Iran International
Iran’s economy is no longer merely experiencing high inflation; it is exhibiting the structural symptoms of a nation losing faith in its own currency and facing a shift in its monetary regime.
Over the past year, a pattern has emerged across markets, policy decisions and price behavior pointing to the early stages of de facto dollarization.
In April 2025, when a “five-dollar pizza” shop opened in Tehran’s affluent Niavaran neighborhood, many dismissed the fixed dollar price as a marketing gimmick. At the time, one pizza cost roughly 5 million rials, with inflation reportedly above 40%.
Less than a year later, on the eve of the current war, the same pizza was priced at 8.6 million rials, while officials acknowledged inflation exceeding 70%. What initially appeared symbolic began to look practical.
The shift was not confined to niche businesses and high-end stores. Informal dollar transactions, once largely limited to luxury goods or services aimed at foreign customers, steadily expanded.
In the months leading up to the 12-day war, despite the departure of many foreign nationals, dollar-pegged property sales and rentals increased noticeably. While upscale properties led the trend, mid-range apartments also entered the market with dollar-based pricing.
By the end of 2025, the US dollar had climbed to 1,430,000 rials, up from 800,000 in January of the same year. The volatility hit the automotive market hard. With car production concentrated among three major state-linked manufacturers and supply unable to meet demand, the price of second-hand cars in rial terms outpaced the increase in the dollar exchange rate.
Media headlines read, “The dollar is in the driver’s seat,” and traders increasingly priced vehicles in dollars. In December, automobile market expert Abdollah Babaei warned that if current trends continued, car transactions would effectively become dollarized.
Economists began warning of a structural shift. Former Tehran Stock Exchange chief Hossein Abdeh Tabrizi cautioned that Iran "will enter the stage of dollarization" if 60% inflation and government overspending continued.
he statement went viral, and many echoed the growing concern that “Iran’s economy is on a dangerous path,” with the rial losing its function both as a store of value and as a unit of account.
Government policy after the 12-day war reinforced these anxieties.
The administration’s 2026–2027 budget introduced three pivotal shifts. First, gasoline subsidies moved from a liter-based rationing system to cash transfers. Second, an inflation coefficient was added to the pricing formula of Iran’s key commodity anchor. Third, the preferential exchange rate was abruptly removed in December, converting the government’s largest dollar commitment into rial-based direct subsidies.
Perhaps most striking was the historic decline in oil revenue’s share of the budget—from about 32% in 2025–2026 to just 5% in 2026–2027, the lowest level since the 1960s.
To compensate, taxes were increased by more than 60%. Across these measures, the common denominator was clear: the state systematically reduced its foreign-currency and commodity obligations, converting them into rial-based commitments. The administration that campaigned on taming inflation now appeared increasingly reliant on inflationary financing to navigate wartime pressures.
In February, before the outbreak of the second war, average inflation for basic necessities reached triple digits, estimated between 105% and 115%. Reacting to these concerns, the administration pushed to remove four zeros from the rial, presenting it as a technical reform to simplify calculations.
In reality, redenomination in a high-inflation environment is an expensive cosmetic surgery on a patient on his deathbed—an adjustment that quickly loses meaning as prices continue to rise.
During the second war, market closures, the suspension of price discovery in the exchange market, and reduced demand slowed money circulation and provided short-term inflationary relief. At the same time, large banks halted operations, increasing demand for physical cash.
The Central Bank responded by issuing a 10-million-rial banknote—raising the highest denomination one hundredfold from 100,000 rials—a step it had resisted for years.
But such pauses rarely eliminate underlying pressures. When markets fully reopen and normal trading resumes, deferred demand for foreign currency is likely to return. A similar pattern followed the 12 day war, when pent-up demand translated into a rapid adjustment in prices once restrictions eased.
Even under conservative assumptions, inflation could move decisively into triple-digit territory if monetary expansion continues. At that point, the shift toward dollar pricing would no longer be limited to select sectors. It would spread more systematically across contracts, wages and savings behavior.
