Can Iran’s resistance economy withstand both the tightest U.S. sanctions in years and the emerging promise of Oman-brokered discussions? After three rounds of indirect exploratory and “technical talks” with Washington — each signaling that more may follow — Iran’s economy is buckling under soaring prices, a collapsing currency, and factory shutdowns. Caught between crippling sanctions and the lure of negotiations, Iran’s vaunted “resistance economy” now faces its sternest test. This analysis explores the collision between external pressure and internal resilience and the deep cracks forming in Iran’s resistance economy.
The Maximum Pressure Policy Reinstated
On February 4, U.S. President Donald Trump signed a National Security Presidential Memorandum that reinstated the “maximum pressure” policy of his previous term on Iran. The renewed campaign revives comprehensive sanctions first imposed after Trump’s 2018 unilateral withdrawal from the Joint Comprehensive Plan of Action (JCPOA) — also known as the Iran nuclear deal — and tasks multiple US agencies with enforcing the policy.
A key aim is to drive Iran’s oil exports to zero — particularly exports destined for China — and to end certain longstanding exemptions, such as those for the Chabahar Port, which links Iran to the Gulf of Oman. By targeting Iran’s energy sector and revoking these exemptions, the U.S. intends to intensify economic isolation, thereby forcing Tehran to adjust its nuclear policies and regional behavior.
Economic Struggles and the Limits of Iran’s Resistance Economy
The reimposition of these sanctions comes at a time when Iran’s economy is already reeling from chronic internal issues. Iran is grappling with a severe downturn, exacerbated by sanctions, structural weaknesses, and a collapsing currency. With the rial trading above one million to the dollar, Iran’s real minimum wage has plunged to barely $120. Inflation, particularly in essential sectors like housing, food, and medicine, has drastically eroded purchasing power, with 27% of Iranians now living on less than $2 a day.
Energy sector challenges compound these pressures. Sanctions — and even sabotage of pipelines — have forced Iran into costly gas imports and emergency reserves, underscoring its energy fragility. These imports highlight Iran’s vulnerability to disruptions in its energy supply chain, with significant ramifications for both industry and daily life.
Meanwhile, other oil-rich nations like Russia have leveraged vast energy exports to negotiate alternative payment systems with China and India, but Iran has struggled to ensure the reliable repatriation of its export revenues.
Industrial stagnation has deepened: 50% of production capacity in some industrial parks has halted due to power shortages. Tehran has responded by promoting its “resistance economy,” emphasizing domestic production, services, and technology. While the service sector has emerged as a key contributor to GDP, structural challenges persist. Youth unemployment remains above 20%, and chronic inflation — recorded at 32% in January 2025 — continues to strain household finances.
Skyrocketing rents and real estate prices have further eroded living standards, casting doubt on the long-term viability of Iran’s economic resilience efforts. With rents and property prices vastly outpacing wage growth, many Iranians can no longer afford basic housing.
Economic turmoil has sparked demonstrations — including rare mobilizations by Tehran’s historic bazaar merchants and weekly protests by retirees across at least five provinces — reflecting widespread discontent.
Cryptocurrency outflows surged 70% in 2024 as Iranians sought to hedge sanctions—prompting regulators to tighten oversight. Meanwhile, concerns about large-scale unauthorized Bitcoin mining have prompted the Central Bank of Iran to impose strict oversight measures, ensuring that all cryptocurrency activities obtain the necessary licenses and that the bank maintains direct access to related data.
Despite its push for economic self-reliance, Iran faces mounting challenges that call into question the effectiveness of its resistance economy strategy in countering both external pressure and deep-rooted internal inefficiencies. In short, while Iran’s resistance economy has provided some resilience by diversifying income sources away from oil, deep-seated economic inefficiencies and continued external pressures raise serious doubts about its long-term sustainability.
The Clash: Resistance Economy vs. Maximum Pressure
At the heart of Iran’s current crisis is a stark confrontation between two forces: the externally imposed maximum pressure campaign led by the United States and the internally driven resistance economy. On one side, the renewed sanctions are designed to cripple Iran by targeting its most critical revenue stream — oil exports — and by revoking long-standing exemptions, such as those for the Chabahar Port and Iran’s energy exports to Iraq. These measures are intended to force Tehran into political concessions on its nuclear ambitions and regional conduct.
On the other side, Iran’s resistance economy represents an ambitious attempt to reorient the nation toward self-sufficiency. By investing in non-oil sectors — particularly the expanding service industry and emerging digital innovations — Tehran seeks to cushion the impact of sanctions and reduce its economic vulnerability. However, this strategy is hampered by persistent challenges: rapid currency devaluation, soaring inflation, recurring budget deficits, and an energy sector that continues to struggle under chronic imbalances.
Iran has responded by actively working to counter the effects of sanctions through diversified export markets and alternative financial channels. Iranian oil exports to China reportedly rebounded in February to an estimated 1.74 million barrels per day — an 86% increase from the previous month. Increased ship-to-ship transfers, alternative receiving terminals, and the sale of oil from floating storage have propelled this surge, highlighting Tehran’s adept circumvention of U.S.-led sanctions.
