Iran Confident It Can Weather US Economic War, but Admits Tough Year Ahead

Iran's government insists that domestic capabilities can help its economy endure the wave of new US economic sanctions announced midweek to pressure Tehran into submission in the six-month-old conflict between the two countries.

Speaking on state television on the evening of August 24, Iran's Economy Minister Ali Madanizadeh said Tehran has a two-year plan to counter the sanctions, emphasizing that Iran has "its own tools and understands the game" after years of experience seeking to circumvent sanctions. He also expressed confidence that many countries would reject US President Donald Trump's threats to sever all ties with Iran, suggesting Tehran could "go on the offensive" in a world where the US is no longer the sole dominant power.

The Iranian government has adopted a strategy of stockpiling essential goods, foreign currency, and gold. Energy distribution has also been tightened even though Iran is one of the world's most resource-rich nations.

Abdolnasser Hemmati, governor of the Central Bank of Iran, admitted that oil exports—the country's main source of foreign currency—have nearly ground to a halt. However, he reassured businesses that the central bank has cash reserves stored "in places the US cannot reach," so there will be no shortage of foreign currency for essential goods.

While acknowledging that runaway inflation and the continuous decline in people's purchasing power are "serious problems," Hemmati insisted that "enduring hardship is completely different from collapse," which is what the US is seeking.

Iranian government spokesperson Fatemeh Mohajerani said people should not expect the situation to improve in the coming year. She also said the Supreme National Security Council needs to allow the government to publish data on poverty levels in the country. The rial continued to fall to a record low of 2.05 million rials per US dollar on the free market on August 25, before recovering slightly on August 26.

Self-Reliance

Mohsen Rezaei, the new secretary of Iran's Supreme National Security Council, called on young people to "join the economy" and begin producing goods their families and communities need at home. The spirit of self-sufficiency has been deeply ingrained in the Islamic Republic's strategic thinking for decades, with national development plans repeatedly emphasizing "self-reliance" and setting costly goals to achieve it.

The Iranian government says it meets 85% of domestic agricultural needs to reduce reliance on food imports for its population of about 90 million, though concerns remain about the negative impact of increased agricultural production on the severe water shortage crisis. Agriculture Minister Gholam-Reza Nouri said Tehran aims to raise food self-sufficiency to 90% in the short term, with the goal of meeting all essential food needs from domestic production.

Nouri said Iran imports about $16 billion and exports $8 billion in agricultural products, with some exports suspended since March when the war broke out. Iran relies on imports of wheat, corn, rice, and vegetable oil from countries such as the UAE, Saudi Arabia, Russia, and Central Asia.

The UN Food and Agriculture Organization (FAO) warned that rising import costs, logistics disruptions, and protectionist policies are driving food inflation and eroding Iranians' purchasing power. Food prices in July rose more than 128% year-on-year, according to data from the Statistical Center of Iran.

The Iranian government says it produces about 97% of its medicine needs, but imported drugs account for a much larger share of pharmaceutical spending. Salman Eshaghi, spokesperson for the parliament's Health Committee, said Iran faces shortages of nearly 1,000 types of drugs and that prices have soared after the government gradually cut subsidized foreign currency allocations for certain imports.

Difficult Wartime Choices

The Iranian government says it is urgently repairing infrastructure damaged in the war, including oil and gas facilities and utilities heavily bombed by the US and Israel. The conflict has exacerbated pre-existing energy shortages and infrastructure problems.

Households and industrial zones in Tehran and many other cities continue to suffer rolling blackouts, while natural gas shortages are expected to worsen in the coming months. Many gas stations in Tehran, Mashhad, Karaj, and other cities have run out of allocated fuel, causing long queues.

Government spokesperson Mohajerani promised that current fuel prices and quotas would remain unchanged until September 22, but the government has cut gasoline quotas for private vehicles. The National Iranian Oil Refining and Distribution Company has pledged that two new refineries in the south will come online by the end of March next year, adding about 12 million liters per day.

Iranian economist Sadegh Alhosseini warned the government must undertake "painful reforms" by raising fuel prices to avoid "bloodshed" during social unrest. He warned that if Iran descends into widespread chaos with kilometers-long lines for gasoline, the situation could become worse and harder to control. However, raising fuel prices would continue to push inflation higher due to rising transport costs, while many people are struggling to make ends meet. Iran may continue to endure historical pressures, but it is increasingly vulnerable to a downward spiral of depleted resources and capacity.