Will tougher US sanctions disrupt Iran's shadow economy?

The United States has escalated its economic sanctions against Iran, targeting not only sanctioned institutions but also the international networks Tehran has used to move money and goods. US Treasury Secretary Scott Bessent announced a focus on digital assets, technology, gold, aviation, and shipping as "economic lifelines" to be targeted.

Any entity facilitating money laundering for Iran will be removed from the US dollar-based financial system. The strategy represents an effort to tighten secondary sanctions, pressuring companies, financial intermediaries, and trading partners outside Iran.

Iran has long relied on informal networks, including exchange houses, gold, cryptocurrency, front companies, and shipping, to circumvent sanctions. The new US measures aim to make these methods more difficult and costly for foreign intermediaries. Oil exports to Iran have dropped significantly due to US efforts to disrupt shipments, with China, Iran's main oil customer, importing about 534,000 barrels per day in August, down from 823,000 in July.

Food prices in Iran have surged by around 128% year-on-year in July, and the Iranian currency has lost so much value that many transactions are conducted in US dollars.

The pressure is evident in ordinary businesses, with a building materials seller in Tehran stating that inflation has become so severe that holding goods can sometimes be more profitable than selling them. The restrictions are also disrupting payment methods for private companies, leading to layoffs and difficulties importing raw materials.

Iranian businesspeople outside the country are facing increasing uncertainty, with some relocating due to the restrictive environment. While the US measures may intensify inflationary expectations, experts are skeptical about a fundamental strategic shift in Iran, warning that the pressure could deepen polarization and weaken the middle-income and professional groups that might otherwise provide space for more moderate politics.