What the Kremlin learned from the protests in Iran: Inflation, repression and fear of sanctions

The preservation of the corrupt, sanctioned, and oppressive regime in Tehran is a critically important outcome for Moscow. It will have watched with great (self-)interest and will draw conclusions from the Iranian theocracy’s initial, bloody success in driving protesters off the streets.

So what lessons might the Kremlin have learned from the largest protests in Iran since the 1979 revolution?

Lesson One: Inflation Above All 

In terms of maintaining stability, it is more important to control inflation than to stimulate economic growth.

Inflation in Iran has been high for decades, rarely falling below 10% a year since the revolution. According to the World Bank, it has been in double digits since the pandemic, peaking at 46% three years ago, before falling to 33% within a year.

At the same time, the economy has grown by an average of 4.5% for several years. The World Bank estimates that falling oil prices and the war with Israel will push inflation to 44% in the current financial year amid an economic downturn. It was this latest round of price increases that sparked the protests.

On this front, Russia has relatively few concerns. Thanks to draconian measures by the Central Bank, inflation in Iran is falling and running at about a tenth of the pace. Although the rise in prices for food and essential goods is higher than the overall figure, Iranian-style price hikes are unthinkable in Russia under current conditions.

The Kremlin is prepared to sacrifice economic growth for price stability. The economic slowdown, especially in the civilian sector, is a direct consequence of this choice. Faced with a contraction due to the war and falling oil prices, Iran cannot stimulate growth by easing monetary policy when inflation is at its current level.

Russia's central bank, which has fought rising prices with years of tight monetary policy, may now cut interest rates (which are already very high) to help ease the economy into a gentle recession, rather than a recession.

Events in Iran will only strengthen the camp in Moscow that supports price stability in their long battle against those pushing for growth at any cost.

Lesson Two: Keep government spending under control 

By Western standards, neither country has a large budget deficit or public debt. In 2023–2024 (Tehran’s accounting is done in a different calendar year), Iran’s deficit was 2.5% of GDP. The government had hoped to reduce it, but the war and the fall in oil prices prevented this, and in 2024–2025, the deficit is projected to have increased to 3.3%. The World Bank expects it to exceed 4% this year. To cover the gap, the government doubled its domestic borrowing plans and increased withdrawals from the National Development Fund.

Russia faces a nearly identical situation. In 2025, Russia posted a fiscal deficit of 2.6% of GDP — five times higher than planned. For 2026, Moscow approved a budget with a deficit of 1.6%, but private conversations within the government cast doubt on whether this can be achieved due to a combination of the war in Ukraine, low oil prices and sluggish growth. The liquid portion of Russia’s National Welfare Fund, which has covered the deficit since the start of the war, has been halved since 2022.

On the surface, both Iran and Russia have tolerable budget deficits. Britain and France, for example, have deficits of 5.2% of GDP. However, sanctions force Moscow and Tehran to rely solely on domestic banks for borrowing to cover the difference. This increases the cost of servicing the debt, and with high interest rates, the cost of domestic borrowing increases even further, causing a debt spiral. Furthermore, the promise of government bonds to the central bank to generate liquidity effectively fuels inflation as debt grows.

This de facto debt financing with the help of the central bank is a consequence of the closed financial systems in both countries. Like the Iranian government, Russia cannot cut spending. The current level of spending is necessary to finance the war and maintain social stability. The Iranian protests could strengthen the position of those demanding spending cuts. But in Russia, as in Iran, any decision to reduce military and social spending must come from the top.

Lesson Three: Strengthening Banks 

One cause of the Iranian protests was the collapse of the country's largest private bank, Ayandeh. For many years, it had offered extremely high deposit rates while lending to affiliated companies.

The bank's owner had strong ties to the country's leadership, bought about $475 million in real estate in London and Europe, and used his bank's loans to finance the construction of the largest shopping mall in the Middle East. A government bailout of the bank was reportedly the last straw for Iranians, who saw it as evidence of systemic corruption and realized the risks to their savings in other banks.

