How Iran Deals With US Sanctions
Tehran, Iran: Right after returning to power, United States President Donald Trump reinstated the “maximum pressure” policy on Iran. He signed a National Security Presidential Memorandum. The executive order revives comprehensive sanctions following Trump’s 2018 unilateral withdrawal from the Joint Comprehensive Plan of Action (JCPOA), also known as the Iran nuclear talks.
The Republican tasked multiple US agencies, including the Department of the Treasury, State Department, Department of Commerce, Department of Justice, and the US Permanent Representative to the UN, on enforcing the policy.
Washington’s major aim is to reduce Iran’s oil exports to zero, particularly to China. It also aims at the Chabahar Port, Tehran’s only oceanic port, which links Iran to the Oman Sea.
The aggressive pressure on Iran has led to the freefall of Iranian Rial (IRR), especially due to the given uncertainty surrounding future nuclear negotiations and sanctions relief. The foreign exchange market and gold prices experienced sharp volatility.
IRR plunged to a historic low of 850,000 rials ($1) on 6 February following Trump’s executive order. Within days, the currency further weakened to 940,000 rials ($1) before slightly strengthening to 880,000 rials ($1).
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Reportedly, since the President Masoud Pezeshkian on 28 July 2024, the rial has lost nearly 57 percent of its value, having stood at 590,000 rials ($7) at the time.
Gold market in the country also faced huge turmoil. The price of the Bahar Azadi gold coin skyrocketed to 740 million rials ($800), while gold per gram reached 60 million rials ($65) – an all-time high.
Grappling to stabilise the market, the Central Bank of Iran announced plans to pre-sell one million Bahar Azadi gold coins. However, the effectiveness of this move remains uncertain, as Iran’s gold and currency markets are heavily influenced by political and psychological factors, especially the status of nuclear talks and sanctions.
This severe fluctuation in the currency and gold market pushed Iranian parliament to impeach the country’s Minister of Economic Affairs and Finance, Abdolnaser Hemmati. He is scheduled to be impeached on March 2nd in a special session of the Iranian parliament. If the impeachment takes place, he will be the first minister of the moderate government of Masoud Pezeshkian to step down from his cabinet.
Iran’s inflation sky-rocketed. Recently, Tehran’s annual inflation rate has fluctuated between 30 percent and 40 percent. The latest data from the Statistical Center of Iran (SCI) recorded an annual inflation rate of 32 percent for the 12-month period ending on 20 January 2025, reflecting a slight decline of 0.5 percent from the previous period.
Essential sectors like food, medicine, and housing faced the biggest thwart as wages failed to keep up with the pace of inflation. As a means to mitigate economic hardship, the Iranian government has been issuing monthly cash subsidies since 2010.
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Iran established food rationing, and electric coupon programme, the National Credit Network, in 2023. Masoud Pezeshkian’s government has decided to allocate electronic coupon [Electronic Kala Barg] to 30 million people in two stages in Ramadan and Nowruz (Iranian New Year in the middle of March). Iran’s Supreme Leader, Ali Khamenei, also agreed to withdraw $1 billion from the National Development Fund (NDF) to finance the allocation of electronic vouchers.
As per the official figures, 78.7 million Iranians out of more than 85 million, receive 26.32 trillion tomans ($6.2 billion) in monthly subsidies. Tomans is super unit of IRR. One toman is equivalent to 10 (old), or 10,000 (new, official) rials.
The mounting sanctions deepened budget crisis. According to Iranian Parliament’s Research Center, a budget shortfall of 19 trillion tomans ($2.2 billion) in the first four months of the Iranian year 1403 (April–July 2024), which is projected to reach 270 trillion tomans ($31.5 billion) by March 2025. The shortfall primarily stems from unrealized oil revenues (142 trillion tomans, equivalent to $16.5 billion)) and underperformance in state asset sales (53 trillion tomans, equivalent to $6.2 billion), reported The Cradle.
Energy imbalance is another headache Iran has to deal with, especially the gas and electricity sector. Frequent gas pressure drops and power outages have forced industrial plants to switch to burning mazut, a low-quality, heavily polluting fuel. Factories were forced to shut down due to power shortages. Domestic inefficiencies paired with sanctions have stifled foreign investment needed to modernize Iran’s energy infrastructure. As a result, Iran lags behind regional competitors like Qatar and Iraq in exploiting shared oil and gas fields. Of Iran’s 28 joint fields, only 15 are operational.
Despite being one of the richest countries in the world regarding energy resources, to overcome the challenge s, Tehran decided to import gas from Turkmenistan and Russia. Iran has the second-largest gas reserves behind Russia – 17 percent – and 9.54 percent of global oil reserves.
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As a response to the increasing economic prices, Iran is doubling down on its “Look to the East” and “Neighborhood Policy” strategies. Key measures include strengthening its “resistance economy” – reducing dependence on oil exports and insulating itself from global markets, said media report.
The country has also signed a 25-year strategic agreement with China, a 20-year partnership with Russia, and secured membership in organizations like the Shanghai Cooperation Organization (SCO) and BRICS. Iran is also finalizing a free trade agreement with the Eurasian Economic Union (EAEU) and working to integrate its banking system with Russia’s to bypass US sanctions.
The renewed maximum pressure campaign against Iran dissolve almost all of the counter measure the country managed to built up. It appears more more severe than during Trump’s first term. Inflation has surpassed 40 percent, and energy imbalances in gas, electricity, and fuel persist.
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US exemptions of Chabahar Port and Iran’s energy exports to Iraq have been revoked. Moreover, Trump’s proposal to impose a 100 percent tariff on BRICS member states could deter India, the UAE, Egypt, Saudi Arabia, and South Africa from supporting Iran’s de-dollarization efforts.
Iran has managed to stand firm so far. The country is now betting on the EAEU (Eurasian Economic Union) which will eliminate tariffs on approximately 5,000 goods, as well as the strategic International North South Transportation Corridor (INSTC) linking Eurasia and the Persian Gulf region.
(With inputs from agencies)
