Welcome back to the MBN Iran Briefing. You can read it in Arabic here, and check out MBN’s flagship Arabic-language Alhurra news platform (also in English). If you were forwarded the MBN Iran Briefing, please subscribe.
Here is what you need to know this week: Today Washington announces what President Trump has called an “economic D-Day,” while Tehran has already pledged counter-measures of its own. Pakistan’s army chief is flying to Tehran today, and the rial has finally cracked the dizzying threshold of two million to the dollar, jumping nearly three percent in a single day, and a rumored gas price hike sent Iranians into panic lines at the pump.
In other news, Sharif University moves to expel ten student protesters, and Iran’s central bank governor gives a speech that hints at a crisis ahead.
I’m joined by our new Iran reporter Tara Rad, who is writing under a pseudonym, for this edition of the MBN Iran Briefing. Share your thoughts, analysis, and predictions with me at ailves@mbn-news.com.
Don’t forget to check out the latest Iran Briefing podcast. In this edition I’m joined by Farzan Sabet, Middle East expert at the Geneva Graduate Institute, and MBN Editorial Chair Matthew Kaminski, as we dig into whether Tehran actually wants this war to end or has decided continued confrontation serves it better.
QUOTE OF THE WEEK
If the economic war continues, not a single drop of oil will be exported, neither through the Strait of Hormuz nor from anywhere in the Persian Gulf. Iran will regard any country’s participation in or support for America’s economic war against the Iranian people as an act of war.
—Mohsen Rezaei, Secretary of Iran’s Supreme National Security Council
TOP OF THE NEWS
1. Washington’s Economic D-Day Is Here
Writing in the Financial Times yesterday, U.S. Treasury Secretary Bessent declared, “At dawn begins an economic D-Day – the single greatest financial offensive ever marshalled against an adversary.” He concluded his piece with this sentence: “The world should understand that our objective is to sever every economic lifeline that sustains the tyrannical regime until Tehran stands alone.”
Combined with the existing naval blockade of the Strait of Hormuz, the measures are meant to cut off foreign banks, businesses and governments from doing business with Tehran.
A key challenge will be enforcement. Iran’s foreign ministry spokesman Esmail Baghaei wrote on X that the sanctions amount to “an assertion of extraterritorial sovereignty over every independent Member State of the United Nations.” His argument was that “No State may lawfully compel foreign banks, enterprises, or airports – each subject to the exclusive jurisdiction of its own sovereign – to renounce lawful commerce with a third State.”
Supreme National Security Council Secretary Mohsen Rezaei, a hardline former commander of the IRGC, went even further. Rezaei said that if Iran’s neighbors join the U.S. in the economic war against Iran, Tehran will consider such countries to be “enemies” and that “not a single drop of oil will leave the Persian Gulf and the Strait of Hormuz, and we will also target other routes through which oil is exported from the Persian Gulf.” Tehran has also said that it will seize any vessel violating its transit rules in Hormuz. This raises the odds of a direct confrontation with the tankers CENTCOM is currently escorting through the strait.
Two things to watch for: how extensive Washington’s new sanctions will be and how Tehran reacts with practical measures.
Pakistan’s Chief of Army Staff Field Marshal Asim Munir. Photo: AFP.
2. Tehran Keeps Diplomatic Channels Open
Even as the Islamic Republic threatens its neighbors, two channels remain open. A visit to Baghdad last week by Iranian parliament speaker Mohammad Bagher Ghalibaf, during which he met with Iraq’s parliament speaker and prime minister, may have shored up relations between the two countries. Tehran has granted a number of Iraqi tankers permission to cross the Strait of Hormuz. Ninety percent of Iraq’s budget comes from the export of oil, and there is no alternative for Iraq other than the Strait of Hormuz to export most of its crude oil.
Ghalibaf also said on X that Iran has received “numerous messages from neighboring countries about shaping new security arrangements and economic cooperation in the region.”
Pakistan’s army chief, Field Marshal Asim Munir, is due to fly to Tehran today. The Iranian foreign ministry bills the agenda of the visit as “strengthen[ing] bilateral cooperation between Iran and Pakistan and to continue Pakistan’s good offices in support of peace and security in the region.” Other sources suggest that the Pakistani army chief will discuss the new Pakistan-Turkey-Saudi Arabia agreement. It’s hard not to notice that the visit is starting the same day as Washington announces its new sanctions against Tehran.
Watch for any statements or signs emerging from the Pakistani army chief’s visit to Tehran at this critical juncture.
3. The Rial Finally Cracks the Two Million Mark
Even as Washington’s new sanctions are rolled out today, a new threshold has been crossed: The dollar is now trading at over two million rials. The exchange rate jumped by nearly three percent from Saturday to Sunday alone.
