While the US dollar reached a new high against Iran’s currency on Wednesday, an economist warned that without an agreement with Washington soon, inflation could climb above 40% before the Iranian New Year in March.
Macroeconomist Morteza Afqah told Tehran’s Khabar Online news website on Wednesday that “If no agreement is reached, the likelihood of reinstating the ‘maximum pressure’ policy against Iran is high.
"Inflation could surpass 40% by the end of the year. Without the lifting of sanctions, the country appears incapable of managing the economy sustainably.”
Iran’s currency, the rial, has depreciated nearly 20-fold since 2018, when President Donald Trump first imposed "maximum pressure" sanctions on the country. Since September alone, the rial has lost an additional 30% of its value.
The current annual inflation rate is unclear, but official figures have hovered around 40% since 2019, with prices for food and other essentials rising at an even faster pace.
The rial was trading at nearly 800,000 per US dollar on Wednesday and over one million per British pound.
Supreme Leader Ali Khamenei’s administrative chief cleric Mohammad Mohammadi Golpaygani conceded on Wednesday that “We are not in a normal situation in the country. For years, we have been burdened by sanctions, facing difficulties in exporting oil.”
However, he added, “In these circumstances, the nation's power comes with its own challenges. After all, being a Muslim nation has its costs and is not something achieved easily.”
Afqah, in turn, expressed deep pessimism about the economy overall, seeing no reason to be optimistic.
"The short- and even medium-term outlook for our country’s economy is not promising. There isn’t much hopeful news or any so-called good news to cling to. Each individual economic and even non-economic factor is structured in a way that leads to rising costs, higher inflation, and a decline in economic growth rates," he said.
The pressure on Iran’s Islamic government is not just economic but also geopolitical, after its key non-state allies, Hamas and Hezbollah were seriously weakened by Israeli blows earlier this year, followed by the fall of President Bashar al-Assad in Syria.
Iran had invested tens of billions of dollars in keeping Assad in power against his domestic opponents, but in a matter of days, the armed opposition swept through the country, capturing Damascus and deposing the long-serving authoritarian president, who fled to Russia.
The incoming Trump administration has signaled that it is inclined to increase the pressure, not just to rein in Tehran’s nuclear program, but more likely to inhibit its power projections throughout the Middle East.
Hossein Shamkhani, son of ex-security chief Ali Shamkhani, oversees a network of companies central to facilitating weapons shipments across the Caspian Sea to Moscow amid its ongoing war in Ukraine, the report said.
Through his Dubai-based company Crios Shipping LLC, the younger Shamkhani began moving missiles, drone components, and dual-use goods last year, relying on at least two ships.
The Bloomberg report cited information provided by more than a dozen unnamed US, UK, and European officials, along with others familiar with the transactions.
These shipments, according to sources cited by Bloomberg, are part of a barter arrangement in which Moscow pays Tehran with oil cargoes in order to bypass sanctions restricting both nations’ access to international financial systems.
“My understanding is the Shamkhani network ties into the drone contracts for use in Ukraine,” said John Bolton, former US National Security Advisor, now a senior fellow at the Foundation for American Security and Freedom.
Shamkhani’s trading prowess highlights Iran's broader use of a vast network of companies spanning commodities trading and hedge funds.
A family legacy of influence and controversy
Hossein Shamkhani’s ascent in global commerce and politics is intertwined with his father Ali Shamkhani’s legacy. As a long-serving Iranian defense minister and national security advisor, Ali Shamkhani has remained close to Supreme Leader Ali Khamenei, leveraging his influence even after stepping down from the Supreme National Security Council in 2023.
The Shamkhani family has faced repeated allegations of corruption and abuse of power. Iran International’s investigative journalist Mojtaba Pourmohsen has reported extensively on family members’ involvement in high-profile scandals, including accusations of illicit business dealings, ownership of extravagant properties and bank accounts abroad.
One particularly contentious episode involved their role in the collapse of a building in Khuzestan province in 2022, a tragedy that left dozens dead. The building’s owner, a businessman linked to the family, was found to have violated multiple construction regulations.
Hossein Shamkhani has denied any wrongdoing and rejected claims of involvement in illegal arms shipments or sanction-busting oil trades.
A lawyer representing him told Bloomberg that the allegations are baseless and lack supporting evidence. Similarly, Mohamed Al Hashmi, managing director of Dubai-based Milavous Group Ltd—another firm tied to Shamkhani—dismissed allegations of involvement in Iranian or Russian oil trading.
Complexities of sanctions and enforcement
The cross-Caspian shipments highlight challenges in enforcing Western sanctions. Ships linked to Shamkhani’s network, including the Sea Castle and Sea Anchor, have completed multiple trips between Iranian ports and Russia’s Astrakhan in the past year.
These vessels, though modest in size by global shipping standards, are believed to have been sufficient for transporting weaponry on the short Caspian routes.
Bloomberg’s analysis of ship tracking data suggests these voyages accelerated in 2023, coinciding with Russia’s increased reliance on Iranian arms for its operations in Ukraine.
Shamkhani’s maritime network extends beyond these two vessels. Bloomberg cited sources describing an extensive fleet of tankers and cargo ships controlled through entities such as Oceanlink Maritime DMCC and Koban Shipping LLC.
While the US Treasury has sanctioned several of these ships and their associated companies, enforcement has been complicated by frequent changes in ownership and the lack of direct links to Shamkhani in official records.
