Last week, US President Donald Trump said his administration will launch against Iran “the most crushing economic operation ever taken against any country”. The details of this “operation” are yet to be fully revealed, but it is designed to make the economic cost of confrontation impossible for Tehran to ignore as the war nears its six-month mark.
Measures are likely to include punishing countries that trade with Iran; targeting countries and entities that help it circumvent sanctions; going after banks and financial infrastructure supporting its trade; and targeting its oil exports.
In response to the threat, Iranian Foreign Minister Abbas Araghchi posted on X the history of US sanctions against Iran, saying: “We have seen this movie before.” Esmail Baghaei, a spokesman for Iran’s Foreign Ministry, said on X: “Iran has demonstrated over decades that it will not be strangled by these exhausted refrains.”
Despite the performative defiance in these remarks, Mr Trump’s “economic D-Day” declaration appears to have generated disquiet within the regime. Iran’s economy has already suffered severe damage due to the war and the US-imposed naval blockade, with Tehran estimating about $270 billion in infrastructure and industrial losses.
President Masoud Pezeshkian called for an end to the conflict while Iran still has leverage. Speaker of Parliament Mohammad Bagher Ghalibaf was even more explicit, warning military strength alone cannot sustain a country “if people are hungry” and there is no economic growth.
These remarks matter, for they suggest some senior figures in Tehran recognise that the war is becoming economically unsustainable. The US should take advantage of that concern rather than simply seeking to deepen it.
It’s important to point out that Iran’s economy was in dire straits even before the war and the latest American sanctions. For years, corruption, mismanagement and Tehran’s use of its funds to fuel proxy wars elsewhere in the region – instead of providing for its own people – have taken a toll on the economy as well as the standard of living.
But the regime is now making matters much worse with its coercive behaviour in the Strait of Hormuz, laying sea mines and terrorising passing ships, thereby forcing various countries to use and build alternative routes and pipelines to continue trading with the rest of the world. The UAE announced an immediate suspension of trade with Iran after detecting two ballistic missiles towards maritime navigation in the area.
The US should avoid making economic warfare an end in itself. While using the stick, it can also offer a carrot. It has previously made clear what Tehran could gain from returning to serious negotiations: phased sanctions relief, renewed access to trade and finance, and a pathway towards return to economic normalisation in exchange for security commitments.
There is currently a narrow window for such a diplomatic outcome, but there’s no time to waste.
