Could Iran’s escalating economic crisis weaken negotiating position with US? | Iran

Iran may not be suffocating like a stuffed pig as Donald Trump predicted, but its economy is in dire straits due to a combination of a massive war reparations bill, inflation, currency devaluation, unemployment and a contraction in oil revenues; The political elite worries about how tough they can afford to be with U.S. negotiators. One estimate circulating in Iranian media suggests that the damage to the economy from US-Israeli attacks was worth nine times Iran’s budget last year.

The UN Development Program estimates that another 4.1 million Iranians could fall into poverty.

Trump had predicted that Iran would drown on the grounds that the country would soon run out of oil storage space due to the US naval blockade. On April 26, he predicted that Iranian wells would “explode” in a “very powerful” destructive process that would begin within three days.

Behind this prediction was the belief that the US naval blockade launched on 13 April would prevent Tehran tankers from reaching the Strait of Hormuz and deprive the Iranian regime of at least $175 million (£129 million) per day in oil export revenue. With oil trapped inside the country, Iran’s stores would soon be depleted and it would be forced to shut off the taps. Such a closure would cause irreparable damage to the wells.

“When it blows up, you can never rebuild it the way it was, no matter what,” Trump said in an interview on Fox News, adding that capacity would drop to about 50% of what it is “right now.” U.S. Treasury Secretary Scott Bessent last week compared Iran’s leadership to “rats in a sewer pipe” who have trouble understanding what’s going on. He said Kharg Island, Iran’s main oil export hub, was “soon approaching capacity.” For good measure, Trump has further tightened exports to China by imposing US sanctions on companies linked to Chinese refineries; The move led China’s Ministry of Commerce to issue a countermeasure on Saturday.

While it is true that Iran is currently producing more oil than it can export, it appears that enough tankers have managed to bypass the US naval blockade for now; Remedial steps such as flaring mean that storage space is not exhausted. Independent estimates, including from Columbia University’s Center for Global Energy Policy, suggest Iran has up to three weeks of free available storage capacity.

But something is putting pressure on the Iranian currency again. The value of the toman, the main currency used in trade and daily life in Iran, fell almost 22 percent on the open market on Sunday, falling to $190,000.

While general inflation was estimated at 73.5 percent, food and beverage prices increased by 115 percent. The Iranian government said on Sunday that it was considering doubling the value of the coupons it currently gives to citizens, an inflationary step in itself. The monthly minimum wage in Iran is less than 170 million rials ($92), and this is after the government increased the minimum wage by nearly 60% in March. Imported cars or iPhones are sold only at incredibly high prices.

According to Gholamhossein Mohammadi, Iran’s Deputy Minister of Labor and Social Security, more than 23,000 factories and firms were hit in US-Israeli airstrikes, resulting in the loss of one million jobs. The already high unemployment rate increased by an estimated 1 million people, hitting those most dependent on digital commerce. A digital-based economy cannot be shut down forever, and at some point the needs of the economy may need to be prioritized over security needs.

Iranian communications minister Seyed Sattar Hashemi has repeatedly promised that the country’s digital quarantine is temporary, but there is no way to force the real decision-makers in the intelligence services to lift the restrictions.

Reza Olfatnasab, President of the Virtual Businesses Association, said in his statement, “The biggest decrease in sales occurred in March. Unfortunately, businesses lost their important year-end market and the issue of ‘unprofitability’ became very prominent and concrete during this period.”

According to him, even now some large businesses are experiencing a 40 percent to 50 percent drop in sales. This is happening despite the fact that these companies have 50 to 60 million users and their apps are installed on most people’s phones in Iran.

“It is possible to imagine how catastrophic and profound damage occurs to small and micro businesses when large platforms of these sizes and infrastructure suffer this level of sales decline,” Olfatnasab said.

Reformist journalist and political analyst Ahmad Zeidabadi, who is critical of the government, said: “The Internet and the economic conditions of the people are no joke. The truth is that normal life and social stability are impossible without the Internet.”

“Unless a fundamental solution is found quickly, the very event that opponents of internet connectivity fear will happen,” he added, referring to protests that resumed across the country in January.

The rainy season also did not provide what was needed. A spokesman for the country’s water industry said: “Despite the positive national index, 10 provinces, mostly located in the downstream and upstream regions of the Alborz mountain range, remain below normal rainfall levels. These provinces include Tehran, Qom, Yazd, Isfahan, Qazvin, Alborz, Gilan, Mazandaran and Semnan.”

The spokesman said that Tehran and Alborz regions have entered the sixth consecutive year of drought.

Open debate about the best route for Iran’s negotiating team to take is constrained by the censorship of state newspapers, the effective shutdown of parliament and, of course, the ongoing shutdown of the internet, which allows only certain licensed voices to be heard.

Despite reports of divisions in the Iranian negotiating team, in practice only a small minority of parliamentarians appear to openly oppose talks, and this group has always opposed a deal with the United States. However, this does not mean that Iran is immune to pressure.