Iran’s Rulers Caught Between Trump’s Crackdown and a Fragile Economy 

Iran's Supreme Leader Ali Khamenei speaks during a meeting with Iranian students in Tehran, Iran, March 12, 2025. Office of the Iranian Supreme Leader/WANA (West Asia News Agency)/Handout via Reuters
Iran's Supreme Leader Ali Khamenei speaks during a meeting with Iranian students in Tehran, Iran, March 12, 2025. Office of the Iranian Supreme Leader/WANA (West Asia News Agency)/Handout via Reuters
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Iran’s Rulers Caught Between Trump’s Crackdown and a Fragile Economy 

Iran's Supreme Leader Ali Khamenei speaks during a meeting with Iranian students in Tehran, Iran, March 12, 2025. Office of the Iranian Supreme Leader/WANA (West Asia News Agency)/Handout via Reuters
Iran's Supreme Leader Ali Khamenei speaks during a meeting with Iranian students in Tehran, Iran, March 12, 2025. Office of the Iranian Supreme Leader/WANA (West Asia News Agency)/Handout via Reuters

For Iran's clerical leaders, engaging with the "Great Satan" to hammer out a nuclear deal and ease crippling sanctions may for once be the lesser of two evils.

Though it harbors deep mistrust of the United States, and President Donald Trump in particular, Tehran is increasingly concerned that mounting public anger over economic hardships could erupt into mass protests, four Iranian officials said.

That's why, despite the unyielding stance and defiant rhetoric of Iran's clerical leaders in public, there is a pragmatic willingness within Tehran's corridors of power to strike a deal with Washington, the people said.

Tehran's concerns were exacerbated by Trump's speedy revival of his first term's "maximum pressure" campaign to drive Iran's oil exports towards zero with more sanctions and bring the country's already fragile economy to its knees, they said.

President Masoud Pezeshkian has repeatedly highlighted the severity of the economic situation in the country, stating that it is more challenging than during the Iran-Iraq war in the 1980s, and pointing this month to the latest round of US sanctions targeting tankers carrying Iranian oil.

One of the Iranian officials said leaders were concerned that cutting off all diplomatic avenues might further fuel domestic discontent against Ali Khamenei - given he is the ultimate decision maker in the country.

"There is no question whatsoever that the man who has been the Supreme Leader since 1989 and his foreign policy preferences are more guilty than anybody else for the state of affairs," said Alex Vatanka, director of the Iran Program at the Middle East Institute think-tank in Washington.

It was Iran's weak economy that pushed Khamenei to give tentative backing to the nuclear agreement struck with major powers in 2015, leading to a lifting of Western sanctions and an improvement in economic conditions. But then-President Trump's renewed onslaught against Iran after he pulled out of the nuclear pact in 2018 squeezed living standards once more.

"The situation worsens daily. I can't afford my rent, pay my bills, or buy clothes for my children," said Alireza Yousefi, 42, a teacher from Isfahan. "Now, more sanctions will make survival impossible."

Iran's foreign ministry did not respond to a Reuters request for comment.

'ON EQUAL TERMS'

At the same time as upping the pressure on Iran with new sanctions and threats of military action, Trump also opened the door to negotiations by sending a letter to Khamenei proposing nuclear talks.

Khamenei spurned the offer on Wednesday, saying repeatedly that Washington was imposing excessive demands and that Tehran would not be bullied into negotiations.

"If we enter negotiations while the other side is imposing maximum pressure, we will be negotiating from a weak position and will achieve nothing," Iran's top diplomat Abbas Araqchi told the Iran newspaper in an interview published on Thursday.

"The other side must be convinced that the policy of pressure is ineffective - only then can we sit at the negotiating table on equal terms," he said.

One senior Iranian official said there was no alternative but to reach an agreement, and that it was possible, though the road ahead would be bumpy given Iran's distrust of Trump after he abandoned the 2015 deal.

Iran has staved off economic collapse largely thanks to China, the main buyer of its oil and one of the few nations still trading with Tehran despite sanctions.

Oil exports slumped after Trump ditched the nuclear deal but have recovered in the past few years, bringing in more than $50 billion in revenue in both 2022 and 2023 as Iran found ways to skirt sanctions, according to US Energy Information Administration estimates.

Yet uncertainty looms over the sustainability of the exports as Trump's maximum pressure policy aims to throttle Iran's crude sales with multiple rounds of sanctions on tankers and entities involved in the trade.

