Bazaar merchants and Shia clerics, the allied pillars of Iran’s traditional middle class, formed a post-revolutionary partnership, germinated over centuries and blossoming in the 1989-97 presidency of Ali Akbar Hashemi Rafsanjani. To many Iranians, the bazaar has come to be seen as the heart of the Islamic republic, whose mercantile elite has fused so brilliantly with its political class.

But success fosters change. The traditional focus on the trading sector at the expense of producers is slowly starting to shift as the Iranian economy modernises. Within the bazaar, there is growing evidence of a genuine new division between the wealthiest, most powerful merchants and the majority of traders who are cut out of the power-patronage loop.

And with these changes, the physical presence of the bazaar is losing its importance. The most powerful merchants retain their old family shops, but these are kept as the souvenir fronts to business empires that are as often based in Dubai as Tehran. The story of this gradual shift is in many ways the story of the Islamic republic, but reaches back deep into traditional Persian life.

Merchants have always held a stranglehold over the economy, says Saeed Laylaz, a political and economic analyst based in Tehran. ‘Even up till the revolution, it totally controlled distribution,’ he says. ‘Goods would be imported through Bandar Abbas in the south and be taken up to the big bazaars in Tehran, Shiraz or Isfahan before being redistributed back to the port it came in through.’

The lack of communications gave traders an advantage too. Before the widespread use of the telephone, farmers and carpet weavers knew little about the market price of their product. And because they were so poor, rich traders would agree to the purchase price of an entire year’s crop in advance.

From the 19th century onwards, the producing sectors of the local economy started to change. Political upheaval meant that farms were scaled down, to redistribute land from traditional large owners to the farmers who worked them. Industry, when it emerged, was either nationalised or given over to co-operatives in the same political process.

The oil age pumped money into industry and other productive sectors, but the inflow of petrodollars only accentuated the sense that Iran was an import economy – a merchants’ economy. However, it also created a new educated middle class, whose interests were those of the West and which scorned the more traditional traders. Oil money went to the army and the ‘1,001 families’, who made up the ruling royalist elite and squandered Iran’s energy windfall.

But the bazaar remained largely unchanged, controlling distribution and keeping its assets liquid. The bazaaris themselves had a very close relationship with the clergy, as both were from the same traditional middle class, broadly shared social and political viewpoints and supported each other with money and influence. In the constitutional revolution of 1906 they had worked together closely to force the Shah to his knees.

Because of this close association, and the destruction of the Westernised, modern business community, the bazaar was one of the chief beneficiaries of the revolution. Some bazaaris became very close to the clerical regime, joining such eminent groups as the Islamic Republic Party, Motalafeh and the Militant Clergy Association of Tehran. In contrast to the turbaned mullahs, they were known as the mukalla – ‘the hats’.

‘The bazaar has a very close relationship with the cler