The Iranian financial press has a lot to say on the topic. As one paper wrote, “if this trend continues, the dollar could reach the range of 200,000 to 240,000 tomans [2 to 2.4 million rials]” by Sept. 22. Observing that “[t]he market is buying out of fear of the future,” another financial outlet noted that only 35 days have passed since the rial broke its last record.
The rial has lost 43 to 50% of its value since January, and inflation in July ran at 87.9%. Given today’s new sanctions, a continuing naval blockade, and (as I recently noted in this newsletter) the estimated $300 billion in damage the war has caused to the Iranian economy, the rial will have little chance to rebuild its value anytime soon.
The rial’s plunge to a then-record low of roughly 1.44 million to the dollar in late December triggered unrest. Tehran’s Grand Bazaar shopkeepers went on strike and the protests spread across the country within days. Iran’s largest demonstrations in three years led to a bloody crackdown in which thousands were massacred in early January.
A currency-reform law that nominally took effect in February stripped four zeros from the rial so that 2 million rials would now be 200 rials, but new banknotes won’t be in circulation for years and, of course, doesn’t make the rial any stronger.
Watch whether the rial falls further after the new sanctions are announced.
At the gas pump in Tehran. Photo: AFP.
4. Panic at the Gas Pump
In discussing the state of the Iranian economy and state budget in a speech to a gathering of doctors on Friday, the Iranian president mentioned that the government buys gasoline at nearly 90 times what it charges drivers at the pump.
The speech came just as Iran began a new month yesterday. Kilometers-long lines formed at gas stations on the final days of the outgoing month as rumors spread that the coming weeks would see a reduction in the gasoline ration (check out my previous discussion of the ever-present issue of gas rationing and prices here). In the event, the new month saw no change, and some reports blamed the panic on technical glitches in the fuel card system.
The underlying stress on the Iranian economy of such a massive subsidy remains unresolved. The government has avoided touching gas prices for years, presumably out of wariness after the nationwide unrest that followed the last price increase, which was in Nov. 2019.
Watch if Pezeshkian’s remarks presage a rise in gas prices.
IN OTHER NEWS
Entrance to Sharif University. Photo: AFP.
Sharif University Students Face Expulsion
Sharif University of Technology, one of Tehran’s top public research universities for science and engineering, is facing an unprecedented crackdown on its students.
According to the Telegram channel “United Students,” ten Sharif students have now received expulsion orders.
The orders now go to the Iranian Ministry of Science, Research and Technology for final approval.
At least one expulsion has already been finalized: Student protester Reza Dalman has been expelled. In addition, he has been barred from attending any Iranian university for four years. Dalman was the student who famously hung a mouse doll from a campus tree, a satirical protest aimed at former Supreme Leader Ali Khamenei.
University disciplinary committees issued the orders behind closed doors, with little transparency.
This latest wave of disciplinary actions began across Iranian universities in June, following the announcement of the ceasefire.
In June, the semi-official Fars News Agency – closely tied to the IRGC-backed Basij militia – reported that the students faced a series of charges. The charges included organizing protests and mocking state officials, “insulting sacred matters,” and activity on social media.
Iran’s Economy: Super Crisis on the Way?
Last Wednesday night, Iran’s central bank governor appeared on national TV. He portrayed the economic situation in a way that suggested a major crisis in Iran could be on the way, and that Iranian officials may already know it is coming.
Abdolnaser Hemmati, Governor of the Central Bank of Iran, said Iran is trying to convince BRICS to create a digital financial system fusing cryptocurrencies between the central banks of the bloc.
His remarks were a mixture of good and bad news, but they made many who were sitting in front of their TVs that night nervous. That nervousness was reflected the following day on social media, in newspaper editorials, and in conversations among ordinary Iranians.
Hemmati did not say outright that a major crisis is imminent. He did his best to strike a positive note, claiming that funding for medicine and medical equipment had increased by about 30% and that economic indicators were improving.
Yet that scarcely compensated for the truly bad news he had to share. The release of around $12 billion of Iranian funds expected under the Islamabad Memorandum of Understanding has yet to take place, while sanctions, the war, reduced oil exports, and limited access to foreign exchange continue to squeeze the postwar economy.
Hemmati also acknowledged that Iran’s current economic situation is far more difficult than in 2018-20. This was the period of the initial years of maximum U.S. pressure. Hematti was governor of the central bank then as well.
Even though oil exports had fallen sharply back then, Iran still had some channels for trade. The infrastructure was stronger and in general the economy was in much better shape than today.
Today, years of underinvestment, deteriorating infrastructure, energy shortages, political uncertainty, and limited financing have weakened these economic buffers. Persistent inflation has also eaten into people’s savings and purchasing power.
Couple all this with the U.S. announcement of intensified sanctions, and Iranians can hardly be blamed for feeling terrified about the state of the economy.
