Iran has endured sustained international sanctions for three decades, making economic pressure a permanent feature of its geopolitical landscape. What began as episodic punitive measures gradually evolved into a systematic strategy of threats, financial restrictions, and diplomatic isolation aimed at constraining Tehran’s political and strategic choices.
Despite repeated escalations, including broader efforts to choke its oil exports, banking system, and trade networks, Iran’s economy has adapted rather than collapsed, reshaping domestic governance and regional behaviour while hardening its resistance to external coercion.
In the current regional scenario following Hamas’ attack on Israel, Israeli Prime Minister Benjamin Netanyahu has launched attacks against what Israel considers its adversaries, including Hezbollah in Lebanon and the Houthis in Yemen.
Developments in Syria, including the removal of Bashar al-Assad and the installation of Ahmed al-Sharaa, who was previously wanted for alleged affiliation with al-Qaeda, have marked a major recalibration of US relations with Syria.
Iran began restricting its defence and foreign policy architecture and has shown flexibility as Iran’s atomic energy chief, Mohammad Eslami, has reportedly offered to dilute its highly enriched uranium if the United States ends sanctions, signaling flexibility on a key US demand. He said the prospects of Iran diluting its 60 per cent enriched uranium , a threshold close to weapons-grade, would depend on “whether all sanctions would be lifted in return.”
But the US has so far remained unimpressed. This was evident when Treasury Secretary Scott Bessent admitted during a recent Congressional hearing that Washington deliberately engineered a “dollar shortage” in Iran to push the Iranian rial into free fall and intensify domestic unrest.
Bessent explained that the strategy reached its “grand culmination” in December 2025, when one of Iran’s largest banks collapsed and the currency sharply depreciated.
“What we have done at Treasury is create a dollar shortage in the country,” Bessent said, adding that the Iranian currency “went into free fall, inflation exploded, and hence, we have seen the Iranian people out on the streets.” He further claimed that members of Iran’s leadership were moving money out of the country, remarking, “so the rats are leaving the ship, and that is a good sign that they know the end may be near.”
When exports decline and sanctions restrict access to the US financial system, dollar supplies tighten. As a result, the local currency weakens, the cost of imported goods rises, and inflation worsens.
Speaking earlier at the Economic Club of New York, Bessent outlined how the administration of President Donald Trump would leverage a “maximum pressure” campaign to weaken Iran’s economy by targeting its oil supply chain and restricting access to the international financial system.
In an interview at the World Economic Forum in Davos, he said the strategy had worked because Iran’s economy collapsed in December, limiting imports and contributing to nationwide protests.
Protests that began on December 28, 2025, against the US dollar in late December, swiftly turned into a nationwide demonstrations in which nearly 4,000 people were killed.
The sanctions are not new: they were first imposed in the immediate aftermath of the 1979 Islamic Revolution, but over time they evolved and intensified, particularly in response to Tehran’s nuclear programme.
The first US sanctions came in November 1979, when the United States froze Iranian assets after the seizure of American diplomats at the US Embassy in Tehran during the hostage crisis. The sanctions were directly against government’s actions following the overthrow of Shah Mohammad Reza Pahlavi and the establishment of the Islamic Republic under Ayatollah Ruhollah Khomeini.
Throughout the 1980s and 1990s, sanctions expanded. In 1995, Washington imposed oil and trade sanctions, accusing Tehran of sponsoring “terrorism” and seeking nuclear arms. However, the sanctions regime intensified significantly in the 2000s as concerns mounted over Iran’s nuclear ambitions.
Sanctions had severe economic consequences. By 2012, Iran’s currency lost roughly 80 per cent of its value against the U.S. dollar, largely due to international sanctions tied to its nuclear activities.
A major shift occurred in 2015 when Iran reached the Joint Comprehensive Plan of Action (JCPOA) with the United States, the UK, France, Russia, China, Germany, and the EU under President Barack Obama. The agreement limited Iran’s nuclear programme in exchange for sanctions relief.
However, in 2018, President Donald Trump withdrew the United States from the deal, arguing it was too lenient, and reimposed sweeping sanctions.
Diluting uranium means mixing it with other material to reduce its enrichment level. According to the United Nations nuclear watchdog, Iran is the only state without nuclear weapons enriching uranium to 60 percent.
President Donald Trump has repeatedly called for Iran to be subject to a total ban on enrichment — a condition unacceptable to Tehran and far less favourable than the now-defunct 2015 nuclear agreement.
Iran maintains that it has the right to a civilian nuclear programme under the provisions of the Nuclear Non-Proliferation Treaty, to which it and 190 other countries are signatories.
When asked why Iran has offered nuclear dilution, political economist Zakir Hussain, who specializes in the Middle East, described the move as a “trade-off to end sanctions. According to Hussain, such a proposal would allow Iran to retain its enrichment rights for civilian purposes, including electricity generation and cancer treatment.
Maintaining enrichment capabilities, he explained, would enable Tehran to produce fuel for its civilian nuclear reactors domestically rather than relying on foreign suppliers and international markets.
He further argued that the proposal sends a strong message to the United States, Israel, and regional Arab countries that issues considered vital to Iran’s national interests are not open to negotiation.
“With this proposal, Iran draws its red line, abandoning enrichment is not an option,” Hussain said. He added that the move also rules out surrendering enriched fuel to any third country and reinforces Tehran’s position that other matters, such as its missile programme and support for regional proxies, remain non-negotiable.
If Washington were to accept such an arrangement, Hussain suggested, it could reinforce Iran’s status as a regional power and shift the strategic balance with Israel. At the same time, the proposal may serve as a tactical maneuver, potentially delaying or deterring a US-Israel military strike while giving Iran additional time to strengthen its defense capabilities and manage internal economic and political pressures.(Arti Bali)
