Overview of The Bank Collapse Behind Iran's Protests
This episode from The Journal (The Wall Street Journal & Spotify Studios), hosted by Jessica Mendoza, explains how a deep financial crisis — centered on the failure of a large, politically connected bank — ignited mass protests across Iran and pushed the regime into its most serious challenge since 1979. The report connects U.S. sanctions, years of financial engineering by Iran’s central bank, a spectacular loan-fueled real‑estate project, capital flight, and austerity measures to the popular unrest and the government’s violent crackdown.
Key takeaways
- The immediate spark for nationwide protests was a major bank collapse that exposed widespread graft, risky lending, and the government’s limited fiscal room.
- Long-term causes include the U.S. withdrawal from the 2015 nuclear deal (2018) and renewed sanctions that isolated Iran’s financial system.
- The failed bank (Ayandeh/Ayanda) had been heavily reliant on central‑bank support and had lent to regime‑connected real‑estate projects (notably the Iran Mall), fueling public anger about elite enrichment.
- Currency collapse and capital flight (estimates of $10–20 billion) dramatically reduced living standards; the rial reportedly fell roughly 84% in a year.
- Government austerity (ending subsidies for staples like bread and gasoline) and proposed budget cuts were the proximate triggers for widespread street protests.
- The government responded with a harsh crackdown amid near‑total internet and communications blackouts; human-rights groups report thousands killed and many more arrested.
- The situation is politically volatile and unpredictable; protests have drawn support from a broad social cross‑section, including conservative regions.
Background: how sanctions and isolation set the stage
- After the U.S. withdrew from the Iran nuclear deal in 2018 and reimposed sanctions, Iran’s banks were cut off from global payment networks and borrowing channels (e.g., SWIFT restrictions, sanctions on the central bank and other banks).
- Iran increasingly relied on informal workarounds (a shadow oil tanker fleet, banking arrangements through third countries) and on the central bank to support domestic banks.
- By 2019 an emergency loan program—high interest, no collateral—was propping up banks; the central bank funded these by printing money, stoking inflation and weakening the rial.
- A short external conflict and increased military spending (mid‑period) exacerbated capital flight and economic anxiety among the public.
The bank at the center: Ayandeh (Ayanda) Bank and the Iran Mall
- Ayandeh/Ayanda was founded in 2013 by Ali Ansari (described as close to conservative elites). The bank offered very high deposit interest rates and was heavily dependent on central‑bank liquidity.
- Much of the bank’s lending flowed into lavish real‑estate projects tied to its founder — most prominently the Iran Mall in northwest Tehran, a massive shopping complex and high‑profile symbol of elite spending.
- Central‑bank officials described Ayandeh’s operations as akin to a Ponzi scheme: lending beyond its capacity to repay and using shell transactions and central‑bank funds to cover shortfalls.
- When the currency and liquidity crises intensified, political pressure mounted to close the bank. Ayandeh was shut down and its founder later faced sanctions (the UK is cited in the episode).
Economic fallout and lived effects
- Capital flight in the estimated range of $10–20 billion intensified the currency collapse; the rial reportedly fell ~84% in a year.
- Rapid devaluation made everyday commerce chaotic (shops unable to price goods; many businesses shuttered to avoid losses).
- The government, already strapped for cash after assuming bank liabilities, announced severe budget cuts, including cutting longstanding subsidies on bread and fuel — measures that would hit ordinary citizens hard.
- In response to unrest, the government offered a modest cash transfer (10 million rials per person — roughly $7), which protesters and analysts saw as inadequate.
Protests, repression, and human cost
- Protests spread widely across Iran: big cities and peripheral regions (including conservative and religious centers like Mashhad), pulling in merchants and constituencies that historically supported the regime.
- The state mounted a lethal crackdown. Rights groups cited in the episode reported thousands killed (the episode references more than 2,600 deaths and over 18,000 arrests as a figure cited by a watchdog), and there were reports and video evidence of mass casualties and bodies in morgues.
- A near‑total internet blackout made independent verification difficult and suppressed visible protest activity in some areas; the broader toll and exact dynamics remain contested and evolving.
Why did this happen — could it have been avoided?
- The episode frames the crisis as the result of a “perfect storm”: long‑term financial mismanagement; state dependence on printing money and propping up politically connected banks; sanctions‑driven isolation; a sudden currency crisis and capital flight; and increased military spending after regional strikes.
- Analysts interviewed argue the government’s own policy choices — risky central‑bank lending, opaque elite projects, and delay in structural reforms — were central to the collapse. Whether the crisis was strictly “inevitable” is debated, but many of the drivers were self‑inflicted and compounded by external pressure.
Implications and what to watch
- Political stability: protests drawing in conservative, religious regions mean the regime faces an unusually broad legitimacy crisis; the longer mass unrest and repression continue, the greater the risk of deeper political change.
- Humanitarian and human‑rights concerns: the high death toll and mass arrests require international monitoring; communications blackouts complicate accountability.
- Economic contagion: bank failures and state liabilities could cause prolonged fiscal strain, deeper inflation, and longer recovery time even if political stability resumes.
- International relations: sanctions, possible further pressure or responses from regional actors, and foreign sanctions on elite figures will shape Tehran’s options.
- Reporting constraints: the communications blackout and government controls mean independent verification is limited; numbers and details should be treated as provisional pending further confirmation.
Notable quotes and figures from the episode
- “Ayandeh Bank was operating a Ponzi scheme” — senior central‑bank official (quoted).
- Estimated capital flight: $10–20 billion.
- Rial depreciation: roughly 84% over the year referenced.
- Reported human‑rights toll cited: more than 2,600 dead and more than 18,000 arrested (figures from a rights watchdog reported in the episode).
- Government austerity package: roughly $10 billion in subsidy cuts; a proposed monthly cash transfer of 10 million rials (~$7).
Bottom line
The episode explains that what began as a banking and currency crisis — driven by sanctions, risky state bank practices, and elite‑linked lending into megaprojects — cascaded into mass protests when austerity measures hit ordinary people. The state response has been severe and the political and humanitarian fallout significant. The situation remains fluid, and the combination of economic fragility and popular mobilization poses a major test for Iran’s regime.