Trump is trying to tighten the screws on an Iran numb to economic pain

A New Economic Squeeze on Tehran: Washington Escalates Pressure as Iran’s War Economy Strains

Earthguardiansonline.com – After six months of sustained military confrontation with the United States and Israel, compounded by years of international financial isolation, Iran now confronts yet another layer of economic coercion. President Donald Trump is preparing a fresh tranche of sanctions measures, set to be unveiled at a Monday news conference, that Treasury Secretary Scott Bessent has characterized as “the toughest sanctions in history.” The announcement comes at a moment of acute deadlock in negotiations aimed at ending the ongoing conflict, while Tehran continues to inflict disruption on global trade by impeding shipping through the Strait of Hormuz — the narrow waterway through which roughly one-fifth of the world’s daily oil consumption flows.

The Human Toll Becomes Visible

Iran’s own leadership has acknowledged the severity of the domestic situation. President Masoud Pezeshkian, speaking through state media channels, conceded that the country is locked in what he described as a full-scale economic, military, and security war.

“We are apologetic that these problems exist, as we find ourselves in a full-scale economic, military, and security war. As the government, we are seeking with all our being to steer inflation, public problems, people’s livelihoods, people’s jobs, people’s future, and people’s lives towards dignity and pride.”

That admission is corroborated by imagery circulating on social media over the past week: footage from Tehran and the neighboring city of Karaj showing produce markets with stalls largely empty, vendors lamenting that fresh vegetables and fruits are going unsold because consumers simply cannot afford them. A 36-year-old Tehran resident identified only as Nima described conditions that have become “untenable,” noting that beyond the universal price surge, certain essential medications have become unavailable altogether. A small-shop owner, who spoke on condition of anonymity to discuss the situation candidly, explained that foreign-branded toiletries — shampoo, conditioner, toothpaste — are disappearing from shelves, and that even domestically manufactured goods have required price increases to cover rising input costs.

Decades of Sanctions Evasion Have Built a Parallel Economy

Yet the question that haunts Washington policymakers is whether any new package can actually break through the elaborate architecture Tehran has spent decades constructing to absorb Western financial pressure. Over successive rounds of sanctions, the Islamic Republic developed a decentralized web of front companies, currency-exchange brokers, intermediary banks, and a shadow tanker fleet that relies on ship-to-ship transfers at sea, manipulated AIS tracking signals, and fabricated documentation to move crude oil to market without triggering dollar-settlement controls.

The scale of this parallel system is substantial. According to the US Financial Crimes Enforcement Network, approximately $9 billion in Iranian shadow-banking activity transited through American correspondent accounts in 2024 alone, based on filings from US financial institutions. Treasury Department assessments indicate that shell entities operating in oil, shipping, and investment channels facilitate billions of dollars in transactions through networks anchored in the United Arab Emirates, Hong Kong, and Singapore. Much of the underlying settlement occurs in Chinese yuan, through barter arrangements, or entirely outside the dollar-based interbank system, according to Umud Shokri, an energy strategist and senior visiting fellow at George Mason University.

Who Actually Bears the Pain?

Bessent framed the incoming measures in uncompromising terms, telling CNBC that they will “squash” the economy of what he called “this murderous regime,” curtail Tehran’s capacity to “project power through their proxies,” and constrain its ability to fund the Iranian military apparatus. The rhetoric is designed to signal resolve to both domestic audiences and regional allies watching from the sidelines.

Shokri, however, cautions that the distributional effects will fall unevenly. Ordinary wage earners, pensioners, small retailers, and lower-income households will absorb the most immediate shock: a further weakening of the rial, accelerated inflation, higher prices on imported consumer goods and industrial inputs, and a contraction in household purchasing power. By contrast, politically connected intermediaries and state-adjacent institutions will remain partially insulated, continuing to profit from smuggling margins, currency manipulation, and control over scarce import allocations.

The Strategic Dilemma: Targeting China’s Role

For the new sanctions to bite where Washington intends — at the revenue core of the Iranian state rather than at the checkout counter of a Tehran grocery — experts argue that the administration must extend its reach toward the major Chinese buyers of Iranian crude, the independent refineries that process it, and the banks that clear the resulting revenue. Doing so, however, carries the risk of provoking retaliation from Beijing, which has steadily deepened its energy dependence on Persian Gulf supplies and views any direct pressure on its refineries as an encroachment on its own strategic interests. Whether Trump will sustain the course of such a confrontational strategy, or recalibrate once Chinese pushback materializes, remains the central open question as the Monday announcement approaches.

For the millions of Iranians already navigating empty shelves, unaffordable medicines, and a currency that has lost most of its purchasing power over the past decade, the distinction between strategic calculus and daily survival is increasingly academic. The screws are tightening again, and the question is whether this time the mechanism will actually turn.