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.



Itamar Ben-Gvir Reenters Israel Politics as Gaza Conflict Escalates

Israel's National Security Minister Itamar Ben Gvir, center, addresses the media as he enters a courtroom in Tel Aviv before the start of Prime Minister Benjamin Netanyahu's hearing, Dec. 10, 2024. (AP)
Israel's National Security Minister Itamar Ben Gvir, center, addresses the media as he enters a courtroom in Tel Aviv before the start of Prime Minister Benjamin Netanyahu's hearing, Dec. 10, 2024. (AP)
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Itamar Ben-Gvir Reenters Israel Politics as Gaza Conflict Escalates

Israel's National Security Minister Itamar Ben Gvir, center, addresses the media as he enters a courtroom in Tel Aviv before the start of Prime Minister Benjamin Netanyahu's hearing, Dec. 10, 2024. (AP)
Israel's National Security Minister Itamar Ben Gvir, center, addresses the media as he enters a courtroom in Tel Aviv before the start of Prime Minister Benjamin Netanyahu's hearing, Dec. 10, 2024. (AP)

Itamar Ben-Gvir's planned return to Israel's government brings back a West Bank settler who has pressed for an intensification of the war in the Gaza Strip, even as the Palestinian death toll has exceeded 48,000.

The announcement by Ben-Gvir, once a lynchpin of Prime Minister Benjamin Netanyahu's rightist-religious cabinet, followed airstrikes on Gaza that shattered weeks of relative calm after talks with the Palestinians stalled over a permanent ceasefire.

In January, when he was national security minister, Ben-Gvir resigned from the government over disagreements about the ceasefire. His return strengthens a coalition that had been left with a thin parliamentary majority when he departed.

Ben-Gvir, 48, was known as a hardline extremist even before he helped Netanyahu form the most right-wing coalition in Israel's history. Burly, bespectacled and outspoken, Ben-Gvir heads the pro-settler, nationalist-religious Jewish Power party.

While in the cabinet, he repeatedly attacked the army and Netanyahu over the conduct of the war in Gaza, opposing any deal with Hamas and threatening at times to bring down the government if it did a deal to end the war without destroying Hamas.

Together with a fellow hardliner, Finance Minister Bezalel Smotrich, he has clashed repeatedly with Netanyahu. Both have called for the permanent conquest of Gaza and re-establishment of the Jewish settlements there which Israel abandoned in 2005, notions that Netanyahu has rejected.

INTERNATIONAL OUTRAGE

Ben-Gvir's visit in August to the Al-Aqsa Mosque compound in Jerusalem, known to Jews as the Temple Mount, just as ceasefire negotiators were preparing another bid to end the fighting in Gaza and halt a spiral into regional war, was one of a series of actions to inflame global outrage.

The visit, and his declaration that Jews should be allowed to pray there in defiance of decades-old status quo arrangements covering a site holy to both Muslims and Jews, drew condemnation, including in Israel.

Netanyahu quickly disavowed and rebuked Ben-Gvir, whose visit also outraged Orthodox Jews who consider the Temple Mount, revered as the site of Judaism's two ancient temples, too sacred a place for Jews to enter.

For Ben-Gvir, who was photographed brandishing a pistol at Palestinian demonstrators in East Jerusalem during the 2022 Israeli election campaign, the controversy reinforced his status as a firebrand.

A disciple of Meir Kahane, a rabbi who wanted to strip Arab Israelis of citizenship and whose party was ultimately banned from parliament and designated a terrorist organization by the United States, Ben-Gvir was convicted in Israel in 2007 of racist incitement and support for a group on both the Israeli and US terrorism blacklists.

While Ben-Gvir rejects any talk of an independent Palestinian state, he has toned down his rhetoric over the years, saying he no longer advocates expulsion of all Palestinians, just those he deems traitors or terrorists.

But his appointment in 2022 by Netanyahu as national security minister, with responsibility for the police, was one of the clearest signs the new government would pay little heed to world opinion.

His resignation two months ago weakened the government without toppling it.

During the Biden presidency, he repeatedly drew the ire of the United States, Israel's most important ally, over his rejection of a political solution with the Palestinians and his support for violent Jewish settlers who attack Palestinians in the occupied West Bank.