March 15, 2024
A February report by BBC Persian asserted that the 17-month-long intermittent internet blockages caused more than $1.6 billion in damage to Iran’s economy, adding to the economic issues of Iranian society. Without official government data on Iran’s economic status and the impact of internet connectivity and social media platforms on small businesses, understanding the damages caused by internet disruptions remains challenging.
However, even government-released information paints a grim picture. In September 2022, during one of the harshest internet cutoffs in Iran, the ISNA news agency, related to the country’s Supreme Council of the Cultural Revolution, reported that every hour without the internet cost Iran $1.5 million.
The internet blackout started in Iran following nationwide demonstrations that engulfed the country to protest the death of the 22-year-old Mahsa Amini in the custody of Islamic morality police on September 16, 2022. `
The problem was based on the fact that in the years immediately before Amini’s death a multitude of new firms designed to do business via the internet had sprouted up in Iran, with twentysomethings copying American style internet businesses providing shopping, transportation and many other services with orders and payments over the internet This was the basis for a whole new expansion of the Iranian economy.
To control news about the demonstrations and the brutal images of the police and Pasdar crackdown, the establishment shut down the internet on several occasions in late 2022. The frequency of shutdowns was reduced after January 2023. However, several social media platforms and messaging applications have remained blocked, continuing to damage the economy. According to Statista, an online portal providing data on the global digital economy, in 2022, Iran’s internet was off for at least 7,171 hours, costing the country $773 million.
A significant blow was dealt to online shopping and electronic payment processing. During the initial two weeks of the protests, Zibal and Zarin Pal, two Iranian companies providing online payment platforms for businesses, witnessed a drastic 55 and 60 percent drop in the number of online transactions they supported, respectively.
Adding to the country’s economic crisis, the authorities clamped down on social media platforms such as WhatsApp and Instagram, along with blocking access to Google Play, App Store, Skype, and Microsoft’s website.
However, the most significant economic damage was witnessed by small businesses due to the social media restrictions. In October 2022, Farzin Fardis, chairman of The Economic Innovation and Digital Transformation Commission at the Tehran Chamber of Commerce, estimated that the Instagram ban alone had led to the closure of at least 500,000 Iranian small businesses on the platform and had a direct impact on one million Iranians, with eight million more indirectly affected.
Seventeen months after the anti-establishment protests first ignited, the nation saw a further reduction in total internet cutoffs. However, the restrictions on social media platforms and other websites remained firmly in place. Following a four-monthlong, deadly confrontation between protestors, the police and Pasdaran, the authorities leveraged the social media to suppress any resurgence of protests. But Iranian economists and businesses quickly argued that this fueled a surge in capital outflow.
Nasser Beiki, the director of the Arak Chamber of Commerce, warned that the country’s economy had already suffered immensely due to internet cutoffs and the constraints on internet users. “One of the impacts of the internet shutdown is capital outflow,” Beiki said. “Capital, by its nature, seeks a safe and secure environment, and if it can no longer find such a space, it will not be possible to keep the capital.”
A month after Beiki’s remarks, while the crackdown on protestors was still ongoing, the Iran Migration Data Portal, in a report, warned of an increasing pace of capital moving from Iran to other countries due to the government’s restrictions on the internet. In response to whether the pace of capital outflow would increase, the report said, “A glimpse at the official data released by the Central Bank shows that the answer to this question is affirmative.” It added that the amount of capital moved from Iran to other countries over two decades has exceeded $200 billion.
Despite the mounting economic losses and pleas from experts and citizens to lift the bans, the government remained unresponsive. In January, during his latest statement on the internet ban, Issa Zarepour, Iran’s minister of information and communications technology, stressed that social media platforms and messaging applications would not soon be accessible to the public.
Reza Olfat-nasab, a member of the union of internet-based businesses, underscored the difficult circumstances, remarking, “The conditions have been so dire over the last three years. In general, we have all come to accept that there is no alternative.”
Citing the frequent disruptions to the internet, Olfat-nasab expressed concerns about the possibility of its speed decreasing even further and more outright shutdowns. “Officials, indifferent to the livelihoods of those dependent on the internet, show no concern. As a result, we are doomed to persist with the existing internet,” he concluded.
