Iran’s Economy Is Crumbling as Tehran Tries to Dictate Terms to Washington

Tehran Talks About an Agreement, but in the Language of Surrender

The day began not with a diplomatic breakthrough, but with a dispute over how to characterize the negotiations themselves. Overnight, Iranian media outlets circulated Arab reports suggesting that Iran and the United States had already reached an agreement in principle that would permit uranium enrichment to 3.67 percent inside Iran. Almost simultaneously, a denial emerged from an anonymous Iranian diplomatic source, who claimed that no technical discussions had yet taken place that could have produced such an agreement.

Mohsen Rezaei, however, chose to deliver a far less conciliatory message. According to Rezaei, the time has come for the United States to “surrender to the seven conditions” Iran has presented.

The word “surrender” is as important here as the conditions themselves. Rezaei is not closing the door to an agreement, but he is attempting to establish in advance how any future deal will be presented to the Iranian public. Rather than a compromise in which both sides made concessions, it would be portrayed as the result of Iranian pressure that forced Washington to change its position.

In doing so, Tehran is trying to prevent its willingness to negotiate from being interpreted as weakness, particularly after months in which the regime has portrayed its control over the Strait of Hormuz and its military posture as proof that time is on its side.

The problem is that no single public document has yet presented a definitive, numbered list of these seven conditions. Previous statements repeatedly point to the same set of demands: an end to the war, the lifting of the naval blockade, safe passage for ships and oil tankers, sanctions relief and fewer restrictions on oil exports, the release of Iranian assets, and the retention of nuclear material inside Iran.

Until Tehran publishes a complete official text, however, it is impossible to determine precisely how the conditions are formulated or how they are prioritized.

That ambiguity serves Iran’s interests. It allows officials to speak publicly about seven nonnegotiable conditions while giving mediators room to work behind the scenes on more flexible language.

The public is presented with a red line. The mediators are given room to maneuver.

On the Nuclear Issue, There Are More Leaks Than Agreements

The dispute over uranium enrichment illustrates just how premature it remains to speak of an agreement.

According to Arab reports cited in Iran, the United States has supposedly agreed to allow enrichment to 3.67 percent inside Iran, while a third country, most likely Russia or China, would help reduce the enrichment level of material already held in the country. Those reports also raised the possibility of releasing between $6 billion and $9 billion in frozen Iranian assets.

For now, however, there is no joint announcement, written agreement, or identifiable official confirmation from either side.

The Iranian denial is not necessarily definitive either, since it relies on an anonymous source. A more reasonable conclusion is that the negotiations remain at a stage characterized by leaks, testing reactions, and efforts to establish in advance what will be considered a concession and what will be portrayed as an achievement.

Tehran’s clearer official position emerged the previous day. Foreign Ministry spokesman Esmaeil Baghaei emphasized that Iran had not withdrawn from the Nuclear Non-Proliferation Treaty and that International Atomic Energy Agency inspectors had recently visited Bushehr.

At the same time, however, he made clear that Tehran does not envision a straightforward return to prewar conditions. Iran views inspections of facilities damaged in military strikes differently, and the removal of enriched nuclear material from the country is not under consideration.

This is a calculated middle position.

Iran is not withdrawing from the international framework, a step that would immediately increase pressure on the regime. But neither is it agreeing to restore the previous inspection system or surrender the enriched uranium stockpile already in its possession.

Consequently, anyone portraying the latest developments as a nuclear agreement is overlooking some of the most difficult unresolved questions.

What will happen to the material already enriched? What level of enrichment will be permitted in the future? Who will conduct inspections, and at which facilities? And which side will act first, the United States by providing sanctions relief or Iran by taking steps to meet American demands?

Hormuz Remains Tehran’s Main Bargaining Chip and Its Greatest Risk

The Strait of Hormuz remains central to the confrontation.

An Islamic Revolutionary Guard Corps spokesman claimed that the strait is “completely closed”, that American forces do not dare enter it, and that naval mines laid in the waterway have not been cleared.

These are claims made by a party to the conflict, and the material reviewed provides no independent verification of the strait’s condition as described. This is particularly important given that the United States has presented a different account of naval operations and efforts to reopen shipping routes.

Even without accepting the Iranian claims at face value, it is clear why Hormuz is so important to the agreement Tehran is attempting to construct.

Demands to lift the naval blockade and guarantee safe passage for oil and commercial shipments repeatedly appear in Iranian proposals.

In other words, Iran is using threats to maritime traffic to create the conditions under which removing those threats becomes a valuable concession. The greater the disruption to trade and energy supplies, the more valuable the promise of restoring normal operations becomes.

This is an effective bargaining mechanism as long as it remains under control.

But it could also backfire quickly.

Another serious attack on an oil tanker, a broader attempt to reopen the shipping route by force, or an American strike following an incident in the strait could transform the very bargaining chip intended to produce an agreement into the trigger for another round of fighting.

Israel also continues to serve two purposes in the Iranian narrative: as an enemy and as an explanation for why negotiations with Washington are not advancing more quickly.

Mohammad Bagher Ghalibaf claimed that Israel is attempting to drag the United States into an endless war with Iran.

Conservative Iranian media outlets use this argument to portray any American movement toward an agreement as a defeat for Israel. More moderate newspapers, however, use the same argument to reinforce calls for regional diplomacy before the situation once again spirals out of control.

While Tehran Debates Seven Conditions, Iranians Are Fighting Over Who Qualifies for Subsidized Food

As the regime’s security rhetoric grows more ambitious, domestic debates are becoming increasingly focused on everyday survival.