Dollarization rarely begins with legislation; it begins with economic self-preservation. It starts with a pizza menu, moves to apartment contracts and car listings, and eventually reshapes fiscal expectations.
If post-war reopening triggers another inflationary wave, the timeline may not be measured in years but in quarters. Under such conditions, the transition toward de facto dollarization would become increasingly difficult to reverse.
It suggests that the emergence of Iran Parliament Speaker Mohammad Bagher Ghalibaf’s name is less about his standing among Iranians and more about how Washington is reading power inside the Islamic Republic.
US President Donald Trump on Monday indicated he was in contact with a senior Iranian figure without naming a formal office. “We’re talking to a top person in Iran,” he said, describing the contacts as “very good and productive,” remarks that coincided with his decision to delay strikes on Iran’s energy infrastructure.
Ghalibaf rejected the suggestion outright. “There has been no negotiation with the United States,” he wrote on X, adding that such reports were being circulated “to manipulate financial and oil markets.”
A test channel, not a political endorsement
What places Ghalibaf in this discussion is not legitimacy or popularity, but how he fits a specific operational need.
Washington appears to be searching for a test channel – a figure embedded enough within Iran’s power structure to determine whether pressure has shifted internal calculations, yet visible enough to engage without committing to a formal negotiation track.
Ghalibaf fits that role. As parliament speaker with a background spanning the Islamic Revolutionary Guards Corps, the police, and executive administration, he sits at the intersection of political authority and coercive power. Over time, he has also sought to project a more technocratic and managerial image, particularly during election campaigns.
That combination makes him more legible to Washington than figures whose authority is either opaque or purely symbolic.
Who can deliver in Iran’s system?
The central question for US policymakers is not who represents Iran – but who can act. President Masoud Pezeshkian, despite holding elected office, is widely seen as constrained by unelected centers of power. At the same time, killing of former Supreme Leader Ali Khamenei and uncertainty around leadership structures has made it difficult to identify a single decisive authority.
In that environment, Ghalibaf emerges as a practical option. He connects political, military, and administrative networks and is positioned to transmit signals across factions.
This also aligns with a broader pattern in Trump’s foreign policy. His approach has consistently favored leaders perceived as decisive and capable of enforcing outcomes.
Engagements with figures such as Abdel Fattah el-Sisi, Vladimir Putin, and Kim Jong Un reflect a preference for authority and deliverability over institutional legitimacy.
Ghalibaf fits that pattern as well – not because of what Trump put as being “respectable,” but because of perceived functionality.
Limits of power and the legitimacy gap
Yet the same factors that make Ghalibaf useful to Washington also define his limits. Iran’s strategic decisions are not delegated to individual officials. Authority remains concentrated within tightly controlled security and leadership circles, with networks aligned with the IRGC shaping core policy direction.
Recent statements from these circles have reinforced resistance to negotiations under pressure, with some going further by demanding concessions rather than offering them.
Mohsen Rezaei, a military adviser to the country’s new Supreme Leader Mojtaba Khamenei, warned that escalation would be met with force. “If they make this mistake [hitting Iran power plants], we will paralyze them and sink them in the Persian Gulf,” he said in a televised interview Monday night.
Rezaei added that “the war will not end until sanctions are lifted, compensation is paid, and legal guarantees are provided that aggression against Iran will not be repeated,” ruling out any ceasefire under current conditions.
His remarks feature the broader reality facing any potential channel: even if figures like Ghalibaf are engaged, key security actors continue to set maximalist terms that leave little room for negotiation under pressure.
In that context, even a well-positioned figure like Ghalibaf does not have the authority to shift policy. At most, he can serve as a conduit – not a decision-maker.
Public perception
Ghalibaf’s record includes involvement in past crackdowns, including student protests, as well as longstanding corruption allegations. These factors have shaped his image within Iranian society and limit his credibility beyond state structures.
This creates a structural contradiction. A figure who may be functional within the system is not necessarily acceptable outside it.
This gap becomes more pronounced when viewed against recent unrest. Large-scale protests in January, met with a heavy security response in which Ghalibaf was part of the broader system response, showed the depth of public anger toward figures associated with the state.