Russia has had several high-profile bank failures (for example, Ugra, Otkritie, Probiznesbank) over the past decade, but an effective Central Bank cleanup improved things.

When Russia launched its full-scale invasion of Ukraine in 2022, the domestic banking system had largely recovered. Although high inflation and an economic slowdown have increased bad debts among corporate and retail borrowers, as this author wrote late last year, there are no signs of an imminent banking crisis in Russia.

The country has a much lower level of bad debt than Iran. Even the easy borrowing of defense companies is supported by government guarantees at market rates, which are partially offset by the budget.

Lesson Four: The Internet Can Be Turned Off 

Russia appears to have learned this lesson even before the events in Iran. The Kremlin began restricting access to some online services before the invasion of Ukraine. Since 2022, these efforts have increased significantly. ( The Bell covered the growing scale of internet outages in Russia here. )

The two countries have much in common when it comes to digital repression – almost complete state control over the media, various means of filtering content, and the criminalization of social media posts.

Compared to what appears to be the harsh and general nature of Iran's internet crackdown, Russia is taking a more sophisticated approach. The banning of access to websites is selective. When a foreign service needs to be blocked, a domestic alternative is usually promoted beforehand.

VPNs are banned in name only, with an emphasis on propaganda and narrative control, rather than shutting down the entire internet.

However, as Iran has shown, if the regime fears an existential threat, it is technically and politically possible to intervene. Russian authorities are more prepared to take such a step than they were at the start of the war in Ukraine. In 2024-2025, the Kremlin went so far as to shut down WhatsApp and YouTube, two services that had previously been considered banned due to the risk of causing widespread public discontent.

Lesson Five: Sanctions Work 

Officials in both Iran and Russia promote a rhetorical paradox about sanctions: blaming them for many domestic economic problems while simultaneously dismissing the measures as weak, counterproductive, and failing to undermine the foundations of state stability. Iran has spent four times as long under strict restrictions as Russia. A key difference is that the measures against Iran are based on UN resolutions and are therefore effective globally. Russia’s sanctions are partial, imposed only by the West, and less fixed.

Both countries have cut themselves off from the SWIFT payment network and Western financial systems – although Russia’s exclusion is not as complete. Both have increased their dependence on China for trade, although, again, Russia has financial channels to other countries, especially those outside the Western orbit, such as the other BRICS countries. And both are struggling to import technology – although once again, Russia seems to be coping better thanks to its more developed domestic economy and the fact that many countries, including those it borders in the Caucasus and Central Asia, have not imposed sanctions.

All of this may seem to leave Russia in a better place. But these economic advantages—a more sophisticated economy, better technology, and higher living standards—actually create greater risks. Living under sanctions for an extended period without seriously reducing the well-being, security, and tolerance for pain of the Russian public will be much more difficult. Events in Iran should, in theory, make Russia’s leaders question their ability to withstand sanctions indefinitely without facing increasing risks to the system as a whole.

Lesson Six: Type first, think later 

The bloody and seemingly successful suppression of Iran’s protests should reinforce the Kremlin’s determined approach – if dissent cannot be rewarded, it must be suppressed, and the sooner the better. This means that law enforcement must be prepared to kill and maim, and that the opposition cannot be allowed to gather and organize anywhere (especially domestically).

There is also an understanding that the West will generally limit itself to harsh words. This lesson goes beyond economics. It has likely been learned by the Kremlin from studying the Maidan revolution in Kiev in 2013-2014 and the rallies in support of Alexei Navalny that once drew tens of thousands of people to the streets of Moscow and across the country.

The crackdown on protests in Iran may seem far removed from Russia’s economic reality, but the Kremlin was undoubtedly following events closely. Moscow likely remained even more convinced of the wisdom of its strategy—especially in curbing inflation and cleaning up the banking sector.

It also provides a new argument for cutting government spending and working to ease at least some of the Western sanctions. Beyond the economy, this could also prompt a further tightening of restrictions both online and in the real world.

The Geo Post