For years, I heard a version of Iran that did not quite match the Iran described in international news.

The stories came from Pakistanis travelling for ziyarat.

At the bank where I have worked, Shia customers regularly travelled to Iran and Iraq. When they returned, some spoke about Iran’s broad roads and public transport. They remembered busy shopping areas. Mashhad and Qom did not look to them like cities in a country supposedly being crushed by sanctions.

I used to wonder about the contradiction.

Were visitors seeing only the polished part of Iran? Were reports about economic hardship exaggerated? Or were the pilgrims simply impressed because they had expected something much poorer?

After looking more closely at Iran’s economy, I think another explanation fits better.

Both pictures can be true.

Iran can possess functioning urban infrastructure and busy commercial districts while millions of Iranians simultaneously lose purchasing power.

The mistake comes from treating a country’s visible infrastructure and the financial condition of its households as if they were the same thing.

They are not.

A road does not disappear when the currency falls

Consider what a visitor actually sees.

A Pakistani pilgrim arriving in Mashhad encounters an international airport, highways, hotels, apartment buildings, shops and public transport. Around the shrine of Imam Reza, an enormous service economy has grown to accommodate pilgrims.

Much of that infrastructure is the accumulated product of decades.

Economists sometimes distinguish between a stock and a flow. The distinction sounds technical, but it explains much of the Iranian puzzle.

A metro system is a stock of infrastructure. So is a motorway, a hospital or an apartment block.

Household income is a flow.

Inflation can badly damage the second without immediately destroying the first.

If the Iranian rial loses value this year, a metro tunnel built twenty years ago does not vanish. A six-lane road does not become narrower. An established hotel does not disappear because imported equipment becomes more expensive.

Iran had already constructed a substantial national transport system long before the present crisis. A World Bank assessment from the mid-2000s described a large network of paved roads, railways, ports and international airports that had resulted from major construction investment during preceding years. World Bank transport assessment

Iran has continued investing in parts of that infrastructure despite sanctions.

Mashhad provides a striking recent example. The first phase of its Metro Line 3 began carrying passengers in 2025, and local officials said the project connected the Imam Reza shrine area to the urban rail network. IRNA report on Mashhad Metro Line 3

That happened while Iran was already living under severe financial restrictions.

A Pakistani pilgrim therefore does not have to be imagining things when he says, “Their transport system impressed me.”

He may simply be describing what he saw.

Mashhad is not an ordinary Iranian city

There is another reason visitors can return with an unusually favourable impression.

Mashhad is built around one of the largest pilgrimage economies in the Muslim world.

Millions of domestic visitors travel there, while foreign pilgrims arrive from Iraq, the Gulf, Pakistan, India and elsewhere. Iranian reporting in 2025 described Urdu-speaking visitors as one of the important international groups visiting the Imam Reza shrine. Iran Press report on international pilgrims in Mashhad

Pakistan’s connection is particularly strong.

In May 2025, the Pakistani and Iranian governments discussed special arrangements for Pakistani pilgrims. Iran agreed to provide accommodation and meals in Mashhad for 5,000 Pakistani travellers during the pilgrimage period, while both governments discussed additional flights and border facilitation. Press Information Department of Pakistan

Pilgrimage therefore creates its own urban economy.

Hotels need customers. Restaurants feed visitors. Buses and taxis move them. Shops sell clothes, religious goods, food and gifts. Money circulates around the shrine even when the wider national economy is struggling.

Anyone who has visited a major pilgrimage city will recognize the pattern.

A shrine can sustain intense economic activity within a country whose broader economy is weak.

The presence of crowded shops does not automatically tell us that the average household is prospering.

A Pakistani comparison helps

We can understand this without going very far from home.

Imagine a foreign visitor spending several days in Karachi.

He lands at an international airport, drives through parts of Clifton and DHA, sees expensive restaurants, visits Dolmen Mall and notices thousands of people shopping.

He might reasonably conclude that Karachi contains considerable wealth.

He would be correct.

But suppose he then concluded that Pakistan therefore has no cost-of-living crisis.

That would be wrong.

A shopping mall measures something very different from median household purchasing power.

I made a similar distinction in my recent piece on why an improving Pakistani economy can still feel worse at home. National indicators and household experience often move on different tracks.

The same visitor may never enter the home of a family deciding whether it can afford meat this week. He may not meet a graduate who cannot find a suitable job or a pensioner whose medicine now consumes a larger share of monthly income.

Iran presents a similar problem of observation.

What a visitor can see is real. What he cannot see may be equally real.

The sanctions are also real

None of this means sanctions have failed to hurt Iran.

