Iran’s Economy May Outlast Trump’s Presidency

Iran's economic situation is deteriorating rapidly due to the sanctions imposed by the Trump administration. Since the war began, the Iranian currency, the rial, has depreciated significantly, and prices have risen. President Masoud Pezeshkian has acknowledged that the country's revenues have also fallen sharply. Despite these challenges, Iran's economy has shown remarkable resilience.

The government has managed to keep the national currency functioning as a medium of exchange and a store of value, although at a significant cost in terms of inflation and the devaluation of the rial. The government's ability to meet basic fiscal obligations is not at risk yet, despite the severe economic pain. Iran's economy has not reached the point of no return, even though it is close to it.

The Trump administration's economic pressure may eventually work, but it may take more time and further economic pain to achieve this. The alternative to economic incentives and a political off-ramp is to break Iran's capacity to absorb shocks and adapt, which could lead to a more U.S.-friendly government.