Iran has stood up to two of the world’s most powerful militaries, maintained its position on the nuclear issue, and continued to support its Lebanese proxy. But if that represents a victory, it is Pyrrhic when viewed from an economic perspective.
Iran is facing huge losses to its military infrastructure and economy. Inflation has soared, the Iranian rial has depreciated, unemployment is high, and US sanctions threaten business at home and abroad.
Iran has stood up to two of the world’s most powerful militaries, maintained its position on the nuclear issue, and continued to support its Lebanese proxy. But if that represents a victory, it is Pyrrhic when viewed from an economic perspective.
Iran is facing huge losses to its military infrastructure and economy. Inflation has soared, the Iranian rial has depreciated, unemployment is high, and US sanctions threaten business at home and abroad.
“The enemy has realized that they cannot force the Iranian nation to surrender through military attacks,” Iranian President Masoud Pezeshkian said. he said soon. “The economy and people’s livelihoods are the most important part of dealing with the enemy.” What sounds like arrogance can be taken as a warning. The United States and Israel have failed to force Iran to surrender militarily. But it remains an open question how Iran will manage its debilitating economic losses.
His opponents clearly hope that economic pressure will still force the Iranian government to make major concessions in the talks—or even lead to an uprising that will topple the government. It is possible, however, that the continuation of the war will instead push back the Iranians’ economic problems, strengthening the extremists amid a weak economy.
Iran has suffered hundreds of billions of dollars in losses since the start of the war, although the extent of the damage is disputed. In April, the Iranian government put the loss at $270 billion, while the Washington-based Foundation for Defense of Democracies. estimated $144 billion—with a range from $50 billion to $300 billion. Iran’s Deputy Labor Minister Gholamhossein Mohammadi said in April that more than one million jobs were lost lost as a result of the war, while an Iranian economist increased the number to 10 million to 12 million jobs at risk, or thereabouts. half of Iran’s workers. Regardless of the actual losses, the numbers are bad.
US President Donald Trump speaks more fully, claiming that Iran’s navy and air force were completely destroyed. “Their navy is completely gone—100 percent,” Trump he told it Fox News at the end of May. “Their air force is completely gone—100 percent.” A BBC investigation confirmed in June that more than 50 military sites were destroyed across Iran, including air bases, naval assets, and compounds of the Islamic Revolutionary Guard Corps (IRGC) and the Basij military force, which is responsible for suppressing the opposition.
Almost a five of Iran’s industrial complex was destroyed, and rebuilding the petrochemical facilities in Mahshahr and Assaluyeh could take more than a decade. Iran’s rial had been weakened by years of sanctions and in April fell to a record low of 1.9 million to every US dollar. By June, consumer prices they increased by more than 88 percent, according to data provided by Iran’s Fars news agency.
The economic shock is great, but Iran is not entirely new to such chaos. The then president of Iran Hassan Rouhani he said in 2020 the sanctions cost Iran 150 billion dollars.
The fallout from Trump’s 2018 withdrawal from the Iran nuclear deal and the reimposition of sanctions, along with years of mismanagement, culminated in mass protests in December, as Iranians demanded better living standards. Thousands were killed in the ensuing government crackdown.
The US-Israeli war followed the violence. Statements from Trump and Israeli Prime Minister Benjamin Netanyahu suggest that both saw military intervention as a way to encourage Iranians to return to the streets and, with US and Israeli air support, potentially overthrow the government. That didn’t happen. Even those who opposed the government still did not support the bombing of their universities or appreciate Trump’s threat to remove them as civilization and control their country’s oil resources. The bombing of a girls’ school early in the war, which preliminary investigations conclude Washington was responsible for, has eliminated any possibility of the Iranians standing in any way that might appear to support the United States.
As the economic crisis worsens, the United States and Israel are once again questioning whether they can corrupt the government, with different end goals in mind.
