| A bazaar in Tehran last month. Arash Khamooshi/Polaris for The New York Times |
The U.S. tries economic pressure on Iran — again
By all accounts, Iran’s economy is in truly terrible shape.
In June, my colleague Farnaz Fassihi wrote about the pervasive economic hopelessness across the country.
She spoke with a manager of a plastic bottle factory, who said production was shut down and all employees had been furloughed because the factory lacked the raw materials it needed to function.
A doctor told her that pharmacies were rationing medicine, and that the Health Ministry had advised doctors to prescribe only essential medications because of shortages.
She spoke to a government employee who had recently bought groceries on loan from a neighborhood shop (his paycheck runs out by the middle of the month). When he returned to pay, “the bill had doubled because the prices of everything had gone up,” he said.
That was two and a half months ago; things haven’t improved much since.
There is not a lot of room left for the U.S. to impose broad sanctions on Iran itself, which has been under heavy sanctions for years, except for a brief reprieve after the 2015 nuclear deal.
With Operation Economic Outcast, the U.S. aims to put more pressure on Iran’s trading partners, though the specific measures it plans to take aren’t yet clear; Bessent promised more announcements in the coming weeks. One question hanging over the new effort is whether the U.S. really plans to enforce any secondary sanctions on China, the largest consumer of Iranian oil.
The Trump administration is not wrong to think that Iran’s economic situation is dire. But it’s counting on Iranian authorities responding to more pressure by negotiating. They might well respond by escalating the conflict.
| Treasury Secretary Scott Bessent said the U.S. aimed to “sever every economic lifeline” for Iran. Evelyn Hockstein/Reuters |
A mixed record
The world has been putting economic pressure on Iran for decades. It has succeeded in devastating Iran’s economy, but it has a decidedly mixed record when it comes to altering Iran’s behavior. To understand why, I wanted to talk to my colleague Yeganeh Torbati, whose book “Stolen Revolution” is in part about why the economic promises of the 1979 revolution went unfulfilled.
This is just not a regime that has prioritized economic growth, Yeganeh told me.
During the revolution to overthrow the shah, Ruhollah Khomeini, who would become Iran’s first supreme leader, and other revolutionaries made gestures at the idea of improving people’s material lives. They talked about free electricity for the poor and more housing; they used Marxism-inflected language, talking about the oppressors and the oppressed.
Then the revolution succeeded and, as early as September of 1979, Khomeini made his true priorities clear:
“No wise person can imagine that we sacrificed our blood so that melons would become cheap! [That] we gave our youth so that housing would become affordable … It is for Islam that a person can give up his life. Our saints also gave up their lives for Islam, not for economics. Economics is not worthy of this.”
This is a regime that cares about ideology, Yeganeh said. For all that’s changed since Khomeini, it still retains that in its DNA.
Occasionally, the regime is forced to face the reality that things have gotten so dire its survival is at stake. That’s what brought them to the table to negotiate a nuclear deal in 2015, and the economy is worse today, she said.
The protests that brought thousands into the streets in January were driven by economics. That’s partly why there is a faction within Iran that does want to reach a deal with the U.S.
But there’s another faction that remains convinced that, in the current standoff, the U.S. will blink first.
| A billboard of Ayatollah Khamenei in Tehran last month. Arash Khamooshi/Polaris for The New York Times |
A leverage problem
One problem with the fact that the Trump administration wants to step up the economic war against Iran? It sends a signal that the U.S. doesn’t particularly want to go back to actually fighting Iran, as my colleague Anton Troianovski, a global affairs correspondent, has pointed out.
Trump’s reluctance to go back to war won’t come as a surprise to anyone who has watched the conflict and seen the president issue dire warnings on several occasions about the destruction he’s about to unleash — only to walk them back.
Trump has a leverage problem. The war is unpopular, the U.S. has elections coming up and he doesn’t want the war to be central to the campaign. Iran knows this, and wants to use it.
Over the weekend, Iran’s security chief issued a warning that any country that joined U.S. efforts to isolate Iran would be “regarded by us as an enemy.” Should the economic pressure ramp up, one analyst told Anton, Iran is likely to look for a way to put fresh military pressure on the U.S. or its Gulf allies.
But it also might not have to. Bessent’s announcement followed a familiar pattern. He’d spent days promising an “economic D-Day,” the sanctions equivalent of storming the beaches of Normandy. But when the announcement finally came, as one of our reporters put it, it was more like a warning shot.