“Sanctions enforcement against these barter networks is a lot harder, particularly when you consider Russia’s historic dominance in the region,” said Behnam Ben Taleblu, a senior fellow at the Foundation for Defense of Democracies.
He emphasized the importance of transparency and international cooperation to expose these networks and curb their activities.
Expanding business empire and diplomatic implications
Beyond shipping, Shamkhani’s network includes a hedge fund operating in financial hubs such as London, Geneva, and Singapore, and a Dubai-based commodities trading firm dealing with Western oil companies.
Despite these connections, he has not been personally sanctioned by the US or European governments. This lack of direct penalties has fueled concerns about loopholes in current sanctions regimes, particularly as entities within Shamkhani’s network continue to conduct significant business with Chinese buyers using yuan transactions, avoiding the US financial system.
Both Iran and Russia have acknowledged their growing military cooperation without detailing specific arms deals.
While their collaboration appears not to inherently violate international law, it exposes participants to potential sanctions.
A State Department spokesperson warned of the broader security implications, saying, “This partnership threatens European security and illustrates how Iran’s destabilizing influence reaches beyond the Middle East and around the world.”
The allegations against Hossein Shamkhani, if substantiated, underscore the resilience of global sanctions evasion networks and the complexities of monitoring illicit trade.
With limited transparency and persistent geopolitical rivalries, success in curtailing Iran's sanctioned trade has eluded the West and its allies.
New data from the Central Bank of Iran (CBI) reveals that the country's GDP growth has slowed since the beginning of 2024. During the summer, GDP growth stood at 2.7%, which is half of the 2023 growth rate.
The GDP growth rate has fallen across all sectors except agriculture. However, calculations by Iran International indicate that the Central Bank's figures are overly optimistic and, in some cases, manipulated.
For instance, while Iran's Statistical Center and the Research Center of the Parliament reported a 1% decline in the industrial and mining sector's share of the GDP during the summer due to repeated power outages, the Central Bank claims a 1.7% economic growth in this sector during the same period.
The industrial sector is important for Iran’s economy, as part of it is based on or related to oil-related sectors and accounts for around 15% of Iran's GDP and employs around a third of the country's 25 million workers.
Another example is the agriculture sector. According to the Statistical Center of Iran, this sector's output has been in decline since 2021 and the share of employment in the sector declined by 1% this summer, reaching 14.5%.
Yet, despite worsening droughts and widespread power outages, the Central Bank claims a 2.8% growth in agriculture during the summer.
The International Monetary Fund (IMF) previously predicted that Iran's economic growth would decline from this year until 2028, eventually reaching 2%.
Oil: The driving force of economic growth
In the last two years of Donald Trump's presidency (2018-2020), Iran faced negative economic growth due to US sanctions. However, with the Biden administration's policy of appeasement toward the Iranian government, Iran's economic growth turned positive again.
Details from the Central Bank's statistics show that the driving force behind Iran's economic growth over the past 3-4 years has been the oil sector. During this period, Iran's oil exports quintupled, reaching 1.6 million barrels per day in 2024 in average.
Iran exports 40% of its oil and gas condensate output, and the growth in this sector has had a significant impact on boosting the country’s economic growth.
It remains unclear how Iran’s economic growth will fare considering a sharp drop in oil exports this fall and the anticipated start of Donald Trump’s administration, which has promised to revive the "maximum pressure" campaign against Iran. Data from oil tracking companies such as Kpler and Vortexa indicate a 500,000-barrel-per-day decline in Iran's oil exports since October.
At the same time, the head of Iran's Agricultural Guilds Chamber recently reported a 30% reduction in autumn crop planting, and an official mentioned a 20% damage to poultry farms due to power outages in autumn.
This fall, in addition to power cuts, Iran has drastically reduced gas supplies to industries, exacerbating the recession in these sectors.
A Look at key economic indicators for Iran in 2024
The year 2024 has brought significant challenges for Iran, including severe electricity and gas shortages, a sharp depreciation of the rial, two direct confrontations with Israel, weakening of its regional proxy groups and the fall of Bashar al-Assad's regime in Syria as well as the end of Joe Biden's presidency.
This summer, Iran faced a 25% electricity deficit, which has been continuing in autumn due to gas shortage. In fall, the daily gas shortage peaked at 30% of the country's gas demand.This seriously impacts industries, particularly the steel sector, which has witnessed a 46% decline this year.
Since the beginning of 2024, the US dollar's value in Iran has surged by 60%, and inflation, even according to official estimates, has exceeded 32%. Over the past six years, Iran has consistently ranked among the ten countries with the highest inflation rates.
Official statistics show that despite the addition of 5 million people to Iran’s population since 2018, when US sanctions were reintroduced, the number of employed individuals has only increased by 300,000 to 25.1 million.
Poverty rates in Iran have also risen during this period. Even according to the Islamic Republic's official statistics, about 28% of Iran’s population was below the poverty line in 2018. Now, this figure has climbed to 33%, with some parliamentarians, experts, and domestic media outlets claiming the real number exceeds 50%.
One of the few positive aspects of Iran's economy is the increase in oil exports to China. Data from Kpler and Vortexa shows that Iran's average daily oil exports in 2024 stood at approximately 1.6 million barrels in average, 34% higher than in 2023 and almost double the 2022 levels, but the figure plunged to 1.3 mb/d in November.
Iran’s economic vows will worsen if Donald Trump acts upon his threats to reduce Tehran’s oil exports to China, which provided close to $40 billion in revenues until this fall.
