Iran Unveils New Economic Package to Counter US Pressure

Iran's government is working to ease the severe financial pressure bearing down on its citizens from US sanctions and encirclement. President Masoud Pezeshkian recently discussed with several cabinet members measures aimed at cushioning the economic impact of the campaign waged by the US and Israel, including the plunging rial and a cost-of-living crisis.

"The enemy's plan in recent months has been to cut off the country's lifelines in order to pressure the Iranian people," Pezeshkian wrote on social media. Although full details of the government's response remain unclear, the scope of the meeting and the president's subsequent remarks offer some indication of the direction of these policies.

Iranian Lives Amid a Protracted Conflict

Iran's economy has contracted sharply since fighting erupted on February 28, when US and Israeli airstrikes killed numerous senior political and military figures. Those strikes are estimated to have inflicted roughly $270 billion in damage on Iran.

The situation deteriorated further after Washington launched Operation Economic Outcast in late August, aimed at completely isolating Iran from international trade. Iran's gross domestic product has fallen 10 percent as energy exports collapsed under the US naval blockade, while the rial has hit record lows. Tehran has made the lifting of the blockade a central demand in talks with the US over reopening the Strait of Hormuz.

Maryam Ashrafi of the London-based Bourse and Bazaar Foundation said the economic situation is worsening for Iranian consumers, particularly as food prices climb. People are being forced to "increasingly turn to cheaper, lower-quality goods." A shortage of raw materials for certain staples, such as margarine, has also driven prices up.

Wheat and grain imports have fallen as well because of the US naval blockade on southern ports. According to Ashrafi, large cargo ships that can normally carry up to 80,000 tons of agricultural products are affected. Some vessels have shifted to alternative routes through Caspian Sea ports, which are not subject to the embargo, but those can carry only about 7,200 tons, while road trucks are limited to roughly 20 tons each.

Rising packaging costs have also exposed businesses to supply-chain disruptions, while insurance premiums have soared even though war-related losses are typically not covered. Although pharmaceuticals are not sanctioned, raw materials for Iran's drug industry are increasingly scarce and expensive. Aviation disruptions caused by US sanctions on Iranian airlines have further heightened concerns about medicine shortages.

What Iran Plans to Do

At Saturday's meeting, Iran's Planning and Budget Organization presented a seven-point package to respond to the crisis, though details have not been made public. The semi-official Tasnim news agency said the proposal is intended to "help the country navigate the challenges ahead in a more orderly and less costly manner."

A day after the meeting, President Pezeshkian ordered the formation of a committee to coordinate the new economic agreement, comprising Central Bank Governor Abdolnaser Hemmati, Interior Minister Eskandar Momeni and Tehran Mayor Alireza Zakani. According to state broadcaster IRNA, the committee's goal is to help stabilize prices nationwide.

On Monday, Pezeshkian told lawmakers that economic policy should focus on supporting the most vulnerable groups, including female-headed households. He said energy efficiency would be one of the main ways to address current difficulties, pledging that electricity and energy supplies to manufacturers and businesses would not be cut under any circumstances.

Iran's president also called for a "car-free Tuesday," urging people to limit driving to save energy and asking civil servants to set an example. Despite being a major oil and gas producer, Iran has faced gasoline shortages and power outages since the fighting began.

Are the Measures Enough?

Economist Saeed Laylaz, a former adviser to the Iranian government, said Pezeshkian should have acted sooner. When signs of war loomed, the government needed to prepare for shrinking resources and disrupted import-export activity.

While calling the president's response delayed, Laylaz said tackling the prices of basic goods — the target of the new measures — would benefit the country. He assessed that Iran currently has sufficient stockpiles of basic goods, and even if the embargo continues, the country will not face problems securing supplies thanks to suitable routes, abundant resources and trading partners that can help.