Iran’s bazaar merchants, the trader class who were the financial backbone of the 1979 Islamic Revolution, have turned against the clerics they helped bring to power, fulling unrest over an economy that has morphed into full-blown anti-government protests.

Frustration among bazaar merchants, from small-scale shopkeepers to large wholesale traders, has grown as their political and economic clout in Iran has diminished over the decades while the elite Revolutionary Guards have tightened their grip on the economy, building sprawling and tightly held networks of power.

“We are struggling. We cannot import goods because of US sanctions and because only the Guards or those linked to them control the economy. They only think about their own benefits,” said a trader at Tehran’s centuries-old Grand Bazaar, speaking on condition of anonymity.

The wave of protests that has engulfed the country, posing one of the toughest challenges ever to the clerical leadership, erupted in late December in Tehran’s Grand Bazaar, where hundreds of shopkeepers denounced the sharp fall in the rial currency.

The demonstrations quickly swelled and turned political, challenging the Islamic Republic’s legitimacy. Protesters burned images of Supreme Leader Ayatollah Ali Khamenei and chanted “Death to the dictator” – undeterred by security forces armed with tear gas, batons, and, in many cases, live ammunition.

Iran’s rulers, while acknowledging economic difficulties, have blamed their longtime foes the US and Israel for fomenting the unrest. They appear intent on holding onto power at any cost, backed by a security apparatus refined over decades of suppressing ethnic revolts, student movements, and protests over economic hardship and social freedoms.

A combination of international sanctions and the Guards’ sprawling economic empire has limited the government’s ability to ease the dire economic situation.

Tehran-based analyst Saeed Laylaz said the government has lost control over the situation.

“What is striking is that the unrest began in the bazaar. For merchants, the core issue isn’t inflation – it’s price volatility, which leaves them unable to decide whether to buy or sell,” he said.

Economic disparities between ordinary Iranians and the clerical and security elite, along with economic mismanagement and state corruption – reported even by state media – have fanned discontent at a time when inflation is pushing the price of many goods beyond the means of most people.

Iran’s rial currency has lost nearly half its value against the dollar in 2025, with official inflation reaching 42.5% in December.

CONTROL OF SECTORS FROM OIL TO CONSTRUCTION

Created by the Islamic Republic’s late founder Ayatollah Ruhollah Khomeini, the Guards first secured an economic foothold after the Iran-Iraq war in the 1980s, when clerical rulers allowed them to invest in leading Iranian industries.

Their influence expanded exponentially over decades, benefiting from Khamenei’s full backing and from opportunities created by Western sanctions, which effectively excluded Iran from the global financial and trading system.

The Guards now control vast sectors of the economy, from oil to transportation, communications, and construction.

Another trader said the crisis was not over, as the Guards have long proved adept at defending their economic interests.

“The government wants to resolve the problem, but it lacks the means and power in this system. The economy is not controlled by the government,” said the trader, a 62-year-old carpet seller in Tehran.

All aspects of the country’s sanctions-hit oil business have come under the growing influence of the Guards – from the shadow fleet of tankers that secretly ship sanctioned crude, to logistics and front companies selling the oil, mostly to China.

“No one knows how much of the oil money that the Guards get from selling Iran’s oil returns to the country … they are too powerful to be questioned about it,” said a senior Iranian official, who asked not to be named.

During his 2013–2021 presidency, pragmatist Hassan Rouhani repeatedly clashed with the Guards, accusing them publicly of resisting budget cuts, while his attempts to curb their commercial networks and assets were largely frustrated.

THE ESTABLISHMENT RELIES ON THE GUARDS TO END UNREST

Even as it has relinquished economic power, the clerical establishment has relied on its loyal forces – the Guards and its affiliated Basij paramilitary – to violently crush ethnic uprisings, student unrest, and protests over economic hardship, preserving the political order.

“Given the sensitive circumstances when the country faces foreign threats, Khamenei cannot upset the Guards by curbing their economic influence. The establishment needs them to quell the protests and confront foreign threats,” said an insider, close to Rouhani.

US-based rights group HRANA said it had verified the deaths of 544 people – 496 protesters and 48 security personnel – with 10,681 people arrested since the protests began on Dec. 28 and spread around the country. Reuters was unable to independently verify the tallies.

The authorities have not given numbers of casualties, but officials claim many members of the security forces have been killed by “terrorists and rioters” linked to foreign foes, including the US and Israel.