RENEE MONTAGNE, HOST:
When the day finally arrived and many of the sanctions weighing down Iran's economy were lifted, Iranians might have been expected to celebrate in the streets. Suddenly, the country could sell oil, replenish its fading fleet of airplanes and do business with much of the world. Instead, Iranians offered a collective shrug. Virginia Tech economist Djavad Salehi-Isfahani, just back after spending a month there, was not surprised.
DJAVAD SALEHI-ISFAHANI: The answer to why they're not more enthusiastic, why the financial markets in Iran actually have not responded - you know, the dollar-rial exchange rate barely moved. The stock exchange, it rose by 4 percent, and it's been in very low numbers for three years now. I think the reason is that the economy is tied in knots, some of it caused by the sanctions. And these knots are not easily removed when the sanctions are removed. A prime example is the banking sector. See, once the sanctions tightened in 2011 and in 2012, Iran's housing boom - rather, housing bubble - came to a quick end. A lot of people who had borrowed money from the banks and had invested it in real estate, they were unable to pay the banks. So banks now hold a lot of what you might call toxic assets. They're very similar, actually, to the problems that the United States and Europe had after the 2008 crash.
MONTAGNE: But what about the drop in oil? I mean, you were talking about toxic assets and the drop in real estate. How much has the fact that the price of oil has dropped - I mean, the average person on the street would know this, right?
SALEHI-ISFAHANI: Yes, they know that. The economy is, as we speak, in its deepest recession since the revolution. Iranians have not known a time as bad as now. Iran anticipates the new budget that was just presented in the Parliament is expecting $20 billion worth of oil revenue. So it's like one-fifth of the oil revenues Iran was getting a few years ago.
MONTAGNE: So what does this mean for - if there's such a thing as an average business or an average family, what does this mean to them?
SALEHI-ISFAHANI: If you are from the upper class, you'll probably be riding in nicer, cleaner airplanes. You will have an easier time moving money around the world, paying for your children's education abroad. For the middle class, lower middle class and poor Iranians, I suspect things are going to take a couple of years to improve. We are talking about 4 million people unemployed. Economic improvement that President Rouhani's promising for, like, next year of 5 percent is not going to make a dent in that unemployment. So I think as far as those people are concerned, they have to wait for the improvements to trickle down the economy so employment begins to improve.
MONTAGNE: There are a few businesses that should be very happy about the lifting of sanctions because it really opens up new markets for them. And those are carpets, caviar...
SALEHI-ISFAHANI: Pistachios.
MONTAGNE: Saffron. Why? Why those businesses?
SALEHI-ISFAHANI: First of all, they can probably penetrate export markets better now, much faster, call people and find distributors abroad and so on. But I think they're waiting for the banking crisis in Iran to blow over, for the banks to be able to lend at lower interest rates, before they can fully take advantage of these businesses abroad. There's one other thing. You know, Iranian carpets, for example, are now facing tough competition from Pakistan, Afghanistan, China. They're - it's not like the old days when they had a monopoly. I go to Iranian carpet stores and have to really work hard to find out if this carpet is not imported from China. It says, made in Iran. But you have to be an expert to be able to tell.
MONTAGNE: That was economist Djavad Salehi-Isfahani of Virginia Tech, who is just back from Iran. Thank you very much for joining us.
SALEHI-ISFAHANI: You're very welcome.