The World Bank’s current assessment is bleak. It says Iran faces mounting pressure from intensified sanctions, conflict, water and energy shortages, and disrupted international trade. High inflation and declining real incomes are suppressing domestic demand, while financial sanctions make trade, insurance and international payments more difficult. World Bank: Iran overview

The Bank also says sustained high inflation has caused a substantial loss of household purchasing power. Iran has responded to sanctions partly by shifting trade toward China and neighbouring states while making greater use of barter, bilateral currency arrangements and indirect payment channels. World Bank: Iran economic overview

This is not the picture of an economy untouched by sanctions.

Yet it is also not the picture of a country in which ordinary state functions have vanished.

Iran remains a large society with a substantial domestic market, an educated workforce and important industrial capacity. It also possesses the world’s second-largest proven natural-gas reserves and fourth-largest proven crude-oil reserves, according to the World Bank.

Economic isolation has damaged Iran.

It has not erased Iran.

Sanctions do not strike everything equally

I think this is where much of the confusion comes from.

We often speak about sanctions as though someone turns a dial marked “economy” and the whole country becomes poorer at exactly the same speed.

Real economies do not work like that.

Some sectors receive protection.

Others deteriorate faster.

A government may keep funding transport infrastructure that it considers essential. Municipal authorities can continue projects already under construction. Domestic cement, steel and engineering capacity can support construction even when importing sophisticated foreign equipment becomes more difficult.

Religious centres may receive special attention because of their cultural and political importance.

Meanwhile, private households absorb inflation directly.

The Iranian family buying cooking oil experiences sanctions through prices.

A municipality operating a metro experiences them differently.

A shrine complex supported by established institutions experiences them differently again.

That is why the question “Do sanctions work?” is often too crude.

We should ask: work against whom, and against what?

The same uneven pressure appears in Iran’s strategic sector. In my analysis of Iran’s missile force, I looked at how the state sustained a complex military program despite repeated attempts to constrain it.

Iran also adapted rather than simply waiting for sanctions to end

The other part of the story is adaptation.

Iran has lived with different forms of American sanctions for decades. Institutions and businesses have had time to find substitutes, restructure supply chains and develop domestic production where possible.

The World Bank notes that Iranian trade increasingly pivoted toward neighbouring states and China as conventional international channels became more difficult. Barter and indirect payment mechanisms became more important.

That does not make the system efficient.

Sanctions raise transaction costs. They discourage investment. They make technology harder to obtain and can leave consumers paying more for inferior substitutes.

But adaptation matters.

A country exposed to sanctions for one year and a country exposed for several decades do not respond in the same way.

Iran has had time to develop economic scar tissue.

Ugly perhaps. Expensive certainly. But functional enough to keep large parts of society operating.

That resilience also shapes Pakistan’s economic exposure to Iran. I discussed the regional side of this in my pieces on the stalled Iran-Pakistan gas pipeline and how Hormuz tensions can still raise Pakistan’s fuel bill.

What the pilgrims are actually telling us

I now look differently at those conversations with Pakistani zairain.

When someone returns from Mashhad and says, “You should see their roads,” I would not dismiss him.

He saw the roads.

When another visitor talks about organized transport, hotels and busy shopping centres, I would not assume he was repeating Iranian propaganda.

He may be giving an accurate eyewitness description of one part of Iranian life.

The mistake would come later, if we converted his observation into a national economic conclusion.

Good roads do not prove that wages are keeping pace with prices.

A functioning metro does not tell us whether young Iranians can afford housing.

A crowded shopping centre does not tell us what percentage of income a working family now spends on food.

And a weak currency does not mean every Iranian city must physically resemble an economic ruin.

The Iran we see depends on where we stand

Perhaps that is the useful lesson from the Pakistani pilgrimage experience.

Western reporting often encounters Iran through sanctions, nuclear negotiations, missiles and economic statistics.

Pakistani pilgrims encounter it from a bus window.

They see Mashhad illuminated at night. They see the shrine, markets and hotels. They use roads and public transport. They notice things that macroeconomic reporting can easily make invisible.

Neither view is sufficient by itself.

The statistics tell us what is happening to purchasing power and investment.

The pilgrim sees what decades of accumulated infrastructure, domestic capacity and religious tourism have preserved.

Put those two Irans together and the apparent contradiction becomes easier to understand.

Iran has not escaped the economic cost of sanctions.

But neither has it become the broken society that the word “sanctioned” can sometimes make outsiders imagine.

Its cities carry the physical investments of earlier decades. Selected infrastructure continues to expand. Commercial life adjusts. Pilgrimage keeps money moving through places such as Mashhad.

Then, behind those roads and shopping centres, families calculate what their salaries can still buy.

My Pakistani visitors were not necessarily wrong.

They were looking at Iran through a different window.

And sometimes a bus window shows something an economic chart cannot.