PUBLIC ANGER SIMMERS

Iran's rulers are also facing a string of other crises - energy and water shortages, a collapsing currency, military setbacks among regional allies and growing fears of an Israeli strike on its nuclear facilities - all intensified by Trump's tough stance.

The energy and water sectors are suffering from a lack of investment in infrastructure, overconsumption driven by subsidies, declining natural gas production and inefficient irrigation, all leading to power blackouts and water shortages.

The Iranian rial has shed more than 90% of its value against the dollar since the sanctions were reimposed in 2018, according to foreign exchange websites, officials and lawmakers.

Amid concerns about Trump's tough approach, Iranians seeking safe havens for their savings have been buying dollars, other hard currencies, gold or cryptocurrencies, suggesting further weakness for the rial, according to state media reports.

The price of rice has soared 200% since last year, state media has reported. Housing and utility costs have spiked sharply, climbing roughly 60% in some Tehran districts and other major cities in recent months, driven by the rial's steep fall and soaring raw material costs, according to media reports.

Official inflation hovers around 40%, though some Iranian experts say it is running at over 50%. The Statistical Center of Iran reported a significant rise in food prices, with over a third of essential commodities increasing by 40% in January to leave them more than double the same month the previous year.

In January, the Tasnim news agency quoted the head of Iran's Institute of Labor and Social Welfare, Ebrahim Sadeghifar, as saying 22% to 27% of Iranians were now below the poverty line.

Iran's Jomhuri-ye Eslami newspaper, meanwhile, said last week that poverty rates stood at around 50%.

"I can barely cover the rent for my carpet shop or pay my workers' salaries. No one has the money to buy carpets. If this continues, I will have to lay off my staff," Morteza, 39, said by phone from Tehran's Grand Bazaar, giving only his first name.

"How do they expect to solve the economic crisis if they refuse to talk to Trump? Just talk to him and reach a deal. You cannot afford pride on an empty stomach."

NUCLEAR RED LINE

Based on Iranian state media reports, there were at least 216 demonstrations across Iran in February, involving retirees, workers, healthcare professionals, students and merchants. The protests largely focused on economic hardships, including low wages and months of unpaid salaries, according to the reports.

While the protests were mostly small-scale, officials fear a deterioration in living standards could be explosive.

"The country is like a powder keg, and further economic strain could be the spark that sets it off," said one of the four officials, who is close to the government.

Iran's ruling elite is acutely aware of the risk of a resurgence of the unrest similar to the 2022-2023 protests over Mahsa Amini's death in custody, or the nationwide protests in 2019 over fuel price rises, the officials said.

The senior Iranian official said there had been several high-level meetings to discuss the possibility of new mass protests - and potential measures to head them off.

Nevertheless, despite the worries about potential unrest, Iranian officials said Tehran was only prepared to go so far in any talks with Trump, stressing that "excessive demands", such as dismantling Iran's peaceful nuclear program or its conventional missile capabilities, were off the table.

"Yes, there are concerns about more economic pressure, there are concerns about the nation's growing anger, but we cannot sacrifice our right to produce nuclear energy because Trump wants it," the senior official said.

Ali Vaez, Iran project director at the International Crisis Group, said Iran's rulers believed that negotiating with Trump under coercion would signal weakness, ultimately attracting more pressure than reducing it.

"That is why Khamenei seems to believe that the only thing that is more dangerous than suffering from sanctions is surrendering to them," he said.



What to Know about the Tensions between Iran and the US before Their Third Round of Talks

The flags of US and Iran are displayed in Muscat, Oman, 25 April 2025. Iran and US will hold third round of nuclear talks on 26 April 2025, in Muscat. (EPA)
The flags of US and Iran are displayed in Muscat, Oman, 25 April 2025. Iran and US will hold third round of nuclear talks on 26 April 2025, in Muscat. (EPA)
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What to Know about the Tensions between Iran and the US before Their Third Round of Talks

The flags of US and Iran are displayed in Muscat, Oman, 25 April 2025. Iran and US will hold third round of nuclear talks on 26 April 2025, in Muscat. (EPA)
The flags of US and Iran are displayed in Muscat, Oman, 25 April 2025. Iran and US will hold third round of nuclear talks on 26 April 2025, in Muscat. (EPA)

Iran and the United States will hold talks Saturday in Oman, their third round of negotiations over Tehran’s rapidly advancing nuclear program.

The talks follow a first round held in Muscat, Oman, where the two sides spoke face to face. They then met again in Rome last weekend before this scheduled meeting again in Muscat.

