Scrap metal dumped in piles around Tehran has traditionally been good business for Jaafar. For nearly three decades, the Afghan migrant has sold what he finds to small factories, sending most of what he earns to his family back home. Lately, that hasn’t been much. “I can only afford enough bread for myself,” he says.

The waste picker, 50, is one of millions of people in Iran caught in the jaws of Donald Trump’s policy of enforcing “maximum pressure” on the country by suffocating its economy with sanctions. He could return home, he says, but there he would collide with another overseas American project.

“We are in limbo,” he says. “We can’t go home because of the war, but we can’t stay here either because of the sanctions.”

Iran has been convulsed with grief and rage in the past fortnight, and fear of a war with the US that at some points felt imminent. But even before a chain of events unleashed when the US responded to attacks on its embassy in Baghdad by assassinating a top Iranian general, Qassem Suleimani, people in Iran were bracing for a year of danger and misery.

Following Iran’s admission that it shot down a Ukrainian airliner, protests in Tehran and other cities this week were quickly dispersed, but conditions are ripe for more unrest.

Sanctions, piled on top of an already sluggish economy, are biting hard. The cost of health and medical services jumped by a fifth in 2019, according to the Statistical Centre of Iran. So did housing costs. Meat became 57% more expensive, putting it out of reach of many poorer families. More than 1.6 million Iranians have fallen into poverty since the American sanctions were re-imposed, according to Esfandyar Batmanghelidj, the founder of the media service Bourse & Bazaar, which fosters business links between Iran and Europe.

“The maximum pressure sanctions are advertised as measures against the Iranian state, but are functioning most effectively as measures against the Iranian people,” Batmanghelidj says.

The pain is being felt not just among the poor and migrant workers such as Jaafar. “I am middle class and had an easy life before,” said Mehdi, 49, an IT worker from the south-central city of Shiraz. “[Before] I could travel to either Turkey or Delhi once a year. I can’t any more … I see my family and I getting poorer day by day.”

Iraqi students hold national flags during an anti-government demonstration in the central Iraqi city of Najaf. Photograph: Haidar Hamdani/AFP via Getty Images

“Inflation is the biggest problem and it’s affecting everyone,” said Amir, 38, who works for a development company in Tehran. “My income has decreased by around 15 to 20% in a year but the price of meat and groceries has doubled. My wife and I both work and we used to save millions of Iranian rials. This year we barely saved anything. We are living in the hardest phase in Iran since the [1979] revolution.”

The Islamic Revolutionary Guards Corps (IRGC), the elite, ideologically hardline branch of the Iranian military that advocates limiting engagement with the west, is thought to be suffering less than most: they control the borders, and therefore access to the smuggling routes that become increasingly lucrative as legal trade is blocked.

I see my family and I getting poorer day by day Mehdi, 49, IT worker

But with Iran’s economy shrinking by 9.5% last year, the most since the height of the country’s war with Iraq, their sprawling business interests have also taken a hit, says Ali Alfoneh, the author of a book on the IRGC.

“In the past, the IRGC benefited from sanctions as its contracting arm replaced foreign companies engaged in major infrastructure development projects, in particular in the oil and gas sector,” he said.

“However, now that foreign presence in Iran’s economy is minimal and the IRGC already has taken over those [existing] projects, the Iranian economy in its entirety is contracting, and the IRGC is also suffering.”

Renewed tensions with the US have hastened a decline in support for the president, Hassan Rouhani. Photograph: Iranian Presidency/AFP via Getty Images

In November, Iranians did what policymakers in Washington might have been hoping for. Triggered by a sudden hike in fuel costs, people in 29 of the country’s 31 provinces rose up against the government in unprecedented numbers. They met a response that was brutal even by the Islamic Republic’s standards: at least 304 people were killed, according to one credible count, with other estimates putting the death toll as high as 1,500.

Yet despite this mass unrest, and outbreaks of dissent in Tehran and other cities this week, few analysts believe the Iranian regime is on the brink of collapse.

Iran’s economy is likely to stabilise in 2020, albeit in a miserable place, according to IMF forecasts from October. If the Trump administration had been hoping that strangling Iran’s economy would force its leaders to negotiate a new, wider reaching nuclear deal with Washington in 2020, that strategy appeared to be failing, said Batmanghelidj.

“Iran’s economy is holding up better than people think,” he said. “There is no doubt it is failing to achieve the kind of growth that is politically or socially necessary, but the US is failing to bring Iran’s economy to its knees.”

Instead, the downturn might consolidate power in the hands of hardliners. Renewed tensions with the US have hastened a decline in support for the president, Hassan Rouhani, a pragmatic conservative in an alliance with reformists, who came to power in 2013 on promises of re-engaging with the outside world and reaping the economic benefits.

He defeated hardliners who argued the US and Europe could never be trusted. In the eyes of many, the isolationists have been proven correct. Just how unpopular Rouhani’s forces have become will be clearer in February, when Iranians vote in parliamentary elections – in which many reform-minded candidates, including 90 incumbents, have already been disqualified by Iran’s clerical rulers.

“Most analysts would say that Trump has undercut the reformists so much that there is no way they will make headway,” said Rouzbeh Parsi, a historian of Iran at Sweden’s Lund University. “Even if they aren’t erased, the elections will radically weaken them.”

These days, Iran is drowning in sorrow and grief Student protesters

Factions are always rising and falling in influence in Iran’s government, but the diminishing of Rouhani’s reformers comes at a sensitive time: presidential elections are due in 2021 and Iran’s supreme leader, Ali Khamenei, turns 81 this year.

His death will be a once-in-a-generation opportunity to redefine the Islamic Republic from its highest post – and might come at a low ebb for forces in favour of engaging with the outside world.

Caught in between these domestic and international power struggles are the Iranian people. This week, a group of students who protested at Tehran’s Amir Kabir University against the government’s mistaken shooting down of the passenger jet, voiced their despair.

“These days, Iran is drowning in sorrow and grief,” they wrote. “While economic policies and political repression suffocate the people, the shadow of war looms over our heads. What has been lost in the current political climate, amidst ongoing threats from military powers, is the voice of the people.”

The presence of the US in their region had “done nothing but sow chaos and disorder”, they said, and presented their government with an opportunity to repress its own citizens in the name of national security. Opposition groups outside Iran had become “corrupt and totally dependent” on foreign powers.

“Today, we are surrounded by evil on all sides,” they said.