Will tougher US sanctions disrupt Iran's shadow economy?

US Treasury Secretary Scott Bessent announced a new phase of economic sanctions against Iran, targeting its international networks for moving money and goods. These sanctions aim to disrupt five economic lifelines: digital assets, technology, gold, aviation, and shipping. Bessent also warned that entities facilitating money laundering for Iran will be removed from the US dollar-based financial system.

The sanctions impact foreign companies, financial intermediaries, and trading partners outside Iran. Iran has traditionally relied on networks outside the formal banking system, including exchange houses, gold, cryptocurrency, front companies, and shipping networks, to bypass sanctions. The recent US strategy aims to make these methods more difficult by increasing the cost for foreign intermediaries.

This comes at a challenging time for Iran, with oil exports falling sharply due to US efforts and food prices rising over 100% year-on-year. The pressure on ordinary businesses is evident, with building materials sellers and stone-cutting businesses facing severe inflation and rising costs for replacement materials. The sanctions also affect private companies' ability to pay suppliers, import raw materials, and maintain employment.

An Iranian businessman in Dubai, who previously owned cosmetics brands in Iran, now finds it difficult to conduct transactions due to restrictions on imports and difficulties obtaining raw materials. Political economy commentator Alireza Salavati doubts that the new US measures will result in a fundamental strategic shift for Iran, as the country is already heavily sanctioned across most major sectors.

He believes the immediate burden is on companies, workers, and households already dealing with wartime disruption and extreme inflation.