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The prosperity gap is on full display on Tehran’s main boulevard.

EghtesadOnline: Valiasr Street, the 12-mile boulevard that Shah Reza Pahlavi built in the 1930s to link his summer palaces in the north of Tehran to a new train station in the south, connects two increasingly polarized Iranian worlds.

At the top, where the city climbs into the foothills of the Alborz mountains, the wealthy try to escape Tehran’s dense pollution. Their marbled apartments can go for $10 million, stores sell Rolexes and Maseratis. Chicly dressed women have their compulsory headscarves casually slung, reports Bloomberg.

By the time you reach the flat, smog-afflicted districts near the station, the severe black chador robe is more prevalent. Luxury imports are out of reach. At a tiny shoe store there, $22 a-pair leather shoes gather dust. "People just buy sandals nowadays," said shopkeeper Hossein Falahat, gesturing at the boxes of $1.50 flip-flops on the floor.

 

As in western capitals, Tehran’s “one percent” divisions are on clear display and roiling politics before May’s presidential election. Iran may have already had its Donald Trump in the shape of former leader Mahmoud Ahmadinejad, but disappointment at the slow pace of change has given the country’s chastened conservatives a weapon with which to attack successor Hassan Rouhani as the man who sold out to the west.

Since coming to power in 2013, Rouhani reversed most of the populist economic and foreign policies that had left the country isolated, its economy in recession and inflation rampant. While those changes culminated with the nuclear deal that ended international sanctions in January, residual U.S. restrictions have blocked the awaited flood of investment. 

Opponents call the government extravagantly paid elitists, uninterested in either protecting the poor or building the "Resistance Economy" mandated by Supreme Leader Ayatollah Ali Khamenei to thwart the sanctions. Rouhani’s allegedly pro-Western, neo-liberal economic policies, favor Iran’s wealthy, these critics claim.

Tensions between rich and poor go back to the 1979 revolution that brought Ayatollah Ruhollah Khomeini to power, according to Djavad Salehi-Isfahani, an Iranian-born professor of economics at Virginia Tech University in the U.S.

 

"When people see Maseratis driving around Tehran, it tells them something: It is again a symbol of the poor, the revolutionary children of Khomeini, not having control," said Salehi-Isfahani. "Deep down there is this class issue that Ayatollah Khomeini understood and Ayatollah Khamenei also understands, and which they have tried to exploit."

On the face of it, Iran appears to be doing modestly well since the nuclear deal with major world powers last year took effect in January. Sanctions had halved oil exports, collapsed the currency and pushed inflation above 40 percent. Oil production is now edging toward the pre-sanctions level of about 4 million barrels a day.

The Saudis and OPEC just agreed an output cut that could boost the price of oil while still allowing Iran to expand production. Every dollar on a barrel of crude adds about $1 billion to the Iranian economy, said Homayoun Falakshahi, oil and gas analyst for the Middle East and North Africa at Wood Mackenzie. The International Monetary Fund forecasts the Iranian economy will grow more than 4 percent this year.

Rouhani, 67, would appear unassailable at the richer north end of Valiasr, the heartland of support for his effort to reintegrate the Islamic Republic into the global economy.

The complaints most often heard here are that Rouhani and his government aren’t reformist, internationalist or pro-free market enough and too much a part of the system. Yet there’s also widespread belief his opponents are deliberately undermining efforts to draw foreign investment in an attempt to damage him politically.

"Things are getting better," said petrochemical engineer Mahdi Jahangar, 35, shopping for vegetables at northern Tehran’s Tajrish market, a middle-class alternative to the chaotic Grand Bazaar downtown. "But then Iran fires off a missile and it changes everything,” he said, referring to weapons tests Iran has conducted since the nuclear deal was signed.

Priced Out

Back at the southern end of Valiasr, near the shoe store Falahat took over from his father after retiring as a nuclear engineer, other shopkeepers selling goods from motorcycles to real estate to cards told a less optimistic story: The poor are getting priced out by the lingering effects of a devalued currency and inflation.

"People aren’t getting married," lamented Mohammad Hassemi, who has been selling wedding invitations for 30 years.

For residents here, the lifting of sanctions in January has yet to produce the prosperity and jobs Rouhani promised. That’s widely blamed on the U.S., which has kept in place non nuclear-related sanctions that continue to dissuade large international banks from doing business in Iran. But it has also opened Rouhani to attack. "People are not patient," said Falahat.

Cheap Suits

In July, opponents pounced on leaked salary data showing that some government employees were earning as much as $220,000 a year. The sums hardly stood out by western standards, or the revelations of spectacular corruption under Ahmadinejad. But in a country where officials go for inexpensive suits and five o’clock stubble to show their populist credentials, the revelations stung. The government announced salary caps.

"One percent of the Iranian population owns 70 percent of the wealth," claimed Said Zahedi, 53, a former civil servant in a café on Valiasr, citing a newspaper article he had just read. "The mottos and slogans of the revolution were partly about changing this system, but it failed."

A poll published in July found 74 percent of respondents said their living conditions hadn’t improved. In the survey by Toronto-based IranPoll.com for the University of Maryland’s Center for International and Security Studies, 38 percent held a “very favorable” view of the president versus 61 percent when the nuclear deal was signed.

Mohammad Hassan Abyaneh, a former Iranian ambassador to Australia, Italy and Mexico, is among conservatives trying to persuade Iranians that Rouhani is failing. The reason, he says, is that the nuclear agreement he signed was based on a naïve assumption the West would stick to its side of the bargain.

Abyaneh said the U.S. was never going to allow an end to sanctions because that would undermine its enduring strategic goal: To keep Iran weak and overly dependent on oil. Rather than promote investment in a diversified Iranian economy, the U.S. wants Iran to spend its oil revenue on the kind of imported goods seen in at the northern end of Valiasr, he said.

"That’s one of the complaints the Iranian nation has against the government: Why did you let yourselves be fooled by them?" said Abyaneh. Sanctions at least forced Iran to rely on its own resources, he said.

The conservatives are disunited and it’s still unclear who Rouhani’s main challenger might be. Ahmadinejad, a self-styled champion of the poor, recently floated the idea of running again, only to be slapped down by Khamenei. The ayatollah said his participation would “polarize” the country.

Unknown Quantity

Another unknown is the shift in U.S. foreign policy should Trump prevail next month and tear up the playbook when it comes to Iran. The risk for Rouhani is that even if he wins reelection, he emerges weakened.

Supporters of Rouhani’s policies say the Supreme Leader’s "Resistance Economy" doesn’t mean cutting off the country. "It means: How can we keep our economy alive in the face of domestic and foreign shocks?" Mansour Moazami, deputy minister for industry, mining and trade, said at his office towards the top of Valiasr. Yet Iran’s doors are being closed from the outside. 

The big western banks capable of financing investment were fined billions of dollars by the U.S. Treasury Department for doing business with Iran in the past and, so far, none has been willing to take the risk again.

"This is frustrating and it’s creating a problem for the administration," said Mostafa Behesti Rouy, a board member at Bank Pasargad, one of Iran’s largest banks, said at his office on Valiasr. "People say, ‘you haven’t delivered what you promised’ -- and the government’s opponents are using that."

Iran's Divide Iran election Maseratis