Slogans widely heard during those demonstrations – including “This is the final battle, Pahlavi will return” and “Reza Pahlavi is the national slogan” – showed that the opposition is widely rallying around the exiled son of Iran’s last Shah, rejecting any one associated with the Islamic Republic.
In that context, any attempt to elevate a figure such as Ghalibaf – even as a de facto interlocutor or transitional figure – would likely face immediate resistance from a public that has already signaled its rejection of the existing power structure.
What Ghalibaf’s selection really reveals
Therefore, the focus on Ghalibaf is not that much about elevating him – it appears it is about testing the system around him.
For Washington, he represents a point of access into Iran’s power structure at a moment of uncertainty, a figure through whom pressure can be measured rather than resolved.
On the other hand, for Tehran, the episode highlights how tightly controlled that structure remains, with authority dispersed across networks that limit any individual’s room to act.
This makes the channel inherently narrow. It may reveal whether pressure has altered internal thinking, but it does not resolve the deeper constraints that define decision-making in Iran.
In that sense, the question is not whether Ghalibaf can deliver – but whether anyone within the current structure can.
The Rebrand Begins
The pattern is familiar. When Ali Larijani was killed in an Israeli strike last week, some Western coverage quickly reached for the usual labels: practical, moderate, easier to work with than the other men around him. Ghalibaf may now be next. He is now the most senior surviving figure in the Islamic Republic with deep IRGC roots. That puts him in a dangerous and important position. He could become the next major assassination target. He could also be sold as a channel to the West in a system that increasingly looks like an IRGC republic.
At the very moment that reports are emerging of further U.S. military steps around Iran, there are also reports that JD Vance may soon meet senior regime figures. Ghalibaf may be one of them. We do not know whether those reports are true, whether any such contact will take place, or who exactly would be involved. No name has been officially confirmed. But if such a meeting does happen, it may prove clarifying. Vance belongs to the isolationist wing of the Trump administration. A meeting with Ghalibaf or another senior regime figure would give Vance a direct look at who actually holds power in Iran and the kind of men the administration would be dealing with. That could matter if the war deepens and the isolationist wing has to judge the regime more directly.
As I argued in an earlier piece, ambiguity about potential contacts is already doing political work, unsettling senior officials in Iran as they wonder who may be talking to Washington. This piece makes a different point. The same ambiguity can also create openings for the wrong kind of figure to be misread as a moderate or a usable channel.
But Ghalibaf is not a moderate. He is not a hidden reformer. He is not a practical man trapped inside an ideological state. He is a hardliner, corrupt to the bone, who has spent years trying to look like something else.
Ghalibaf has always been ambitious. He once cast himself as the Islamic Republic’s version of a modernising strongman, even using the language of an “Islamic Reza Khan.” He wanted the presidency and, for years, carried himself like Iran’s next president. He ran in four presidential elections after 2005. Around him, that ambition produced a political project: to present Ghalibaf not as just another insider, but as the man who could impose order after Khamenei.
That image was built not only for domestic politics. It was built for foreign eyes too.
How the image was built
Inside the system, Ghalibaf is a hardliner and a loyal product of the regime. Outside that circle, especially in private meetings and foreign-facing conversations, he has long tried to present himself as more modern, more practical, more disciplined, and less ideological than the Islamic Republic’s usual faces. He has tried to market himself as the man who could keep the system in place while making it easier for the outside world to deal with.
By mid-2024, that effort was already visible. On June 10, IranWire reported that people presenting themselves as Ghalibaf’s advisers had spent the previous two weeks approaching European and American diplomats with a clear message: Iran would need a strongman after Khamenei, and that strongman should be Ghalibaf. A European diplomat quoted in the report said they were presenting him as the only figure with the authority and connections to contain factional conflict, restore order, improve Iran’s foreign relations, and “cleanse” the regime of radical elements. The diplomat added that academics and think tank figures in Europe and the United States were also involved, suggesting a broader effort to persuade Western officials that Ghalibaf was not merely a candidate, but a future leader they should start accepting now.
