Iran’s economy is capable of withstanding American punishment because it had already adapted to isolation from the Dollar for many years before this war began.
Mahyar Ramezankhani is a professor of economics and an economic analyst. He holds a PhD in economics from the University of Tehran.
Cross-posted from Midd le East Eye
Picture by Raimundo Pastor & Pilar Pastor
The Strait of Hormuz has been effectively closed for most of the past six months. Brent crude is trading just below $90 a barrel, and rose about five percent in a single session earlier this month.
Yet when the International Monetary Fund (IMF) revised its global forecast on 8 July , it trimmed 2026 growth from 3.1 to 3.0 percent – one-tenth of a percentage point for the closure of the world’s most important oil chokepoint and five months of war. The oil market has repriced; the world economy has barely moved.
The more instructive anomaly is inside Iran . By any conventional reading, the Iranian economy should be in freefall.
In April, the IMF cut its 2026 forecast for Iran by 7.2 percentage points , from growth of 1.1 percent to a contraction of 6.1; its July update revises that slightly, putting the contraction at 5.4 percent .
Consumer prices in June were 88.6 percent higher than a year earlier; food, beverages and tobacco were up 134.6 percent , with red meat and poultry rising by 178 percent .
On Monday, the rial touched 2m to the dollar following news that Washington was preparing to announce new sanctions.
Gas output has fallen by roughly 230m cubic metres a day against a prewar 650m; petrol was already running some 20m litres a day short before the fighting began, and cities are rationing electricity .
And yet official unemployment is just 7.5 percent . Salaries and pensions are being paid. Shops are stocked. There has been no banking crisis, no sovereign default, no disorderly failure of a major firm.
Whatever this is, it is not the collapse that more than five months of bombardment and naval blockade would produce almost anywhere else.
Nothing to withdraw
The explanation is an interesting one, because it inverts what economists normally tell governments. Nearly every feature that makes Iran a poor place to deploy capital in peacetime – concentrated ownership, rationed foreign exchange , near-total detachment from global finance , a handful of quasi-state actors sitting astride the export economy – is precisely what is absorbing the war.
Start with the simplest mechanism: there is nothing to withdraw. Iran carries negligible external debt and almost no foreign portfolio investment. You cannot have capital flight without foreign capital.
The Tehran Stock Exchange shut on 28 February as the US – Israeli strikes on Tehran began, and stayed closed for about 80 days. A market no foreigner owns can simply be switched off.
What happened when it reopened in May is stranger. The Tedpix index had slipped to around 3.7m points before the closure, well below the 4.5m it reached at the start of the year. It passed 5. 9 m in early July – an all-time high, set in the fifth month of a war – before falling back below 5m within a week.
Read the rally as confidence, and you misread it. With deposit rates deeply negative in real terms and hard currency rationed, Iranian savers have nowhere else to put money. Adjusted for the rial, the gain is not really a gain: the index rose because the exits are shut, and it fell again the moment the ceasefire framework that had briefly lifted the currency came apart.
Then there is concentration, which in wartime works as an allocation system. When feedstock supplies to the petrochemical complexes at Asaluyeh and Mahshahr were disrupted, the government halted petrochemical exports outright to keep domestic plants running.
An open market would have needed price signals, renegotiated contracts and several months. Iran needed an instruction to perhaps a dozen entities. The deadweight loss of monopoly in peacetime is command capacity in war, and Iran has been accumulating it for 15 years.
Thirdly, the workarounds were not improvised under fire. Before the war, Iran was moving between 1.4m and 1.8m barrels a day through a fleet of several hundred elderly tankers, with the bulk going to independent refiners in Shandong , China, at discounts of around $10 to $15 against Brent .
The overland routes into Iraq , Turkey and Pakistan , and the rail links towards Russia and China , were built when shipping was merely sanctioned rather than blockaded. The oil ministry says it sold $11.5bn of crude during the fighting itself , and another $6.5bn during the ceasefire period, generating more than 60 percent of the revenue budgeted for the year.
Sanctions did not weaken this infrastructure. They commissioned it.
Households pay the price
Here, the argument has to concede something. What is happening is not shock absorption. It is shock transfer.
In an integrated economy, a war surfaces on balance sheets: defaults, bankruptcies, equity wipeouts, a bond market that forces the government’s hand within weeks. In a closed economy with a rationed multiple exchange rate, it surfaces in prices instead.
Economist Hadi Kahalzadeh, of the Quincy Institute, told Al Jazeera that shocks absorbed through inflation and currency depreciation keep goods on the shelves but make them increasingly unaffordable. The system keeps functioning, as the costs land directly on households.
The monthly minimum wage is now worth about $87 at the open-market rate. A study by a think-tank affiliated with Iran’s state pension fund projected poverty rising from around 30 percent five years ago to 45 percent this year . Nothing broke; households paid.
The loyalty the system depends on is conditional, too. The same concentration that lets the state direct resources hands a small number of exporters the largest arbitrage opportunity in the country.
Iran’s General Inspection Organization reported last month that more than 20,000 exporters had failed to repatriate €94bn ($107bn) of earnings , and that trustees appointed to bring back sanctioned oil proceeds were holding at least $11bn of it. A system that can be commanded can also be farmed, and it is being farmed by the actors who make the commanding possible.
The deeper cost is what is not being spent. Gross fixed capital formation was contracting before the first bomb fell. An economy that stays upright by depreciating its currency, rationing its dollars and deferring maintenance on its refineries and its grid is consuming its own capital stock. That is a strategy with a term structure, and the term is probably short.
None of this is an argument for isolation. It is an argument for separating two things the post-1990 consensus fused together: integration and safety are not the same property. Iran has built an economy that is unusually hard to break and, for exactly the same reasons, unusually hard to grow. The IMF pencils in 3.2 percent for 2027 , which is a bounce off a floor rather than a repair.
You could put it more bluntly. Sanctions arrested Iran’s development and hardened it at the same time. The country was denied a decade of growth, and given in exchange a tolerance for punishment that few open economies possess.
For anyone treating economic pressure as a lever, that is the finding worth sitting with. The absence of collapse is not evidence that the pressure is about to work. It is evidence that 15 years of pressure already built the thing now doing the absorbing.
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Mahyar Ramezankhani – Sanctions didn’t break Iran. They hardened it.
Aggregated summary from an independent source. Read the original at BraveNewEurope.