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Geopolitics

Iran moves to ease cost-of-living crisis as US economic pressure mounts

Pezeshkian meets cabinet on sanctions fallout as rial hits record lows and GDP contracts by 10 percent

By LineZotpaper
Published
Read Time2 min
The Iranian government is preparing measures to ease the severe financial strain on its population caused by tightened US sanctions and a naval blockade, President Masoud Pezeshkian has signalled, as the year-long war with the US and Israel takes an escalating economic toll.

President Masoud Pezeshkian recently discussed new economic measures with several cabinet members aimed at softening the effects of what Al Jazeera describes as the US-Israeli war on Iran, including the depreciation of the Iranian lira and a deepening cost-of-living crisis. Full details of the government's response have not been disclosed.

"The enemy's plan in recent months has been to cut off the country's vital arteries with the aim of pressuring the noble people of Iran," Pezeshkian said on social media.

Iran's economy has deteriorated sharply since the war began on February 28, with US and Israeli strikes having killed top Iranian political and military figures. US-Israeli bombing has inflicted an estimated $270bn in damages on the country, according to Iranian figures cited by Al Jazeera.

Conditions worsened after Washington launched "Operation Economic Outcast" in late August, seeking to isolate Iran from international trade. Iran's gross domestic product has contracted by 10 percent following the collapse of energy exports under a US naval blockade, while the rial has sunk to record lows.

Maryam Ashrafi of the Bourse and Bazaar Foundation, a London-based think tank, told Al Jazeera that the situation has deteriorated for Iranian consumers, particularly through higher food prices. Iranians are increasingly turning to cheaper, inferior goods, she said, and shortages of raw materials used in staples such as margarine have affected prices.

Imports of wheat and grains have also declined because of the naval blockade on Iran's southern ports. "Large bulk carriers serving these can carry upwards of 80,000 tonnes of agricultural commodities," Ashrafi noted, with some shipments now relying on the alternative route of the Caspian Sea.

Iran has made the lifting of the blockade a key demand in negotiations with the US over reopening the Strait of Hormuz.

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Analysis

Why This Matters

  • Iran's GDP has contracted by 10 percent and the rial has sunk to record lows, putting acute pressure on ordinary consumers through rising food prices and shortages.
  • The deepening economic crisis is now central to Iran's diplomatic position, with the lifting of the US naval blockade made a key condition in negotiations over reopening the Strait of Hormuz, a vital global oil route.
  • Damages from the war are estimated at $270bn, a burden that will shape Iran's reconstruction and economic policy for years.

Background

Iran has been under escalating US economic pressure since the war with the US and Israel began on February 28, with strikes killing senior Iranian political and military figures. Washington launched Operation Economic Outcast in late August, seeking to isolate the country from international trade entirely. The naval blockade has cut energy exports and the imports of bulk agricultural commodities, compounding a currency collapse and cost-of-living crisis.

Key Perspectives

Iranian government: Frames the pressure campaign as an enemy effort to sever the country's vital arteries, and is moving to cushion the impact on households through new, as yet unspecified, economic measures.

Analysts: Maryam Ashrafi of the Bourse and Bazaar Foundation describes deteriorating conditions for consumers, with higher food prices, a shift to cheaper and inferior goods, and shortages of raw materials for staples like margarine.

US and its partners: Washington has framed the blockade and sanctions as a bid to totally isolate Iran from international trade, with the toll on civilians largely a secondary concern in its stated goal of pressuring the government.

What to Watch

  • Whether the new cabinet measures succeed in arresting the rial's slide and easing cost-of-living pressures for Iranian households.
  • Progress in negotiations over reopening the Strait of Hormuz and whether the US makes concessions on the blockade.
  • The trajectory of food and medicine shortages, and whether the Caspian Sea route can partly offset the loss of bulk commodity imports.

Sources

Zotpaper

Written by software from the reporting listed above, scored by an automated standards desk, and published without a person reading it first. If something here is wrong, tell the editor and it will be put right.

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