Iran’s economy buckles under US oil blockade as war deepens pressure

Iran's economy is coming under its most severe pressure in years as a US campaign to block oil exports and restrict sanctions evasion cuts into Tehran's access to foreign currency and imported goods, three senior Iranian sources said.

Washington has intensified economic pressure in an effort to force concessions in any future negotiations. The latest measures target international financing networks that Iran has used for years to keep its economy functioning. The financial squeeze is also making it harder for Tehran to pay the high premiums needed to evade sanctions through illicit channels.

Iran's rial has fallen to record lows in recent days, while inflation is spiraling. One senior source said the country has only another two months of gasoline supplies. Iran must import gasoline despite producing oil because its refining capacity is limited. The sources said US efforts have completely cut off Tehran's main source of revenue by blocking Iranian oil exports.

The war has returned to open fighting this week. US attacks along Iran's Gulf coast prompted Iranian strikes against Arab states. More energy is reaching international markets through the Strait of Hormuz despite Iranian efforts to disrupt the waterway, but the conflict remains a costly stalemate. Months of bombing have also generated a huge reconstruction bill for damaged industry and infrastructure.

Iranian leaders are aware that an economic collapse could reignite nationwide protests suppressed in January, when thousands of demonstrators were killed, the sources said. “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, a modern history professor at the University of St Andrews. Iran hopes inflation will deter the US administration before November's midterm elections, while Washington seeks to use the pressure to shape the conflict's direction.

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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.