the US pulled out of the Iran nuclear deal and reimposed sanctions in 2018. But in recent years, we have seen an uptick again. And that's mainly due to an increase in purchases from China, which have enabled Iran to maintain a positive trade balance.

I'm wondering if you could give some insight into this. Oil prices did initially rise after the Iranian attack on Israel, but they've since stabilized again amid a lot of talk of de-escalation. To what extent is Iran factoring in its heavy dependence on oil as it assesses its next move?

Speaker 1: I'm sure they are very worried that if the war damages the infrastructure to export oil that that would take, that would hit a hard blow to the economy. I must say that your chart was very, very good, very informative, you know, especially the fact that Iran has been able to recover like 80 percent of its oil exports. And most people attributed that to a softening of the sanctions since Biden has been in power. Iran's economy in fact has been growing partly as a result of this increase in oil exports. Not all of that increase in GDP, which is about 5 percent per year, which is not bad compared to what's happening in the region overall after COVID.

Not all of that has translated into higher living standards by the population because I think the government has been building up its military. It's been has a lot of expenditures. We do see in the GDP data a more vibrant economy than we see in household expenditures for which we have data with a year of back. But if there is any decrease in oil prices or in oil exports, that will have an impact similar to the tensions that have raised the exchange rate, devalued the real Iranian currency, and it will again translate into inflation. Then with some delay, it will affect people's living standards.

We will see food prices rising, people buying less food. We looked very carefully into the household budgets in a book that recently published on how sanctions work. And Iranian living standards are back to 20 years ago because of sanctions, not the GDP. The GDP is about the same level or maybe a couple of percent higher than that. But I would say that the economy is very sensitive to any further declines.

So I don't know what is going to be the balance between tensions or military conflict, reducing the oil output and raising the oil price. Clearly, there's a place where you lose 20 percent of your oil exports and prices go up by 20 percent and you come out even. But there's going to be a delay. Oil that Iran sells now is going to be delivered in 2 months, 3 months, and the money is probably going to come back a couple of months later. So Iran is looking into an economic shock, a negative economic shock, if there is a military conflict.

Speaker 0: I want to talk to you about the role of China as well, because it is, of course, is the biggest buyer of Iranian oil. Talk to me about the importance of that relationship.

Speaker 1: Well it's very important because what happened with sanctions is that Iran shifted its imports from Europe. Iran's economy has been very close was very closely integrated into Western Europe. But in the last decade, Iran has slowly shifted its connections, trade connections to the East, especially to China. China is able to provide Iran with a variety of goods that Iran needs. It hasn't been as active in investing in Iran.

There's been much talk, but not much action. So it can't help the economy grow, but it can buy the oil and send back commodities in exchange. Iran is also depending more and more on Chinese political support globally. You know, China was instrumental in getting Iran and Saudi Arabia together. That has been a big boon for Iran's diplomatic power.

Iran was invited again by China into the BRICS, which is an alliance of semi-industrialized or emerging economies. That has been a big hope, source of hope for Iran, that getting out of the Western orbit there's some other place to go. And that place is kind of vaguely defined by China, Russia, Brits and others. We haven't seen actual influence or actually impact from that shift of alliance to China. All we have now is here's a big country that can buy the oil and can actually ship goods to Iran.

But in terms of generating economic growth, we're not sure.

Speaker 0: Would it be fair to say then that 1 effect of the American sanctions is actually to strengthen another regional bloc that has no interest in strengthening.

Speaker 1: Yes absolutely. I think that's again 1 of the messages that we are book emphasizes. Not only does a shift externally from the West to East and China and Russia in particular, but there's also a shift inside Iran from private sector and the middle class to big state authorities, including the IRGC.

Speaker 0: To that extent, then, would you declare those American sanctions a success or a failure?

Speaker 1: Well, it's definitely a failure if they wanted to create more moderate Iran, which in some way was the ultimate aim of sanctions, to get Iran to behave more to the liking of Western powers. And Iran has defied that. Although I must say sanctions were very successful in doing their first job, which was to cripple Iran's economy, bring its growth to a halt, and hurt the ordinary Iranians, hoping that they would then put pressure on their own government to moderate with respect to investment demands. That also has not happened. So there are success points.