Trump has imposed new sanctions on Iran as part of his “maximum pressure” campaign targeting the country. He has repeatedly suggested military action against Iran remained a possibility, while emphasizing he still believed a new deal could be reached by writing a letter to Iran’s 85-year-old Supreme Leader Ali Khamenei to jumpstart these talks.

Khamenei has warned Iran would respond to any attack with an attack of its own.

Here’s what to know about the letter, Iran’s nuclear program and the tensions that have stalked relations between Tehran and Washington since the 1979 revolution.

Why did Trump write the letter? Trump dispatched the letter to Khamenei on March 5, then gave a television interview the next day in which he acknowledged sending it. He said: “I’ve written them a letter saying, ‘I hope you’re going to negotiate because if we have to go in militarily, it’s going to be a terrible thing.’”

Since returning to the White House, the president has been pushing for talks while ratcheting up sanctions and suggesting a military strike by Israel or the US could target Iranian nuclear sites.

A previous letter from Trump during his first term drew an angry retort from the supreme leader.

But Trump’s letters to North Korean leader Kim Jong Un in his first term led to face-to-face meetings, though no deals to limit Pyongyang’s atomic bombs and a missile program capable of reaching the continental US.

How did the first round go? Oman, a sultanate on the eastern edge of the Arabian Peninsula, hosted the first round of talks between Iranian Foreign Minister Abbas Araghchi and US Middle East envoy Steve Witkoff. The two men met face to face after indirect talks and immediately agreed to this second round in Rome.

Witkoff later made a television appearance in which he suggested 3.67% enrichment for Iran could be something the countries could agree on. But that’s exactly the terms set by the 2015 nuclear deal struck under US President Barack Obama, from which Trump unilaterally withdrew America.

Witkoff hours later issued a statement underlining something: “A deal with Iran will only be completed if it is a Trump deal.” Araghchi and Iranian officials have latched onto Witkoff’s comments in recent days as a sign that America was sending it mixed signals about the negotiations.

Yet the Rome talks ended up with the two sides agreeing to starting expert-level talks this Saturday. Analysts described that as a positive sign, though much likely remains to be agreed before reaching a tentative deal.

Why does Iran’s nuclear program worry the West? Iran has insisted for decades that its nuclear program is peaceful. However, its officials increasingly threaten to pursue a nuclear weapon. Iran now enriches uranium to near weapons-grade levels of 60%, the only country in the world without a nuclear weapons program to do so.

Under the original 2015 nuclear deal, Iran was allowed to enrich uranium up to 3.67% purity and to maintain a uranium stockpile of 300 kilograms (661 pounds). The last report by the International Atomic Energy Agency on Iran’s program put its stockpile at 8,294.4 kilograms (18,286 pounds) as it enriches a fraction of it to 60% purity.

US intelligence agencies assess that Iran has yet to begin a weapons program, but has “undertaken activities that better position it to produce a nuclear device, if it chooses to do so.”

Ali Larijani, an adviser to Iran’s supreme leader, has warned in a televised interview that his country has the capability to build nuclear weapons, but it is not pursuing it and has no problem with the International Atomic Energy Agency’s inspections. However, he said if the US or Israel were to attack Iran over the issue, the country would have no choice but to move toward nuclear weapon development.

“If you make a mistake regarding Iran’s nuclear issue, you will force Iran to take that path, because it must defend itself,” he said.

Why are relations so bad between Iran and the US? Iran was once one of the US’s top allies in the Middle East under Shah Mohammad Reza Pahlavi, who purchased American military weapons and allowed CIA technicians to run secret listening posts monitoring the neighboring Soviet Union. The CIA had fomented a 1953 coup that cemented the shah’s rule.

But in January 1979, the shah, fatally ill with cancer, fled Iran as mass demonstrations swelled against his rule. The revolution followed, led by Khomeini, and created Iran’s theocratic government.

Later that year, university students overran the US Embassy in Tehran, seeking the shah’s extradition and sparking the 444-day hostage crisis that saw diplomatic relations between Iran and the US severed. The Iran-Iraq war of the 1980s saw the US back Saddam Hussein. The “Tanker War” during that conflict saw the US launch a one-day assault that crippled Iran at sea, while the US later shot down an Iranian commercial airliner that the American military said it mistook for a warplane.

Iran and the US have see-sawed between enmity and grudging diplomacy in the years since, with relations peaking when Tehran made the 2015 nuclear deal with world powers. But Trump unilaterally withdrew America from the accord in 2018, sparking tensions in the Middle East that persist today.