Key facts
- U.S. is intensifying pressure on Iran's economy through sanctions and a blockade of oil exports.
- Iran's currency has fallen to record lows, and inflation is running at nearly 70%.
- Crude oil loadings have significantly decreased, impacting Tehran's primary revenue source.
- Expanded secondary sanctions target countries doing business with Iran, making evasion networks too expensive.
- Total trade between Iran and the UAE has been halted, further disrupting financial dealings.
A U.S. campaign to economically pressure Iran by blockading its oil exports and preventing sanctions evasion is becoming increasingly difficult for Tehran to withstand, according to three senior Iranian sources. Washington has intensified these measures in recent weeks, aiming to secure concessions after months of conflict failed to yield results.
While Iran has historically managed to bypass sanctions, the latest U.S. actions have placed the country in a more vulnerable position, limiting its access to foreign currency and essential goods. The effort to cut off Iran from international financing networks is seen as a significant and immediate threat.
The war has seen renewed fighting, with U.S. attacks on Iran's Gulf coast met by retaliatory strikes on U.S. bases in Arab states. Despite Iran's attempts to disrupt shipping through the Strait of Hormuz, more energy is flowing to international markets, while the U.S. blockade has severely impacted Tehran's primary revenue stream.
Iran's economy was already in crisis with a collapsing currency and spiraling inflation before the recent conflict. Months of bombing have also led to substantial costs for rebuilding damaged infrastructure. The financial squeeze is reducing the funds available to pay the high premiums required for illicit sanctions evasion.
The Iranian rial has hit record lows, and the country has only about two months' supply of gasoline, which must be imported due to limited domestic refining capacity. Iranian rulers are concerned about the potential for economic meltdown, which could reignite widespread protests.
"They are under very, very severe economic pressure. They're losing control of the Straits. It's really a question of if they choose to negotiate and I think they'll have to," said Ali Ansari, a modern history professor at St Andrews University.
The war is evolving, with both sides attempting to influence each other's politics. Iran hopes inflation will deter the U.S. administration before midterm elections, while the U.S. aims to encourage revolt within Iran, according to a senior Iranian official.
The expanded U.S. secondary sanctions target countries trading with Iran, hindering its ability to clear dollar transactions for oil sales and crucial imports. This has made Iran's existing sanctions evasion networks too costly to maintain.
Iranian crude loadings have dropped significantly, from approximately 1.7 million barrels a year ago to about 260,000 barrels per day, according to Kpler data. While Tehran claims to have tens of millions of barrels in storage, new sanctions mean intermediaries are either withdrawing or demanding higher prices.
President Masoud Pezeshkian stated that total trade has fallen by 25% to 35%, with imports affected more than exports. Disruptions from U.S. pressure and Iran's own actions have also impacted trade through the United Arab Emirates, which has halted commercial and financial dealings with Tehran.
An Iranian trader noted that closed channels and increased costs for imported goods are making supplies arrive later and more expensively. The rial has depreciated from around 1 million to the dollar a year ago to over 2.2 million rials currently. Official figures indicate a 12-month average inflation rate of 69.9%, with food prices rising at nearly double that rate. Unemployment officially rose to 9.1% in the spring, and the number of employed individuals decreased by approximately 450,000 from the previous year.