Inflation has soared, oil exports have dropped and the government is facing revenue shortfalls.
But instead of bringing about a change in the government’s behavior, the pressure campaign has led to Tehran doubling down on its opposition to talks with the Trump administration, and some U.S. officials say they see an increased threat from Iran and its proxies in the region — something Iran denies.
Last May, Trump pulled out of the nuclear accord, formally known as the Joint Comprehensive Plan of Action, or JCPOA, which saw the U.S. and other powers — France, Germany, the United Kingdom, China and Russia — lift certain economic sanctions in exchange for Iran accepting limits on and inspections of its nuclear program.
The accord was a signature foreign policy achievement of Trump’s predecessor former President Barack Obama, and, since the 2016 campaign, Trump has routinely ridiculed it as weak and said it wouldn’t stop Iran from obtaining nuclear weapons.
While the deal barred Iran from developing nuclear weapons, it will eventually decrease the so-called break-out time that it would take if Iran were to develop a bomb — something it says it will never do.
Trump’s top advisers, like National Security Adviser John Bolton and Secretary of State Mike Pompeo, long-time critics of the deal, have also said the accord limited the United States’ ability to counter “malign” Iranian activity in the Middle East.
Three months after withdrawal, the U.S. reimposed the first round of sanctions, targeting Iran’s gold and precious metals, other metals like aluminum and steel, the automotive sector, sovereign debt and national currency, the rial. Three months later, an even tougher wave of sanctions was reimposed, hitting Iran’s banking and shipping industries and, most importantly, oil exports.
In April, Pompeo also announced that the administration was designating Iran’s Islamic Revolutionary Guard Corps, an elite branch of its military, as a foreign terrorist organization — the first time that legal label had been used on another government.
The economic pressure has forced Iran’s already mismanaged economy to buckle. Despite double-digit growth after the nuclear deal lifted sanctions, Iran’s economy shrank by 3.9% in 2018, according to the International Monetary Fund. Inflation has also jumped to 31% in 2018, the IMF reported, with predictions it could hit 37% or more this year.
As the value of the Iranian rial drops, the price of goods has skyrocketed, with red meat and poultry climbing by 57%, vegetables by 47% and milk, cheese and eggs by 37%, according to the Statistical Center of Iran.
The IMF projected in April that 2019 would be even worse, saying it expected a 6% contraction of Iran’s economy.
That forecast came before the U.S. announced it was tightening the belt even more. To mark the one-year anniversary of withdrawal, the White House announced on May 8 that Trump had authorized sanctions on iron, steel, aluminum and copper sectors, which it said comprise 10% of Iran’s export economy. The sanctions could also target financial institutions or foreign countries that facilitate Iran’s export of those goods.
More importantly, the administration announced days prior that it would no longer provide any waivers to countries to allow them to import Iranian oil, after granting eight nations exemptions in November. That means that any country still importing Iranian oil could face U.S. sanctions, although so far there have been no penalties. The goal is to drive Iranian oil exports all the way down to zero because oil revenue accounts for 40% of Iran’s annual budget, according to special envoy for Iran Brian Hook.
The administration has gotten close. Last month, Iranian crude exports dropped to just 400,000 barrels per day, according to Reuters news agency, compared to 2.5 million barrels per day in April 2018. In April, the State Department estimated that sanctions had cost Iran $10 billion in oil revenue.
In the face of all of that, however, Iran publicly has stood firm. Supreme Leader Ayatollah Khamenei said Wednesday that his country “won’t negotiate with Americans. Because there’s no use negotiating and it’s even harmful… Our only option is to use [our] means of pressure in the face of U.S. pressures.”
Hours earlier, President Hassan Rouhani was more open, saying that the “road” to talks “is not closed,” but that the U.S. would have to first return to the nuclear deal — a nonstarter for Trump.
In the meantime, Iran is warning it will restart parts of its nuclear program that are blocked under the JCPOA if it doesn’t get economic relief. In a televised address on May 8, Rouhani said that China, Russia and the European powers have 60 days to improve economic ties with Iran or it will keep its excess enriched uranium and heavy water instead of shipping them overseas — two requirements of the deal.
While U.S. officials dismissed that as a threat, the U.N.’s nuclear watchdog raised questions about Iran’s nuclear program on Friday. The International Atomic Energy Agency reported that Iran continues to comply with the deal, but that its stockpiles of low-enriched uranium and heavy water had grown, as Iran promised. The IAEA also reported that Iran appears to have installed 33 new centrifuges that can enrich uranium more quickly, which could violate the deal.
“Technical discussions in relation to the IR-6 centrifuges are ongoing,” the agency said in an assessment, according to The Associated Press.
Still, with tension increasing and both sides doubling down, some experts think the pressure is getting to the regime and they may be willing to talk.
“Outside Iran, most analysts believe Tehran won’t bow to Trump’s pressure and the risk of war is high. Inside Iran, many fear the country’s economy isn’t sustainable and a deal is likelier than war,” tweeted Karim Sadjadpour, a senior fellow at the Carnegie Endowment for International Peace.
Others, however, think that Iran may try to wait Trump out. With less than two years left in his term, perhaps the country can withstand pressure — provided that he doesn’t win reelection.