Elite Iranians live in luxury as rest of country feels economic strain of sanctions

Despite international sanctions and increasing isolation, there is a relatively new class of super-rich in the Islamic Republic of Iran.

Mehrdad Emadi, an economic advisor to the European Union, likens Iran’s nouveau riche to the oligarch class in Russia, those tycoons who were able by hook, crook, or corruption to acquire dizzying amounts of money at the end of the Soviet era.

“I can only find a comparison during President Yeltsin years in Russia, where you had sort of the old companies privatized, but they were really just a transfer of ownership to people who had good connections to the former Communist Party and KGB,” Emadi told Fox News. “And we are seeing, in my opinion, at least, a very similar process unfolding itself in Tehran.”

Iran’s ultra-rich reportedly are a mixture of the well-connected. There are the people in the banking sector, as well as the technocrats with talent, valued and rewarded by the regime. Then there are the clergy close to the regime, because not all clergy are in lock-step with the hardliners running the country. The elite is rounded out by a segment of the Revolutionary Guard corps who control trade and smuggling, and finally those with their tentacles around the “bonyads,” or charitable organizations, such as the Foundation for the Oppressed and Disabled, that often end up being convenient money-laundering vehicles.

“The sanctions are helping the process of widening the gap, both in terms of income and wealth in society," Emadi said. "People who are connected to the system in terms of access to foreign currency and ability to sign foreign contracts are accumulating wealth unrivaled in the last thirty-four years of the Islamic Republic’s existence.”

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Those in the import business are jacking up prices exponentially. It is harder to bring goods into the country in the current environment, but it is also easier to put prices up at a whim in the name of “sanctions.”

And the super-rich are spending their cash, not knowing when the party might be over.

Porsche opened a dealership in Tehran a few years back. The pressure not to do business in Iran has built to such a degree that Porsche recently decided to close its business there, but even so, it was a surprise to many that there was a lively market for these coveted luxury cars in Iran, a country in which President Mahmoud Ahmadinejad vowed to spread the oil wealth to people’s tables, but not necessarily to their garages. Ahmadinejad was elected on a populist platform, by voters who had grown tired of some of the more corrupt Ayatollahs.

Meanwhile, the revolving restaurant at the top of the Milad Tower in Tehran aspired briefly to be a beacon of bling, offering gold-topped ice cream desserts in its rooftop restaurant, a delicacy that cost hundreds of dollars per sweet serving, until the Mayor of Tehran had it yanked from the menu.

There are conflicting reports as to whether anyone actually managed to enjoy those golden scoops before they were banned.

This comes as crippling sanctions serve as icing on the cake to what experts call three decades of economic mismanagement. The squeeze is on the middle class and poor of Iran apparently like never before.

The Friday prayer speakers reportedly have warned people not to complain about the effects of international sanctions, and as recently as last week, Ahmadinejad dismissed the latest round of sanctions, saying, “They (the West) use oil as a political weapon against a country that is an oil producer itself. This is among the most ridiculous behaviors of a bunch of political retards.”

But Speaker of the Parliament Ali Larijani, a regime stalwart, earlier this month made a rather unusual declaration. He acknowledged the pain people are feeling but blamed it more on Iranian economic mismanagement than on sanctions.

Meanwhile, with crackdowns on dissent worse than they have been in recent memory, Iranians do not feel at liberty to speak about all this. Fox News, however, was able to find one highly educated, middle-class Iranian woman willing to speak on the phone about the hardship people are experiencing.

“Bare essentials are becoming scarce — food, medicine, transportation, everything. Utilities, housing are becoming next to impossible. They are all further and further out of reach," said Sabrineh, who did not want her last name used for fear of repercussions.

"There are food lines. People don’t know how much money to carry in their pockets every day because prices are rising on a daily basis as opposed to the previous day," she said. "And these are the fortunate people who can buy bread. There are others lingering around who cannot.”

She says the Iranian people are not fooled by statements by many in the leadership that things are just fine.

“We have mad people running our country, trying to fool our people," she said. "When a sack of rice, a 10-pound sack of rice, sells for $32, how can you even afford that in the United States or Europe, much less Iran?”

What really set people off recently is the sky-rocketing cost of chicken, hardly a luxury item. In fact, it has traditionally been what those who can’t afford red meat consume for protein, and it is a staple item in Iranian cuisine. Its price has gone up threefold in the past few months. This has caused much anger, prompting Ahmadinejad’s brother-in-law, who is a police chief, to ask broadcasters to refrain from showing images of chicken on TV, so as not to cause envy-fueled trouble.

In these grim times many Iranians seek refuge in satire. A spate of chicken jokes and cartoons has been one response to the crisis. One particular cartoon shows pornography on TV, with a chicken randomly in the frame. A father dives in front of the TV to keep his young son from seeing, not the fornication, but the chicken.

For those too hungry or scared to find humor in this difficult situation, there has been another outlet—protest. Since the bloody crackdown on demonstrators after the disputed 2009 presidential elections in Iran, dissent has been extremely rare. People took to the streets last month in Nishabur to protest the high price of chicken, in what were the first protests we have seen connected to economic distress.

People now talk about the “chicken line,” as opposed to the “poverty line.” The price rise has been blamed on mismanagement and a failure to properly distribute chicken feed, and not on sanctions.

Several factories of various types have had to shut down in recent months, and that has also been blamed on economic mismanagement, connected to Ahmadinejad’s removal of fuel subsidies last year, generous subsidies that had been in place for as long as anyone can remember.

“Factories are not able to pay the salaries of the workers, the reason for that being subsidies, production subsidies, were removed overnight," Emadi said. "The government promised, Mr. Ahmadinejad himself promised, that they would compensate for high energy costs. They haven't. They (factory owners) can’t pay Western prices for diesel, for fuel, for liquid gas, so they are reducing the output, so they don’t need as many workers.”

Emadi has learned that two dozen factories have told workers that at the end of August they will no longer have jobs. Furthermore, there are already people who have not received paychecks in 18 months. Fights have broken out because of this.

“We have reports (in some cities) of hand-to-hand engagement between Revolutionary Guards who are based in factories and workers who are asking for promised salaries," Emadi said.

Sabrineh sums up the mood on the street: “In a word, anger. Frustration."

"They are just fed up and tired and don’t know which way to turn. They need your help, your help in terms of supporting them in whatever way they can, but the best way is not to turn your back on them," she said. "They feel isolated and left out. They can’t speak out against their own government without jeopardizing their own lives, their families’ lives, and they don’t get support from the outside world either. All they get from the outside world is more pressure and more sanctions, or the threat of war. They are doomed, angry, frustrated, hopeless. But they are trying, regardless.

"The resistance is there. They just need your voice, your microphones….exposure.”

She says there are still people daring to stand on street corners and hand out leaflets in support of political prisoners, despite the risks.

Emadi thinks that what is now crisis will become more like economic disintegration in the fall, with unpredictable consequences.

“I cannot envisage what channel they will be releasing this energy but I have very little doubt that if this situation continues deteriorating, we will see serious social unrest which could be very violent," he said.

Fox News senior foreign affairs correspondent Amy Kellogg reports on the lifestyles of the rich inside Iran on Friday at 10 p.m. ET and Sunday at 9 p.m. ET on "Fox Files."