Why Iran refuses to collapse on schedule — Abbi Kanthasamy

On September 9, U.S. Treasury Secretary Scott Bessent declared a relentless economic onslaught against Iran, vowing to sever every economic lifeline sustaining the regime. This was not a novel approach, as similar rhetoric and strategies had been employed by previous U.S. administrations. Despite these efforts, Iran has refused to collapse as scheduled.

This does not mean sanctions have been entirely ineffective, as Iran has experienced anaemic growth, skyrocketing inflation, reduced investment, and decaying infrastructure. However, Iran has managed to avoid the total collapse seen in other countries like Syria and Venezuela.

Since the onset of the conflict, Iran has continued selling oil, primarily to China, despite the sanctions. Its non-oil industries have also adapted to the restrictions, such as currency depreciation making imported goods more expensive while making Iranian products cheaper in regional markets. The sanctions have forced Iran to accumulate inventories, improvise supply chains, and operate under challenging conditions.

Tehran has become adept at transferring economic pain downward to the public, ensuring the state remains standing despite the deterioration of the economy.

Iranian leaders have acknowledged the social cost of the strategy, with parliamentary speaker Mohammad Bagher Ghalibaf warning that if the people are hungry and there is no financial circulation or economic growth, the regime will not endure. U.S. Treasury Secretary Bessent believes that American pressure is working, and President Masoud Pezeshkian has expressed frustration with those who insist sanctions have no effect.

Both men genuinely worry that declining living standards will corrode political legitimacy, even in a system not derived primarily from popular consent. However, Washington should be cautious not to interpret every admission of pain as a sign of imminent collapse. The Iranian economy has demonstrated the ability to continue functioning under coercion, with the state preserving itself by sending the invoice to Iranian households.

Policymakers need to delve deeper than macroeconomic indicators to understand whether an economy can withstand economic warfare.