IRAN DESK
The reimposition of United Nations sanctions as well as European Union restrictive measures was expected by the Iranian leadership, notably since the 12-day-war demonstrated Western desires to confront the Islamic Republic.
However, expectation doesn’t translate into preparedness. Despite set policies, the government will struggle to shield Iran’s economy and population from further external pressures and isolation.
On the foreign policy front, Tehran will have no other choice but to lay low and increasingly depend on a select group of Eastern countries.
Executive Summary
- Renewed UN and EU sanctions won’t cripple Iran economically like U.S. sanctions, but they reinforce national despair and isolation.
- UN measures renew Iran’s image as a rogue actor, complicate military and nuclear programs, and are a step closer to legal justification for future U.S.-Israeli strikes.
- Tehran seeks survival through calibrated diplomacy — maintaining its anti-nuke stance, avoiding escalation, and keeping the door open for reasonable negotiations with Washington.
- Russia and China openly defy the UN snapback, deepening Tehran’s reliance on South-South partnerships and giving it a pioneering role in building an alternative global order to counter Western sanction regimes.
- China accounts for 90% of Iranian oil exports and a quarter of non-oil trade, keeping Iran afloat through barter and opaque financial channels.
- Iran’s heavy dependence on a few neighbours (UAE, Iraq, Turkey) exposes it to economic vulnerability and political leverage from regional actors. Accordingly, the primary goal of Iran’s foreign ministry is to ensure regional cooperation.
- Inflation above 40%, currency collapse, and contracting growth (-1.7% in 2025) threaten Iran’s middle class and risk renewed social unrest.
- Multiple exchange rates and subsidies aim to cushion citizens but fuel corruption, distort markets, and deepen fiscal deficits and liquidity growth.
- Even if Iran significantly deepens its eastward turn, it cannot reach a path to sustainable growth unless it reaches a long-lasting agreement with the U.S.
- Iran’s future hinges on China and Russia delivering tangible support. If Eastern backing falters, Tehran may turn from cautious diplomacy to confrontation to impose costs on the West for their hostile actions.
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