Iran prepares to keep economy alive as US threatens further sanctions
Iran prepares to keep economy alive as US threatens further sanctions
Treasury Secretary Scott Bessent said last Thursday that the United States was planning to inflict more economic damage on Tehran as early as this week. The US would apply measures that have “never been seen in the history of economic isolation on a country,” Bessent said.
A day later on Friday, President Donald Trump echoed Bessent and said that Iran would be hit hard economically. As the memorandum of understanding (MoU) expired on Monday, Trump called on Tehran to hold up the “white flag of surrender” but insisted that he was in no rush to end the war.
Since February 2025, following the start of Trump’s second term in office, Washington has sanctioned “more than 1,000 Iran-related persons, vessels, and aircraft,” the Treasury’s Office of Foreign Assets Control (OFAC) said in May. Remaining defiant, Iran’s authorities have said they could shift to offensive operations and are simultaneously prepared to counter a potential ground invasion.
According to Mohammad Reza Farzanegan, professor of economics of the Middle East at Philipps-Universitat Marburg in Germany, the naval blockade creates a new situation in which traditional sanctions packages are combined with the use of military force to generate a physical shortage of goods in the Iranian economy. “This is an additional burden that raises new questions for policymakers in Tehran: Should they choose a deal whose terms are dictated by the Trump administration, or should they continue the armed conflict to break the blockade of the ports? It currently seems that Iran is leaning toward the second option,” he told Al Jazeera.
Farzanegan said that for the US to achieve its goals, namely changing the behaviour of the Iranian government, it should also “open a diplomatic exit and offer it as an option.” If armed conflict does fully resume, he said “the costs will not be confined to the target of sanctions; the global economy will also pay a price” through continued disruptions in the Strait of Hormuz and attacks across the region.