Trump may hope an 'economic onslaught' will pressure Iran - its leaders are betting otherwise

The United States has imposed an "economic onslaught" on Iran, targeting financial connections across the globe, according to Treasury Secretary Scott Bessent. The sanctions encompass digital assets, technology, gold, aviation, and shipping industries, aiming to isolate any nation that partners financially with Iran. However, the announcement may have seemed more dramatic in Washington than in Tehran, which was prepared for such measures and had contingency plans.

Bessent has hinted at further secondary sanctions against countries, banks, and companies that continue engaging with Iran. Yet, this is not a new policy, as Iran has faced US sanctions for years, including penalties against foreign firms trading with the nation. Iran's economy is already facing challenges due to high inflation, a weakening currency, and reduced oil exports.

The US blockade has already curtailed Iran's ability to export oil by sea, making it challenging to import goods and equipment. Iran's seven land borders provide alternative routes, but land routes cannot fully substitute sea trade, particularly for oil exports. If Washington manages to close channels that evaded previous sanctions, particularly those involving China and Iran's neighbors, the pressure could intensify.

China has strongly opposed the sanctions, labeling them illegal. If the sanctions fail, Bessent's announcement could bolster those in Iran who oppose a deal with the US, who might argue that Washington's economic pressure is a fallback due to limited options. The US has also limited diplomatic opportunities, leaving little room for negotiations beyond threats of further strikes.

A declining Iranian currency, the rial, adversely impacts imports, business planning, and personal savings. Many Iranians are already feeling the strain, with reduced income, limited leisure activities, and a freeze on purchasing non-essential items. While some may believe time is working against President Trump, the Iranian economy could become even weaker by the time of the November midterm elections, and Trump's outgoing administration may have more freedom to continue the conflict with Iran.

Ultimately, Iranian leaders face a challenging decision: making concessions now might appear as surrendering and strengthen hardliners, or waiting could strengthen Iran's position if Trump's strategy encounters political or economic setbacks. The outcome depends largely on external factors, such as changes in Chinese banks, regional partners, and companies' response to US sanctions.