US Targets Iran's Economic Lifelines with New Sanctions

The US Treasury has introduced new sanctions targeting five economic lifelines of Iran, including digital assets, technology, gold, aviation, and shipping. The move aims to disrupt Tehran's ability to illicitly move money around, with Washington warning foreign entities that help the country to be removed from the US dollar-based financial system.

For years, Iran has relied on networks outside the formal banking system to evade sanctions, using exchange houses, gold, cryptocurrency, front companies, and opaque shipping networks. The new strategy seeks to make these methods more difficult by increasing the cost for foreign intermediaries.

The measures come at a vulnerable moment for Iran, with its economy already heavily strained due to oil exports plummeting amid US efforts to disrupt Iranian oil shipments. Shipments to China, Iran's main oil customer, have fallen sharply, while food prices have risen 128% year on year in July. The Iranian currency has lost significant value, and many transactions are now conducted in US dollars.

Businesses in Iran are feeling the pressure, with one building materials seller reporting that inflation has become so severe that holding goods can be more profitable than selling them. Another employee at a trading company said more than 70% of its employees had been laid off due to difficulties in obtaining raw materials and transferring payments through exchange houses.

Some experts are skeptical about the effectiveness of the new sanctions, with London-based political economy commentator Alireza Salavati warning that further restrictions may only intensify inflationary expectations and deepen polarization. He also cautioned that economic pressure could weaken the middle-income and professional groups that traditionally provide space for more moderate politics.

Another paradox is that the more Washington restricts formal financial channels, the stronger the incentive becomes to develop informal ones. Iran's sanctions economy has already created complex networks of intermediaries, cryptocurrency transfers, front companies, cash transactions, and unofficial currency markets.