Yes, U.S. Has got a big power, the dollar is the king, and if you defy the US, you better be ready for economic contraction, economic crisis. But can that then translate into a country subjugated, being subjugated, you know, and changing its policies? And that hasn't happened, if anything, I think Iran has become more aggressive,

Speaker 0: the larger ramifications of the conflict and what it could mean for the global economy. The Strait of Hormuz in particular has become a real flashpoint in this conflict. Around a fifth of the world's oil passes through here and in recent months we've seen a number of attacks on vessels there. Just last weekend Iran's Revolutionary Guards seized a cargo ship it said was linked to Israel. Javad, talk to me about the kind of disruption to global trade that could occur if Iran and the groups it backs were to step up their attacks on the Strait of Hormuz?

Speaker 1: Well, I suspect that Iran's greatest strength is in its own neighborhood. So when push comes to shove, Iran may decide to close the Strait of Hormuz. It may decide to attack shipping that is closer to the southern shore of Persian Gulf, maybe even attack its newfound allies in terms of Saudi Arabia and UAE. We don't know that. But the closest target would be to cause a crisis in terms of oil exports, which would primarily hurt China and maybe India, but not necessarily Western Europe or the US, which is now self-sufficient in oil.

So there is some complex calculation that's going on there. I am not sure Iranians would want to, as first resort, go to closing of the Strait of Hormuz. But then there are other groups like the Houthis, which have now enough technology to disrupt shipping in the Red Sea. They could do similar disruptions in the Persian Gulf. So all in all, I think the region, which is at the cost of becoming much more developed, The flow of oil money is facing a kind of disruption that may delay its economic development by a decade.

Speaker 0: You mentioned that Iranian backing of some of these groups isn't as significant as we might assume. On that, I'm wondering then how much control they really do have over those activities. If the Houthis choose to carry out attacks and Iran isn't in favor of that, to what extent do they have power over that?

Speaker 1: Well, they are allies in many ways. And that means just like Israel has quite a bit of independence from the U.S., Houthis have independence from Iran, but they don't want to completely break relations. So if Iranians really want to say we don't want any more ships being hit, I'm sure the Houthis will agree. The only group that Iran has close alliance with, close relationship with, is the Hezbollah. You know, everybody knows that Hamas is a Sunni organization that has not in times of crisis been allied with Iran.

Now they appear as allies, or recently they have, but they're always side with the general Palestinians are more likely to, like they did with Saddam Hussein when he was fighting Iran. So Iranians are aware that besides the ideological anti-Israel, anti-U.S. Alliance they have with some of these groups. Only the Shia groups can be trusted with reliance when the going gets tough.

Speaker 0: I'd love to end on a personal note. You grew up in Iran. I imagine you still have family and friends there. How are ordinary people faring amid this ongoing tension?

Speaker 1: Well, they are not faring well. In fact, Most of what our book is about is talking to various people, women, young people, to find out how they imagine their future. And 1 of the things that sanctions and these kinds of tensions tell young people is that the future is bleak. I don't blame them to want to study more English so they can immigrate when they get an offer from a university either in the West or India or Singapore or Malaysia, they pack their bags and leave. If the young people, especially the educated young people, cannot see a future for themselves in the country, the country has a lot of difficulties to grow and to become a normal country.

And I don't know if it's possible for Iranians to feel that way. They have the sanctions. They have the looming regional conflict, if not war. But they also have on top of that a lot of social restrictions that the government of Iran imposes on people, especially women. So all of this together is very hard to be optimistic about Iran growing, becoming a kind of happier nation for the time being.

Speaker 0: A real tragedy of lost potential there. Javad Zalahi is Bahani Professor of Economics at Virginia Tech. Thank you so much for talking to us today.

Speaker 1: Thank you. My pleasure.

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