Iran–Iraq War - Home Front - Iran - Economy

Economy

The war furthered the decline of the Iranian economy that had begun with the revolution in 1978–79. Between 1979 and 1981, foreign exchange reserves fell from US$14.6 billion to $1 billion. As a result of the war, living standards dropped dramatically, and Iran was described by British journalists John Bulloch and Harvey Morris as "a dour and joyless place" ruled by a harsh regime that "seemed to have nothing to offer but endless war." Though Iran was becoming bankrupt, Khomeini interpreted Islam's prohibition of usury to mean they could not borrow against future oil revenues to meet war expenses. As a result, Iran funded the war by the income from oil exports after cash had run out. The revenue from oil dropped from $20 billion in 1982 to $5 billion in 1988.

In January 1985, former prime minister and anti-war Islamic Liberation Movement Mehdi Bazargan criticised the war in a telegram to the United Nations, calling it un-Islamic and illegitimate and arguing that Khomeini should have accepted Saddam's truce offer in 1982 instead of attempting to overthrow the Ba'ath. He added, "Since 1986, you have not stopped proclaiming victory, and now you are calling upon population to resist until victory. Is that not an admission of failure on your part?" Khomeini was annoyed by Bazargan's telegram, and issued a lengthy public rebuttal in which he defended the war as both Islamic and just.

By 1987, Iranian morale had begun to crumble, reflected in the failure of several government campaigns to recruit "martyrs" for the front. Israeli historian Efraim Karsh points to the decline in morale in 1987–88 as being a major factor in Iran's decision to accept the ceasefire of 1988.

Not all saw the war in negative terms. The Islamic Revolution of Iran was strengthened and radicalised. The Iranian government-owned Etelaat newspaper wrote, "There is not a single school or town that is excluded from the happiness of 'holy defence' of the nation, from drinking the exquisite elixir of martyrdom, or from the sweet death of the martyr, who dies in order to live forever in paradise."