Can new US sanctions cripple Iran's shadow economy?

The United States has intensified its economic campaign against Iran, targeting five key economic sectors: digital assets, technology, gold, aviation, and shipping. Treasury Secretary Scott Bessent warned that entities aiding Iran in illicit money transfers will be cut off from the US financial system. The strategy aims to put pressure on international networks used by Iran to circumvent sanctions, but it stops short of targeting China, Iran's largest trading partner.

Iran has long relied on shadow economies such as exchange houses, gold, cryptocurrency, front companies, and obscure shipping routes to move money. The recent sanctions are particularly challenging as oil exports have plummeted due to US efforts to disrupt shipments, food prices have surged by over 128% year-on-year, and the Iranian currency has depreciated significantly.

Many ordinary Iranians are now conducting transactions in US dollars, and some businesses find it more profitable to hold onto goods than sell them. The restrictions have led to layoffs in private companies, with over 70% of a trading company's workforce recently being let go. This has also affected Iranian businessmen abroad, with one stating that holding an Iranian passport has become increasingly difficult in Dubai.

Political economy commentator Alireza Salavati doubts the sanctions will lead to a significant shift in Iran's leadership, warning that the measures may only cause inflationary fears and exacerbate political polarization. The sanctions could make it harder for Iran to finance trade, obtain foreign currency, and sustain its existing economic networks, but the immediate impact is being felt by companies, workers, and households already struggling with wartime disruption and extreme inflation.