In his first public remarks since mass protests erupted in Iran, Supreme Leader Ali Khamenei sought to draw a clear line between what he considered “legitimate” grievances in the bazaar and open rebellion across the country. “We are talking to the protesters. The authorities have to talk to them, but there is no benefit in talking to the rioters. The rioters have to be put in their place,” he said.
This distinction was intentional. Khamenei went on to praise the bazaar and its traders as “one of the most loyal sectors” of the Islamic Republic, insisting that enemies of the state cannot use the bazaar as a means against the regime itself.
However, his words could not cover up the reality on the ground. Protests continue in Tehran’s bazaar, with authorities firing tear gas at demonstrators chanting anti-state slogans, including one targeting the supreme leader. The state’s attempts to symbolically separate the bazaar from the broader unrest failed in practice, exposing the limits of state control of the narrative.
Khamenei’s assertion of the bazaar’s revolutionary heritage is rooted in historical fact. Bazaar played a decisive role in the 1979 revolution that overthrew Mohammad Reza Shah Pahlavi, and continued to align with conservative political networks in the following decades. However, this historical loyalty no longer guarantees political calm.
Over the past two decades, the bazaar’s economic standing has been steadily undermined by state preferential treatment of the Islamic Revolutionary Guards Corps (IRGC) and the large Religious Revolutionary Foundation (Bonyad) economic apparatus, sanctions controls, and chronic inflation. As a result, what was once the strong foundation of the regime became the latest victim of institutional dysfunction.
From power to alienation
In the aftermath of the 1979 revolution, powerful bazaar traders, often operating through Islamic federations affiliated with bazaars, were incorporated directly into the structure of the new state. They gained influence over key institutions and ministries such as the Ministry of Trade and Commerce, the Ministry of Labor, and the Parent Council.
This political access led to material benefits. Despite the enthusiasm of the new revolutionary state’s strongmen for full nationalization, including control of foreign trade, the bazaar maintained a dominant role in Iran’s commercial trade throughout the 1980s. Bazaar merchants secured import licenses, operated the largest trading companies under the supervision of the Ministry of Commerce, and benefited from preferential access to official exchange rates well below market prices. These imported goods were sold to Iranians at market prices, generating large profits.
When the Islamic Republic turned to economic liberalization in the 1990s, Bazaar-linked political forces, often described as the “traditional right,” supported President Akbar Hashemi Rafsanjani, who excluded Islamist leftists from both the cabinet and the Majlis. Although some of Rafsanjani’s market reforms later clashed with Bazaar’s interests and gave rise to the so-called “New Right,” especially the Restoration Service Party, Bazaar and its allies retained significant influence in the province.
The reformist policies of Rafsanjani’s successor, President Mohammad Khatami, did not fundamentally threaten the bazaar’s economic status or political influence. Key institutions, the Council of Guardians, the Council of Experts, and the judiciary, remained under the control of the “traditional right,” keeping the Bazaar from meaningful challenge.
Bazaar overwhelmingly supported President Mahmoud Ahmadinejad’s candidacy in 2005, but his government’s economic and foreign policies ultimately accelerated the decline of its economic power.
During Ahmadinejad’s presidency, “privatization” became a means of transferring major state assets to companies linked to the Revolutionary Guards and Bonyad. Reclassified as “public non-governmental organizations” under the new interpretation of Article 44 of the Constitution, these organizations have absorbed vast swathes of the economy. Supported by the supreme leader and a cabinet dominated by military and security figures, many of whom were former Revolutionary Guards officers, this redistribution of wealth met with little institutional resistance.
As a result, major changes occurred in Iran’s political economy. The IRGC has emerged as a dominant economic actor, expanding its reach into infrastructure, petrochemicals, banking, and more. Major bonyads, such as the Mostazafan Foundation, Imam Reza Shrine Foundation, and Setad, similarly consolidated their power by acquiring state-owned enterprises and building vast corporate empires. Together, these organizations formed a wide web of interlocking conglomerates that combined revolutionary infrastructure and military institutions, creating a powerful new political bloc within the state: the fundamentalists.
Bazaar complaints
This integration came at the direct expense of the bazaar and the political forces historically aligned with it. Disillusioned with the economic policies of Ahmadinejad’s government, bazaar merchants organized the first open act of defiance since the revolution, holding strikes in several cities in 2008.
Their position worsened as international sanctions intensified in response to the Ahmadinejad regime’s hardline nuclear policies. By 2012, US and EU restrictions on Iran’s oil and banking sectors and its exclusion from the SWIFT system placed the country under severe economic constraints.
States responded by developing sanctions evasion mechanisms, including smuggling routes through neighboring countries. The IRGC played a central role, importing goods using ports and airports under its control. Over time, this sanctions economy consolidated the control of the Revolutionary Guards and Bonyads, further marginalizing the bazaar.
Politically, the consequences were equally severe. The Principists tightened their control over the state, setting aside “traditional rights” and dismantling longstanding arrangements in which they had traded loyalty to the bazaar to gain access and influence within the Islamic Republic.
Challenge to the government
The ongoing bazaar protests are not an anomaly, but a warning. They reveal years of ongoing political and economic transformations that are hollowing out even the traditional backbone of the nation.
For decades, regimes have relied on the bazaar as a stabilizing force, a guarantor of economic compliance in times of crisis, and a basis for political loyalty. But despite Khamenei’s claims of loyalty, the unrest began and continues in the bazaar. His comments showed insecurity rather than confidence, and Bazaar’s open defiance shows that the challenges facing the Islamic Republic will be much more difficult to contain.
In theory, the Islamic Republic could seek to retake the bazaar by easing sanctions and curbing the control of conglomerates linked to the Revolutionary Guards. In reality, this is becoming increasingly difficult to do. Sanctions relief remains remote amid deepening tensions with the United States and Europe over Iran’s nuclear program, while the erosion of the economic and political power of the Revolutionary Guards and Bonyads provides the regime with little incentive and further weakens its strategic logic. In the face of these constraints, the state’s room for maneuver is narrow, leaving repression as the most readily available option, even at the cost of further alienating traditional constituencies on which it once relied for stability and loyalty.
The views expressed in this article are the author’s own and do not necessarily reflect the editorial stance of Al Jazeera.
