US Pressure On Iran Tightens As Oil Blockade Drains Revenue, Sanctions Hit Trade

Iran is coming under growing economic pressure as a US campaign targeting its oil exports, sanctions-evasion networks and access to international financial channels leaves Tehran with fewer options to earn foreign currency and pay for essential imports.

The squeeze comes as the conflict enters another phase, with neither Washington nor Tehran signalling that it is ready to accept the concessions demanded by the other. According to Reuters, three senior Iranian sources said the latest US measures were putting Iran’s long-standing methods of bypassing sanctions under increasing strain and threatening channels it has relied on to keep trade moving.

Washington has sought in recent weeks to intensify economic pressure on Tehran, hoping to gain leverage in any future negotiations after six months of conflict failed to produce concessions. Iran’s clerical rulers managed to circumvent sanctions for decades, but the latest measures have left them with fewer routes to obtain foreign currency, finance trade and purchase goods, the sources said.

The financial squeeze is particularly significant because Iran has long relied on international financing networks in other countries to keep its economy operating. The three senior sources described efforts to block those channels as an urgent threat.

The economic pressure comes as fighting has renewed. US attacks along Iran’s Gulf coast this week prompted retaliatory Iranian strikes against US bases in Arab states. Iran has continued trying to disrupt traffic through the Strait of Hormuz, although more energy is now reaching international markets through the waterway.

Neither side has indicated that it is ready to compromise, leaving the war in a costly stalemate. But the worsening economic situation could alter the calculations on both sides.

Oil exports fall as Iran's main revenue source is hit

The US blockade of Iranian oil exports has cut off Tehran’s main source of revenue, while only limited volumes continue to move through alternative routes.

Reuters reported that Iranian crude loadings have fallen this month to about 260,000 barrels a day, down from roughly 1.7 million barrels a day a year earlier, according to commodity analytics firm Kpler. Only a small volume is still leaving terminals for distribution by truck, train or smaller boats over the Caspian Sea.

Tehran says it still has tens of millions of barrels stored in tankers outside the blockade zone that it can sell. One Iranian official said the new sanctions had caused intermediaries to step back or demand higher payments for the risks involved.

Iran’s established sanctions-evasion networks, including front companies, unregistered tankers and smuggling operations, are also becoming more expensive to maintain. The three senior sources said the financial squeeze was leaving Tehran with less money to pay the high premiums needed to circumvent sanctions.

The latest US measures have expanded secondary sanctions against countries doing business with Iran, targeting dollar transactions required for oil sales as well as the financing of essential imports and raw materials.

Iran is also facing pressure on its fuel supplies. One senior Iranian source said the country has only another two months’ supply of gasoline, which Iran has to import despite producing oil domestically because of limited refining capacity.

Currency collapse adds to pressure on households

Iran’s economic problems predate the latest escalation. The country entered the conflict with a rapidly weakening currency and spiralling inflation, while months of bombing have added to the cost of rebuilding damaged industry and infrastructure.

Iran’s currency has also collapsed. The rial has fallen from around 1 million to the US dollar a year ago to more than 2.2 million now.

Official figures put 12-month average inflation at 69.9%, while prices for food, beverages and tobacco have risen at nearly twice that rate.

President Masoud Pezeshkian has said total trade has fallen by between 25% and 35%, with imports hit harder than exports.

Iran has also lost access to an important trade and financial route. The United Arab Emirates said on August 19 that all commercial exchange and financial dealings with Tehran had been halted until further notice. US pressure and Iranian attacks have disrupted the UAE’s role as one of the main conduits for Iranian trade.

“If those channels stay closed, a supplier wants cash, a deal is routed through another country and a shipment arrives later and dearer,” said an Iranian trader in Tehran who deals in imported goods.

The labour market is showing signs of the wider deterioration. Official unemployment rose to 9.1% in the spring, while the number of people in work fell by about 450,000 from a year earlier amid a broader decline in labour-force participation.

For those who remain employed, incomes are also far below what is needed to cover household costs. Official data puts the average monthly salary at around $125, compared with basic household spending requirements of around $450 a month.

"We are getting poorer every day," said Mahnaz, a 34-year-old private-sector employee in Tehran who asked that her family name not be used.

Economic crisis raises political risks

Iran’s leadership is aware of the political consequences of further economic deterioration. The country suppressed nationwide mass protests in January by killing thousands of demonstrators, and officials are now facing the risk that worsening economic conditions could fuel renewed unrest.

The conflict has also entered a phase in which both sides are seeking to influence each other’s domestic politics.

A senior Iranian official said Tehran hopes the threat of inflation will deter the US administration from maintaining pressure ahead of the November midterm elections. Washington, meanwhile, aims to push Iranians to revolt.

Any indication that the economic campaign could break the months-long deadlock is likely to be welcomed by US planners. Iran has also warned that it could respond to mounting pressure with military escalation, raising the risks as the conflict continues.

"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, modern history professor at St Andrews University in Scotland.

For now, neither side has signalled that it is prepared to make the concessions sought by the other. The conflict remains unresolved, while the oil export blockade, financial restrictions, currency collapse and rising costs are putting further pressure on Iran’s economy.