Israeli Finance Minister Bezalel Smotrich recently calculated the cost of war against Iran and he said the current situation was the best situation for Israel: “(We) must remember that the main goal of Israel, and not necessarily the United States, is to weaken and weaken the Iranian regime – until it falls.” Smotrich’s comments indicate that he believes the collapse of the economy could ultimately contribute to the collapse of the Iranian government, which remains Israel’s main target.
Trump, however, revised his goals later in the war: denying Iran a nuclear weapon and freeing the Strait of Hormuz, not regime change.
A memorandum of understanding between the United States and Iran called to the lifting of sanctions, the resumption of Iran’s oil exports, reduced access to more than $100 billion in frozen assets, and the creation of a $300 billion reconstruction fund to help ease Iran’s economic suffering. Although it was halted when hostilities resumed, it showed that Trump is not opposed to Iran’s economic recovery—if he gets his way.
But he does not shy away from causing economic pain and sees it as a way to achieve his goals. Trump has suggested that Iran will not be able to withstand economic losses and sooner or later accept US terms. In April, he he told Axios that the US sanctions against Hormuz, which are aimed at suppressing Iran’s ability to export, were “better than bombings.”
However, many experts believe that Iran will not relax its nuclear program or give up control of Hormuz and that increasing economic pain in the middle of the war will not bring about sustainable political change or weaken Iran’s hardline position. There are several reasons.
First, Washington’s determination to keep up the pressure may not match the ability of Iran’s hardliners to keep fighting. It would also be foolish to expect the IRGC to sit on its hands while bombings increase and Iran’s economy collapses. Iran could attack more cargo ships, killing sailors and causing panic in the shipping industry and a negative impact on the world economy. It could lay more mines under the sea, repeatedly hit US bases, and kill more US troops, testing Trump’s resolve to continue.
Iran has already empowered its allies in Yemen, the Houthis, who are poised to control the Bab el-Mandeb, another major maritime choke point. Last week, Iran flexed its muscles and got a taste of how the war could escalate when the Houthis fired missiles and drones at Saudi oil facilities in the Red Sea.
Moreover, Iran has been facing Western sanctions for years and has found ways to work around them. It uses hundreds of ships that are part of the shadow fleet and are difficult to track when they turn off their transponders. Iran also circumvents sanctions by moving oil across the ocean—from ship to ship.
Some accounts show that the Iranian people have suffered greatly but this has also increased the threshold of pain they can endure. While rising costs, reduced business activity, and layoffs have drained their pockets, Iranians are currently preoccupied with war.
“This pattern of inflation has been going on for decades—people get shocked for a while, then they move on,” a British-based Iranian told me. He said his impression after talking to his family back home in Tehran was that people found it “harder to protest” during the war.
Neither Trump nor Netanyahu has outlined a lobbying strategy for the next day—or for the many conditions that would have to exist to achieve their respective goals.
Israeli strategists admit that despite their best efforts, the Iranian government has not been weakened enough. “The state is weakened but not enough,” said Yaakov Amidror, Netanyahu’s former national security adviser. “At the end of the day, it’s not about weakening the government for the sake of weakening it but for the Iranians to topple the regime. That hasn’t happened yet.”
There is no sure way to topple the Iranian government, certainly not a quick one. An outside actor has only a limited number of options. But that has been known for a while. There was a reason for US President Barack Obama to adopt a different strategy. The 2015 nuclear deal envisioned that economic benefits would improve Iranians’ living standards over time, empower moderates, and create the environment for political change from within.
Trump instead deployed “maximum pressure” against Iran, followed by war and sanctions. It may create an environment that will lead to great anger against the government and sudden uprisings. But there is no guarantee that it would overthrow the government without an organized political opposition.
Currently, Trump is emboldening Iranian hardliners, who will undoubtedly last his term in office. Attacks and blockades give them reason to remain on the war footing—and the effects of a collapsing economy may fall more heavily on the people than on the government and its revolutionaries.
