Iran Sees Millionaire Boom Amid Sanctions, Covid-19 And An Election

The number of millionaires in Iran has exploded despite the country suffering under U.S. sanctions and the Covid-19 pandemic.

In 2020, the number of high net worth individuals (HNWIs) in Iran grew by 21.6%, way above the global average of 6.3%. The collective wealth of these dollar millionaires grew even faster at 24.3%.

“Between March and July the Tehran Stock Exchange’s trade values increased by 625% compared with the same period a year earlier,” says a report from Capgemini, a consultancy, released on Tuesday (29 June). By comparison the S&P 500 gained just over 16% during the same period.

With access to international assets curtailed by sanctions, many of Iran’s wealthy and professional classes put their money into stocks and shares. The resulting bull market has made millionaires out of them. There are now 250,000 millionaires in Iran, according to Capgemini. Most of them live in Iran.

The Iranian government helped create this millionaire boom by flooding the Tehran Stock Exchange with public money. In September last year it injected 1% of the sovereign wealth fund (the National Development Fund) into the market and announced another tranche of 25 trillion rials (about $595.2 million) in January.

Cryptocurrencies have provided another source of funding for Iran’s new millionaires. Cheap electricity in the country has created a thriving bitcoin mining community.

The craze for mining cryptocurrencies was so extreme the government announced a four-month ban on the practice in May. The computing power needed to mine cryptocurrencies was using so much electricity that it was causing blackouts.

Undeterred, one Iranian bitcoin miner, who did not want to be named, said the practice was “insanely profitable” and that he was earning more from bitcoin mining than practicing as a lawyer. Around 72% of HNWIs have invested in cryptocurrencies, says Capgemini’s World Wealth Report.

The rapid rise of millionaires makes Iran the 14 richest country in the world and the wealthiest in the Middle East, according to Capgemini’s estimates. Iran is now even richer than its biggest rival, Saudi Arabia, which ranks 17 with 210,000 millionaires.

However, the fortunes of Iran’s millionaires stand in sharp contrast to its poor and the wider economy. More than 60% of Iran’s population lives in relative poverty due to the cost of living, says the Islamic Labour Council. There are no official government figures on poverty.

Prices of everyday items jumped following Donald Trump’s decision to pull out of the Iran nuclear deal in 2018. A year later violent protests took place in Iran’s major cities against the rising cost of living.

Those prices have risen still further with inflation encroaching 50%. The Covid-19 pandemic, which hit Iran before much of Europe or America, has caused further unemployment and poverty.

News that Iran’s rich are getting richer could create problems for Iran’s incoming president, Ebrahim Raisi, who will take office in August following a landslide victory in June’s presidential elections.

Raisi backs the talks underway in Vienna for a new nuclear deal with the U.S. If the negotiations are successful it could mean that sanctions are rolled back allowing international investment to flood back into the country benefiting the wider economy and rich and poor alike.

North American Overtakes Asia As Richest Region

For the first time in five years, North America has more millionaires than all of Asia-Pacific combined, according to Capgeimi’s World Wealth Report.

North America is now home to seven million millionaires, while the Asia-Pacific region has 6.9 million. It is the first time since 2015 that North America, which includes the U.S. and Canada, has led over Asia-Pacific when it comes to the number of millionaires calling the region home.

Much of the rivalry comes down to the U.S. and China. A rally in U.S. equity markets in 2020 led to a 12.3% increase in wealth, thanks to high ownership of equities among HNWIs in the country. Chinese HNWIs, on the other hand, are not so exposed to equities and the country’s markets have not rallied with such intensity.

After the U.S. Japan and Germany are home to the highest number of millionaires followed by China in fourth place.