TEHERAN (BLOOMBERG) - Diplomats striving to restore the Iranian nuclear deal are getting a helping hand from the country's deteriorating economy, as growing hardship piles pressure on top officials in Teheran.

Living standards sharply worsened during the nine months that world powers and the government of Iranian President Ebrahim Raisi haggled over how to lift US sanctions and roll back Teheran's advancing uranium-enrichment programme.

Amid the growing public anger, ruling hardliners appear to have given up ground, dropping a demand that the United States remove Iran's elite military forces from its list of foreign-terrorist organisations.

There are still substantial obstacles, but European and American officials seem more optimistic that an accord's within reach.

What's certain is that Iranians are exhausted by surging prices that are, in part, fuelled by sanctions and poor management of the economy.

Inflation hit 52.5 per cent in June compared to a year ago, according to official figures, one of the fastest paces on record. From May to June, price gains rose 13.2 percentage points.

"What the people want from us is an outcome from these negotiations," said Iranian Foreign Minister Hossein Amirabdollahian. "They've said, 'You've talked and negotiated for long enough'."

As the holder of the world's No. 2 natural gas and No. 4 crude reserves, Iran is largely shielded from energy prices that soared following Russia's invasion of Ukraine.

Basmati rice up 200%

But the costs of key imported foods have been elevated by the war, and soared higher in May when the government stopped providing importers with heavily subsidised foreign currency.

The practice was introduced after the Trump administration exited the nuclear deal in 2018 in an effort to stabilise exchange rates. But well-connected businessmen were accused of exploiting the cheaper dollars to make huge profits via the unregulated market.

In Teheran, the retail price of red meat has jumped more than 90 per cent from a year ago, while basmati rice is up over 200 per cent, according to Bloomberg calculations.

Inflation has been fanned by a slump in Iran's rial, which lost a quarter of its value to the US dollar on unregulated markets in the year to June, weakening to record levels.

It rallied when Teheran's response to an EU proposal to resurrect the nuclear deal was deemed "constructive" on Aug 15.

Teachers, pensioners, oil-refinery workers, engineers, farmers and bus drivers protested over prices, stagnant wages and chronic corruption during the last year.

Police and judicial officials linked a spike in theft and burglary to the rising cost of essential goods, Iranian Students' News Agency reported.

Ideal for a deal

"General economic conditions, not just limited to inflation, are for sure driving Iran to make a deal," said Mr Cyrus Razzaghi, founder and chief executive of Teheran-based business consultancy Ara Enterprise.

The International Monetary Fund forecasts growth of 3 per cent this year, significantly lower than Iran's oil-producing regional peers.

"We have five million government workers whom we consider as part of our middle class who are now living on the poverty line," said Mr Saeed Laylaz, an economist and former adviser to reformist ex-president Mohammad Khatami.

The sanctions imposed on Iran by then President Donald Trump in November 2018 severed the economy's oil lifeline and eliminated already feeble foreign investment.

Iran responded by accelerating its atomic programme in a standoff that roiled the oil-exporting Persian Gulf.

By August 2020, Iran's exports of crude and gas condensate had plunged from 2.5 million barrels a day to an estimated 133,000, according to data compiled by Bloomberg, most bought by China.

Mr Raisi responded to the US penalties by expanding ties with allies in Moscow and Beijing, and imploring Iranians to greater self-sufficiency. He has also imposed new taxes on merchants, prompting protests in Teheran's Grand Bazaar, a traditional pillar of support for the Islamic Republic's establishment.

Monthly cash handouts for the poorest were raised.

Mr Bahram, 48, a trained psychologist, says he makes ends meet by working two jobs unrelated to his skills - including driving for a ride-hailing app in Teheran.

"You can't really survive, even with two or three jobs anymore," he said, asking not to be identified speaking to foreign media. "Everything goes back to sanctions one way or another."