Dr. Muhammad Akram Zaheer

The warning from Iran’s parliament speaker Mohammad Bagher Ghalibaf deserves more attention than it has received. Speaking at the Iranian Embassy in Baghdad on Aug 20, he said that military strength alone could not save the country if people were hungry, money stopped circulating and economic growth disappeared. It was an unusually blunt admission from a senior figure in a government that has long presented resilience under sanctions as a sign of national strength.

Ghalibaf’s words came at a particularly difficult moment for Iran. Four days later, US Treasury Secretary Scott Bessent announced what Washington described as an “economic D-Day” against Tehran. The objective, according to Mr Bessent, is to cut Iran’s financial connections around the world and deprive the government of the economic resources on which it depends. For ordinary Iranians, sanctions are hardly new. They have lived for decades with inflation, a weakening rial, shortages and restrictions on international trade. But the present circumstances are more serious because the pressure is arriving when Iran’s economy is already badly weakened.

Iran has experienced economic hardship before, and its history offers several reminders of how quickly political crises can become economic disasters.

The Islamic Revolution of 1979 followed years of rapid economic growth and social change. The Shah’s programme of industrialisation and modernisation transformed much of Iranian society, but it also created deep inequalities and left sections of the population feeling excluded from the benefits of development. Ayatollah Ruhollah Khomeini successfully mobilised those grievances. The revolution, however, was followed almost immediately by economic isolation. Foreign investment declined sharply, while the new government struggled to establish political and economic stability. Then came another catastrophe. In September 1980, Saddam Hussein’s Iraq invaded Iran. Baghdad expected a short war. Instead, the conflict continued for eight devastating years. Cities were attacked, oil facilities were damaged and enormous resources were diverted towards the battlefield. Iran’s economy suffered accordingly. Its gross domestic product fell sharply during the first year of the war, while living standards deteriorated throughout the conflict.

The government introduced rationing as shortages became widespread. For many Iranians, the war years remain among the darkest memories of the Islamic Republic. Yet the country survived. The population endured extraordinary hardship without the state itself collapsing. The end of the war in 1988 raised hopes that Iran could finally rebuild. Khomeini famously described accepting the ceasefire as drinking from a “chalice of poison”. The expectation among many Iranians was that peace would allow the country to recover economically. That recovery, however, was repeatedly obstructed by sanctions and political confrontation with the United States. Washington designated Iran a state sponsor of terrorism in 1984, bringing additional restrictions. During Bill Clinton’s presidency, the United States imposed further limits on trade and investment. The Iran and Libya Sanctions Act of 1996 extended American pressure to foreign companies doing business with Iran, provoking opposition from European governments.

Yet American policy has never been entirely consistent. George W. Bush’s administration maintained secret contacts with Iranian officials. Barack Obama later pursued negotiations that produced the 2015 nuclear agreement, under which Iran accepted restrictions on its nuclear programme in exchange for sanctions relief. Frozen assets were released and Iran gained greater access to international markets. The arrangement demonstrated something important: economic pressure and diplomacy have always been intertwined in the relationship between Washington and Tehran. Donald Trump chose a different course during his first presidency. His administration withdrew from the nuclear agreement and adopted a policy known as “maximum pressure”. The intention was to force Tehran to accept a broader agreement covering its nuclear programme, missiles and regional activities. The question today is whether the latest American campaign represents something genuinely different. If the previous policy was truly “maximum pressure”, there should be little left to add. If the new measures are substantially stronger, then the earlier policy was not as comprehensive as its name suggested.

The collapse of Ayandeh Bank and the subsequent unrest in Tehran’s bazaar revealed weaknesses within the financial system. Banks cannot function indefinitely when bad loans, political interference and weak supervision undermine public confidence. The bazaar has historically been more than a commercial centre in Iranian politics. Its merchants played an important role in the 1979 revolution and their reaction to economic pressure remains politically significant. The latest difficulties have been compounded by damage to industrial facilities and disruption at ports. Iran may still export oil, but sanctions make those sales considerably more difficult and costly. Oil that is sold through restricted channels often brings a substantial discount, reducing the revenue available to the government.

It is unlikely to be the senior political and military leadership. Economic crises rarely affect rulers and ordinary citizens equally. Those with access to state resources, foreign currency and political connections are better positioned to protect themselves. History provides uncomfortable examples. During the Soviet famine of the early 1930s, the political leadership and security apparatus received preferential access to food. Saddam Hussein’s Iraq also demonstrated how sanctions could become a political weapon. The Iraqi government blamed American sanctions for the suffering of civilians while maintaining a political system in which the ruling elite remained protected. North Korea offers another grim example. The ruling family and senior officials have repeatedly maintained their privileges even when ordinary people have faced severe food shortages. Iran should not be assumed to be heading automatically towards famine. The country has substantial agricultural capacity, an educated population, energy resources and a long history of surviving external pressure. A famine is not inevitable.

The greatest danger is that economic hardship becomes a tool of political control. If food becomes scarce, the government could blame foreign enemies, particularly the United States and Israel, for every hardship. The leadership could then use the suffering of ordinary people to strengthen its political narrative rather than address the structural weaknesses of the economy. This would create a cruel circle. Sanctions hurt the population; the government blames foreign powers; public anger is redirected towards external enemies; and the economic problems that produced the crisis remain unresolved.

Washington also needs to consider the consequences of its policy. Economic pressure may weaken a government but it does not automatically produce political change. In some circumstances, it can strengthen those already in power by allowing them to portray domestic opponents as agents of foreign governments. If the United States wants to demonstrate that its quarrel is with the Iranian leadership rather than the Iranian people, humanitarian assistance must remain central to its policy. Food, medicine and other essential goods should be protected from the consequences of financial restrictions. Washington should also work with countries capable of delivering such assistance without allowing it to become another instrument of political confrontation.

Military power can destroy infrastructure. Financial pressure can restrict trade and investment. But neither can by itself determine what happens inside a society. Political systems survive not merely because they possess weapons or money but because they retain enough control over institutions and enough capacity to manage crises. Iran’s leadership has survived revolution, war, sanctions, protests and diplomatic isolation. Yet survival is not the same thing as prosperity. Ghalibaf was therefore right about one fundamental point: a country cannot live on military strength alone. If people cannot afford food, businesses cannot operate, banks cannot function and investment disappears, national power eventually becomes difficult to sustain.

The real test for Iran is whether its leaders recognise this before economic hardship becomes a humanitarian catastrophe. The real test for Washington is whether it can apply pressure without turning ordinary Iranians into its principal victims. And for the Iranian people, the question is far more basic: how long can a state ask its citizens to endure hardship in the name of national resistance while those who govern them remain insulated from its worst consequences? That is the question behind Iran’s economic crisis. It is more important than the slogans coming from either Tehran or Washington.

Dr. Muhammad Akram Zaheer

Assistant Professor Imperial College of Business Studies Lahore

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