Enforcement measures can be expected to intensify, with the Trump administration likely homing in on trading companies that manage Iranian crude oil and tanker operators responsible for its transport. Authorities may also tighten secondary sanctions on financial institutions involved in transactions with Iranian entities, while seeking to coordinate efforts with allied nations to track and intercept illicit oil shipments. However, it remains to be seen whether these enhanced measures will finally break Tehran’s evasion tactics or if Iran’s resilience — and that of its key buyers, including China and India — will allow them to withstand the mounting pressure, or if the U.S. crackdown will ultimately fall short.
Diplomatically, Iran’s messaging has been mixed. On January 28, Supreme Leader Ali Khamenei appeared open to negotiations, stating that it was “possible to make a deal” with a familiar partner. However, by February 7 he had reversed his stance, declaring that negotiating with Washington would “not be intelligent, wise, or honorable” because the U.S. could not be trusted. Then, on February 9, Iranian Foreign Minister Abbas Araghchi explained that while Iran remains open to talks with the U.S., it rejects Trump’s current policy because it does “not want to negotiate with a country that is simultaneously imposing new sanctions.” Despite the tensions, Tehran continues to collaborate with European nations on various matters, as noted by Iran’s Deputy Foreign Minister Majid Takht-e-Ravanchi.
Beyond these immediate relief measures, Tehran is actively pursuing structural reforms to mitigate the long-term impact of sanctions. Recognizing that overdependence on oil exports is a key vulnerability, Iran is accelerating efforts to diversify its economy and economic partnerships. At the 3rd Caspian Economic Forum, President Masoud Pezeshkian met with officials from Azerbaijan, Tajikistan, and Turkmenistan to discuss the development of a north–south economic corridor linking the Caspian Sea with the Persian Gulf. Such infrastructure initiatives, along with plans to expand its Special Economic Zones (SEZs) and to leverage international transport corridors like the International North South Transport Corridor (INSTC), are part of a broader strategy to bolster economic resilience and reduce reliance on volatile oil markets.
Iran is also seeking to strengthen its ties with regional and global partners. Engaging with organizations such as the Eurasian Economic Union (EAEU), BRICS, and the Shanghai Cooperation Organization (SCO) is seen as a means of securing much-needed economic relief. These alliances could provide alternative trading channels and help Tehran circumvent the debilitating effects of US-led sanctions. At the same time, Iran is exploring ways to reposition its ports as vital regional hubs, especially for landlocked areas in Central Asia. At a February conference hosted by Saudi Arabia’s Ministry of Finance and the IMF on economic resilience, then-Economy Minister Abdolnaser Hemmati emphasized the country’s commitment to regional cooperation and its role as a bridge between the Persian Gulf and Central Asia.
On the domestic front, facing a confluence of external sanctions and internal economic instability, Iran’s leadership has been forced to consider a range of policy options. One significant domestic initiative has been the establishment of the National Credit Network in June 2023. This program, designed as a food rationing and electric coupon system, distributed electronic vouchers (Electronic Kala Barg) to 30 million people during critical periods such as Ramadan and Nowruz. In support of this initiative, the government — under the guidance of President Pezeshkian — decided to implement these vouchers in two stages, and Supreme Leader Ali Khamenei also agreed to withdraw $1 billion from the National Development Fund (NDF) to finance this effort.
Nevertheless, politically, the mounting economic pressures have taken a toll on Iran’s leadership. The intensity of the crisis is underscored by recent moves in the parliament — 91 lawmakers submitted a motion seeking to dismiss Economy Minister Hemmati amid a sharp decline in the national currency, the rial. On March 2, just eight months after President Pezeshkian appointed his Cabinet, Hemmati was ousted in a no-confidence vote. The next day, Mohammad Javad Zarif, the former Iranian foreign minister who brokered the 2015 nuclear deal, has resigned under pressure from hardliners. These developments signal that, domestically, the government is under immense pressure to deliver economic relief and restore public confidence.
Conclusion
Facing the stark choice between negotiating with a wary Washington or imposing draconian subsidy cuts at home, Iran has opted for talks — albeit with no guarantee of relief. Writing in the Washington Post, Foreign Minister Araghchi expressed Iran’s willingness to reach a peaceful agreement with the United States through diplomacy — one he said could yield a “trillion-dollar” economic windfall and spare the region further U.S. military intervention.
Far-reaching goals like fully dismantling its nuclear infrastructure or halting enrichment entirely, championed by top U.S. and Israeli officials, appear fanciful. What remains unclear is how much leeway Ayatollah Khamenei will give his negotiators — and how much short of a total rollback Trump, the mercurial dealmaker, will settle for.
As sanctions intensify and talks proceed, the real test will be whether crippling sanctions finally fracture Iran’s resistance economy, if its resourcefulness holds firm, or if a breakthrough accord buys Tehran critical fiscal breathing room. That outcome will reverberate far beyond Iran’s borders, reshaping regional security dynamics and the global energy market.
