Iran braces for economic storm as US sanctions tighten

Iranian authorities are projecting an air of defiance in the face of intensifying economic pressure, insisting that the country’s domestic capabilities and years of experience navigating sanctions will keep its battered economy afloat.

According to the Al Jazeera, the United States has unveiled a fresh round of sanctions aimed at tightening the economic screws on Tehran and compelling it to bend during the six-month-old war between the two countries. Yet Iranian officials say they are preparing for a prolonged confrontation, with economy minister Ali Madanizadeh pointing to a two-year contingency plan unveiled on state television.

“We have our own tools and we also know the game,” Madanizadeh said, stressing Iran’s long experience in finding ways around sanctions. He suggested that Tehran could even “go on the offensive” in a world where Washington’s dominance is no longer absolute, expressing confidence that several countries would resist US President Donald Trump’s threats to sever economic links with Iran.

At the heart of Iran’s strategy is an increasingly familiar doctrine: stockpile what can be stored, produce what can be produced and find alternative routes for everything else.

The government has been accumulating essential commodities, foreign currencies and gold, while rationing energy despite Iran’s enormous natural-resource wealth. Central Bank governor Abdolnasser Hemmati told senior business figures earlier this week that oil exports — the country’s principal source of foreign currency — had almost ground to a halt.

Yet Hemmati sought to reassure businesses that foreign currency for essential imports remained available. The central bank, he said, had reserves of cash stored in locations beyond the reach of the United States.

He acknowledged, however, that the economic picture was deeply troubling, with runaway inflation and the relentless erosion of purchasing power weighing heavily on ordinary Iranians. But, he argued, hardship should not be confused with collapse.

“Enduring hardship is very different from collapse and what the US is after,” Hemmati said.

For ordinary Iranians, however, the distinction is becoming increasingly difficult to ignore.

Government spokesperson Fatemeh Mohajerani warned on Tuesday that people should not expect economic conditions to improve over the coming year. She also revealed that Iran’s Supreme National Security Council would have to authorise the publication of official poverty data — an indication of just how politically sensitive the country’s economic deterioration has become.

The national currency has meanwhile plunged to unprecedented depths. The rial fell to a record low of around 2.05 million to the US dollar on the open market on Tuesday before recovering slightly the following day.

Despite the turmoil, newly appointed security chief Mohsen Rezaei urged young Iranians to enter the economy themselves, encouraging them to manufacture goods needed by their families and communities.

That call echoes a philosophy deeply embedded in Iran’s strategic thinking: self-sufficiency as a shield against foreign pressure.

For decades, Iran’s national development plans have placed domestic production at the centre of economic policy, often pursuing self-reliance at considerable financial and environmental cost. Today, that doctrine is being tested under extraordinary pressure.

The government claims that Iran already produces around 85 percent of its agricultural requirements for a population of nearly 90 million. Agriculture minister Gholam-Reza Nouri said Tehran now intends to raise that figure to 90 percent in the short term, with the eventual ambition of producing all essential food domestically.

But self-sufficiency comes with its own contradictions.

Iran remains dependent on imports of crucial commodities such as wheat, maize, rice and vegetable oils. According to Nouri, the country imports roughly $16 billion worth of agricultural products while exporting around $8 billion. Some exports were suspended in March, shortly after the war began, as authorities sought to safeguard domestic supplies.

The United Arab Emirates and Saudi Arabia are among Iran’s important suppliers of refined sugar and wheat flour through re-export hubs, while Russia and Central Asian countries can provide grain through the Caspian Sea.

The UN Food and Agriculture Organization, as cited by the Al Jazeera, warned in March that rising import costs, disrupted logistics and government measures designed to protect domestic supplies were accelerating food inflation and eroding household purchasing power. It also cautioned that overland trade routes lack the capacity to replace the much larger volumes of goods traditionally carried by sea.

The consequences are already visible on supermarket shelves and in household budgets.

Iranian food prices were more than 128 percent higher in July than a year earlier, according to the latest figures from the Statistical Center of Iran. For millions of families, the same amount of money now buys dramatically less food than it did only six months ago.

Medicine is another vulnerable front.

Iranian authorities say the country manufactures approximately 97 percent of its medicines domestically. Yet imported drugs account for a considerably larger share of total pharmaceutical spending, leaving the health sector exposed to currency shortages, sanctions and rising import costs.

Parliamentary health committee spokesman Salman Eshaghi said in May that Iran was experiencing shortages of nearly 1,000 medicines to varying degrees. Drug prices have also surged, including this week, after the government confirmed that it was gradually withdrawing preferential foreign-exchange allocations for certain imports.

Meanwhile, the war has compounded years of infrastructure problems and chronic energy shortages.

Iranian authorities say they are racing to repair damage inflicted on oil, gas and utility facilities by US and Israeli strikes. But the scale of the disruption is being felt far beyond strategic installations.

Power blackouts continue to haunt households and factories in Tehran and other cities. Natural-gas shortages are expected to become even more acute as winter approaches and demand rises.

Fuel supplies are also under strain. On Tuesday and Wednesday, a significant number of petrol stations in Tehran, Mashhad, Karaj and other cities reportedly ran out of government-allocated fuel, triggering long queues and adding another layer of anxiety to daily life.

Mohajerani promised on Wednesday that existing petrol prices and quota levels would remain unchanged until the end of the current Iranian calendar month on 22 September. Yet the government has already reduced fuel allocations for private vehicles.

There is at least some hope of additional domestic refining capacity. The National Iranian Oil Refining and Distribution Company says two new refineries in southern Iran are expected to become operational by the end of the Iranian year in late March. Together, they are projected to add around 12 million litres per day to the country’s production capacity.

But economists warn that even such measures may not be enough to break the cycle of shortages, inflation and falling living standards.

Iranian economist Sadegh Alhosseini has argued that the government may ultimately have little choice but to undertake “painful reforms”, including raising fuel prices, to prevent a deeper economic crisis from spilling into social unrest.

He warned that prolonged shortages and kilometre-long petrol queues could push Iran towards a situation resembling Venezuela — with consequences that would be considerably harder for the government to control.

Yet higher fuel prices carry their own danger. Any increase would raise transportation costs, feeding directly into already ferocious inflation and placing another burden on households whose purchasing power has been steadily shrinking.

Iran has survived years of sanctions, isolation and economic pressure. Its institutions have learned to improvise, reroute trade, accumulate reserves and manufacture domestically whenever possible.

But the current crisis is testing the limits of that resilience.

The country may still possess considerable resources, industrial capacity and alternative trading partners. What is increasingly uncertain is how long those buffers can withstand simultaneous blows to its currency, energy system, food supply, infrastructure and household incomes.

For Tehran, the challenge is no longer simply surviving sanctions. It is preventing a prolonged war and economic siege from gradually consuming the very resources that have allowed Iran to survive them in the first place.

Iran may continue to withstand extraordinary pressure, but its growing vulnerabilities point towards a dangerous cycle in which resources and economic capacity are steadily depleted.