Critical Iranian newspapers published direct criticism of Tehran’s municipal administration following days of heavy rain and flooding. They also warned that expanding legislation against “infiltration” could deepen public mistrust rather than alleviate it.

This represents an important shift in perspective.

Instead of attributing every problem to an external enemy, critical voices are returning some of the responsibility to domestic institutions. They are questioning whether concentrating more power and expanding surveillance actually improve security when basic municipal management continues to fail.

The dispute over food assistance is even more tangible.

A member of the parliament’s presiding board criticized the government’s proposed new eligibility criteria for supplementary food assistance, arguing that the system of income deciles and means testing contains serious flaws.

Behind this technical dispute lies a simple problem: during periods of high inflation, a fixed income threshold does not tell the whole story.

A family may appear on paper to earn enough to be excluded from assistance, while in reality struggling with rent, food, transportation, and healthcare costs that have risen far faster than wages.

Consequently, any attempt to “target” assistance more precisely is immediately viewed as a potential effort to reduce it.

The government wants to ensure that funds reach those most in need. The public fears that the state is simply trying to reduce the number of people eligible for assistance.

When the purchasing power of that assistance has already been eroded by inflation, the dispute becomes especially volatile.

Cars Are Becoming Unaffordable, and Maintaining Them Is Getting More Expensive

Iran’s automobile market offers perhaps the clearest illustration of how far the economy remains from recovery.

According to figures published in the Iranian economic press, vehicle purchase prices in October increased by 149.3 percent compared with the same month a year earlier, significantly exceeding the overall inflation rate.

At the same time, production by 12 automobile assembly companies plunged from 107,749 vehicles to approximately 41,654 during the first seven months of the year, a decline of 61.3 percent.

The connection between these figures is clear.

Fewer vehicles are reaching the market while the currency remains weak and inflation expectations remain elevated. As a result, automobile prices are rising much faster than the general price index.

For an Iranian family, a car is gradually changing from an expensive purchase into something entirely beyond reach.

Even those who already own vehicles are not protected.

The government has decided to remove engine oil and tires for private vehicles from the system of regulated prices, arguing that price liberalization will encourage production and help rebalance the market.

From the government’s perspective, this is a reform intended to increase supply. From the vehicle owner’s perspective, at least in the short term, it may simply mean another rising expense.

This captures much of Iran’s current economic debate.

The state removes price controls in an attempt to resolve shortages, but consumers experience the higher prices immediately, while any increase in supply may come only later.

With purchasing power already severely diminished, it is difficult to ask families to wait for economic reforms to produce results.

Illness Is Becoming a Financial Risk, While Rainfall Fails to Rescue Tehran

The same pressure is evident in Iran’s healthcare system.

Economic newspapers increasingly describe illness not merely as a medical problem, but as an event capable of destabilizing an entire household budget.

Medication, medical equipment, and treatment costs are rising. Dental care remains one of the clearest examples of a service that poorer families simply postpone until their conditions deteriorate.

Compounding these financial pressures is an increase in influenza cases.

According to figures attributed to Iran’s Center for Communicable Disease Management, 22.5 percent of samples collected through the disease surveillance system tested positive for influenza, more than twice the high-alert threshold. Children accounted for more than half of the positive cases.

With the healthcare system already struggling with rising equipment and medication costs, an unusually severe flu season adds pressure that ultimately falls on households.

Even the rain, which should have been among the week’s few positive developments, has brought only limited relief.

By the morning of November 9, Tehran had recorded 56.5 millimeters of rainfall, compared with none during the equivalent period the previous year.

Yet the five reservoirs supplying the capital remain below 20 percent of capacity after six years of drought.

The rainfall has improved conditions, but it has not resolved the crisis.

Shargh newspaper captured the situation effectively: the rain is a bandage, not a solution.

The same description applies to almost every major economic problem currently confronting Iran.

A temporary decline in the dollar’s exchange rate is a bandage. Food assistance is a bandage. Removing price controls in the hope of increasing production is a bandage.

Each measure may provide some relief, but none addresses the underlying structural problems on its own.

The Desk’s Assessment: The Higher Tehran Raises the Price of an Agreement, the Higher It Raises Expectations at Home

Iran’s messaging reflects a clear paradox.

Just as negotiations appear to be becoming more serious, Tehran is hardening its rhetoric.

Rezaei speaks of American surrender to seven conditions. The Foreign Ministry insists that enriched nuclear material will not leave the country. Reports of a possible agreement permitting enrichment to 3.67 percent are quickly met with denials. And the Strait of Hormuz continues to be presented as the strategic asset forcing the United States to negotiate.

This is a clear attempt to reach an agreement that the regime can portray domestically as a victory.

But the more the Iranian leadership convinces the public that its pressure campaign is working, the more pressing the question becomes: What has that pressure actually achieved for ordinary citizens?

Will the blockade be lifted? Will frozen assets be released? Will the risk of another war decline? Will food assistance buy more groceries? Will medication become more affordable? Will automobile prices stop rising at an annual rate of 149 percent?

Iran’s conservative establishment measures success by its ability to make the enemy pay a price.

The country’s critical voices are increasingly measuring success by whether ordinary Iranians have to pay less.

That is the gap Tehran will have to close if an agreement is reached.

If Iran has indeed succeeded in transforming Hormuz, its nuclear program, and military pressure into significant diplomatic leverage, the next challenge is not to demonstrate once again that it possesses bargaining chips.

The next challenge is to show that it can translate those bargaining chips into tangible improvements in the lives of its citizens.