My own sources point in the same direction. One source who was in the room told me that, in a meeting with European politicians in a European capital a few years before the IranWire report, Ghalibaf was plainly marketing himself as the kind of Islamic Republic figure the West could do business with after Khamenei. He was not presenting himself as an opponent of the regime. He was presenting himself as a more polished custodian of it: strong enough to control the system at home, but measured enough to speak to foreign capitals abroad.
There was another reason this belief took root. People familiar with the matter say Ghalibaf saw his absence from U.S. sanctions lists as a form of distinction, as if Washington treated him differently from other senior figures in the Islamic Republic. According to those familiar with the issue, the explanation was technical and legal rather than political, particularly because of his role as speaker of parliament. Even so, the coincidence seems to have had a real political effect. It fed his belief that he was seen abroad as a more acceptable and more usable figure than others in the system.
According to sources inside Iran, this also made parts of the regime suspicious of him. Some in the intelligence apparatus viewed his unsanctioned status with distrust and asked why a man of his seniority had escaped measures imposed on others. His ability to travel to the West only added to that unease. Ghalibaf is a pilot and, according to these sources, has at times flown aircraft himself, including on trips to London to keep his pilot credentials current. That too strengthened the sense among some insiders that he occupied an unusual place in the regime’s external profile.
The Record Behind the Image
But the image collapses the moment one looks at the record.
Ghalibaf is not a reformer held back by the system. He is one of its purest products. He rose through the Revolutionary Guards, the police, the municipality, and the institutions that sustain power in the Islamic Republic. His name is tied not only to hardline politics but also to repression, corruption, and elite hypocrisy.
For many Iranians, his role in repression has made him one of the most hated faces of the Islamic Republic. He is linked not only to the student crackdowns but also to the coercive institutions that kept the system alive through fear and force.
His corruption record is just as important. His years as mayor of Tehran are tied to some of the best-known scandals of that period, including the “astronomical properties” affair and the wider Yas Holding and Isa Sharifi case. These were not minor accusations at the edge of his career. They became part of the political meaning of his name.
The family scandals tell the same story. “Sismoni-gate” was politically damaging not because it was the gravest case against him, but because it exposed the hypocrisy of the ruling class. While the regime preached sacrifice and resistance, members of Ghalibaf’s family were seen shopping in Turkey for baby goods. Later came the embarrassment over his son’s attempt to secure permanent residence in Canada. These episodes confirmed a familiar pattern: the men who speak in the language of endurance often arrange private exits for their own families.
Why the West Should Resist the Script
That is why the current moment matters.
As war and decapitation strikes have thinned the Islamic Republic’s upper ranks, Ghalibaf has moved closer to the centre of power. Reports have suggested that he may have been involved in contacts with Washington. He has publicly denied that. He called the reports fake news and rejected any suggestion that negotiations had taken place.
But the deeper point is not whether he is lying or whether the reports are true in full. The deeper point is that his name surfaced so quickly at all. Whether Ghalibaf is really involved is almost secondary. He is exactly the kind of figure around whom such speculation gathers: a hardliner who has spent years trying to present himself as more practical, more modern, and more internationally legible than the rest of the ruling class. That makes him a natural target for rumour, whether or not he is the actual channel.
And that is the danger.
In moments of crisis, some in the West begin looking again for a hard man they can call practical. Faced with chaos in Tehran, they search for someone tough enough to control the machine but polished enough to sound like a statesman. Ghalibaf has spent years preparing for that role. He has tried to look like the man who could preserve the system while making it more manageable for outsiders.
But he is not a post-Khamenei solution. He is a distilled product of the Khamenei system.
Before anyone in the West starts calling him a pragmatist, it is worth remembering what he really is.
He is one of the clearest expressions of the Islamic Republic, and one of its most hated figures in the eyes of the Iranian public. That public is not a bystander here. Less than three months ago, Iranians gave more than 30,000 lives in resistance to the same oppressive system that Ghalibaf stands at the heart of. Anyone thinking of dealing with him should remember that.
And that is the point to make now, before the rebranding begins.
