Iran prepares to keep economy alive as US threatens further sanctions | US-Israel war on Iran News
U.S. to Enact New Economic Restrictions on Iran Amid Ongoing Conflict
Amid existing trade embargoes and a naval blockade impacting shipping routes, the United States has announced plans to impose additional economic restrictions on Iran in an effort to undermine its economy.
Treasury Secretary Scott Bessent indicated on Thursday that the new measures could take effect as early as this week, stating that these sanctions would be unprecedented in the realm of economic isolation. “These are measures that have never been seen in the history of economic isolation on a country,” Bessent said.
The following day, President Donald Trump reiterated Bessent’s statements, asserting that Iran would face severe economic repercussions. As a memorandum of understanding (MoU) between the U.S. and Iran expired on Monday, Trump called on Iranian leadership to surrender, though he emphasized he was not in a hurry to conclude the ongoing conflict.
Since the beginning of Trump’s second term in February 2025, over 1,000 individuals, vessels, and aircraft connected to Iran have been sanctioned, according to the Treasury’s Office of Foreign Assets Control (OFAC).
Iranian authorities, however, have maintained a defiant stance, with suggestions of shifting toward offensive military operations while preparing to counter any potential ground invasion.
Mohammad Reza Farzanegan, an economics professor specializing in the Middle East at Philipps-Universität Marburg in Germany, remarked that the current blockade presents a unique situation where traditional sanctions are combined with military force, leading to physical shortages of goods in Iran. He noted that this situation raises significant questions for policymakers in Tehran regarding whether to accept a deal dictated by the Trump administration or continue armed conflict to break the blockade. “It currently seems that Iran is leaning toward the second option,” he added.
Farzanegan also argued that for the U.S. to achieve its objectives of changing Iranian government behavior, it should consider offering a diplomatic solution as a viable alternative.
He warned that should armed conflict fully resume, the repercussions would extend beyond Iran, impacting the global economy through disruptions in the Strait of Hormuz and regional instability.
Iran Demands U.S. Compliance with MoU
Discussions aimed at resolving the conflict have stalled, although Iran is engaged in negotiations with Oman and other intermediaries concerning a potential temporary arrangement in the Strait of Hormuz, a critical passageway for global oil and natural gas supplies.
Iran’s parliament speaker and chief negotiator, Mohammad Bagher Ghalibaf, stated this week that the Strait of Hormuz would remain closed until the U.S. fulfills its obligations outlined in the now-expired MoU. “Until the commitments made by the United States regarding the lifting of sanctions and military threats are honored, the strait will not be opened,” Ghalibaf said.
In response to the escalating tensions, Iran has decentralized some import authorities to border provinces to better manage essential goods. Over recent months, Iran has redirected imports through land borders with neighboring countries, including Pakistan and Turkey, as well as through the Caspian Sea.
During a brief ceasefire established under the MoU, the blockade was lifted temporarily, allowing for increased oil exports, but those exports ceased again with the breakdown of the agreement. U.S. and Israeli officials are reportedly exploring measures to disrupt Iran’s inland imports.
The intensified economic pressure is compounding Iran’s long-standing structural issues, which are rooted in domestic corruption, mismanagement, and international sanctions. The economic fallout has manifested in persistent inflation, job insecurity, and declining living standards for Iran’s approximately 90 million citizens.
In light of these challenges, President Masoud Pezeshkian’s administration has outlined priorities for the next two years, focusing on market stabilization, protecting livelihoods, and enhancing national resilience. However, senior economist Mahdi Ghodsi of the Vienna Institute for International Economic Studies cautioned that without meaningful reforms and reduced confrontation with the U.S. and its allies, achieving lasting stability will remain elusive.
U.S. Energy Sanctions Targeting Iran’s Trade
Unconfirmed reports suggest that Washington’s impending sanctions may target additional independent Chinese refineries, known as “teapots,” that process Iranian crude oil. OFAC has previously imposed secondary sanctions on smaller entities in China and Hong Kong involved in Iranian oil transactions. Tighter restrictions could extend to larger banks if they engage with Iran-related funds, heightening tensions with China.
Ghodsi noted that energy remains a vital tool for U.S. leverage over Iran, especially considering recent infrastructure damage inflicted by U.S. and Israeli attacks. He warned that ongoing restrictions could lead to severe supply shortages for Iran, which has already been grappling with imbalances in electricity, gas, and water resources. Further constraints might force the government to implement stricter rationing measures.
As the government considers adjusting fuel subsidies and raising costs amid halted imports, Ghodsi indicated that U.S. sanctions would likely focus on Iran’s external energy trade, encompassing transportation, shipping services, and payment systems linked to sanctioned transactions.
“Closer scrutiny of entities facilitating these transactions will be critical,” he stated, highlighting the challenges Iran faces amid an evolving geopolitical landscape.
