Difficulties grow in Iran

The Islamic Republic of Iran is going through a very turbulent period, with economic and social problems. 

These are partly linked to the sanctions imposed on Iran and the existing social discontent. The sanctions are largely due to the thorny issue of its nuclear programme, with negotiations at a standstill. 

Iran will not return to negotiations with the United States as long as Washington makes ‘unreasonable demands’, the Iranian Foreign Minister said on Wednesday, according to the semi-official Tasnim news agency. 

Tehran and Washington participated in five rounds of indirect nuclear negotiations that ended with a 12-day air war in June, in which Israel and the United States bombed Iranian nuclear facilities. 

‘The talks that were underway with the United States, as well as the negotiations in New York, were suspended and did not progress due to excessive US demands,’ Abbas Araghchi said, according to Tasnim. 

Last month, an Iranian source told Reuters that ‘several messages have been sent to Washington in recent weeks to resume talks through mediators, but the Americans have not responded.’ 

Earlier this month, Iranian government spokeswoman Fatemeh Mohajerani said US officials did not attend a meeting proposed by Iran in New York during the UN General Assembly. 

Araghchi said on Wednesday that Iran had contacts with US Special Envoy to the Middle East Steve Witkoff through mediators, reiterating that Iran ‘has always been committed to diplomacy and peaceful solutions.’

The breakdown in dialogue with the United States coincides with an effort by clerical rulers to preserve stability in the country, with limited room for manoeuvre following the reimposition of UN sanctions after talks failed to curb Iran's disputed nuclear activity and ballistic missile programme. 

Both sides say diplomacy to resolve the impasse is still possible, although Iran's supreme leader, Ayatollah Ali Khamenei, has rejected US President Donald Trump's offer to forge a new deal. 

Senior Iranian officials, speaking on condition of anonymity, told Reuters that Tehran believes the US, its Western allies and Israel are stepping up sanctions to fuel unrest in Iran and jeopardise the very existence of the Islamic Republic. 

Since the reimposition of UN sanctions on 28 September, multiple high-level meetings have been held in Tehran on how to avoid economic collapse, circumvent sanctions and manage simmering public anger, the officials said. 

Growing economic disparities between ordinary Iranians and a privileged clerical and security elite, economic mismanagement, rampant inflation and state corruption, reported even by state media, have fuelled discontent. 

‘The establishment knows that protests are inevitable, it's just a matter of time... The problem is growing, while our options are shrinking,’ one of the officials said. 

Iran's leadership relies heavily on its ‘resistance economy’, a strategy of self-sufficiency and closer trade with China, Russia and some states in the region. Moscow and Beijing support Iran's right to nuclear energy for peaceful purposes and condemned US and Israeli attacks on three Iranian nuclear facilities in June. 

But analysts warn that such alternative solutions may not be enough to protect the vast country of 92 million people from renewed economic blow. 

‘The impact of UN sanctions will be severe and multifaceted, deepening the country's long-standing structural and financial vulnerabilities,’ said Umud Shokri, an energy strategist and senior visiting scholar at George Mason University near Washington. 

‘The government is struggling to maintain economic stability as sanctions disrupt banking networks, restrict trade and limit oil exports, the country's main source of income, creating growing social and economic pressure. 

Iran has avoided widespread economic collapse since 2018, when, during his first term, Trump withdrew the United States from Tehran's 2015 nuclear deal with six world powers and reimposed US sanctions. 

But the resumption of broader UN sanctions is causing shocks that will hamper economic growth, accelerate inflation and the collapse of the rial currency, pushing the economy into a recessionary spiral, one of the Iranian officials said. 

The Iranian economy contracted sharply after 2018 due to the renewal of US sanctions. It recovered in 2020, with moderate growth at times, mainly due to oil trade with China. However, the World Bank this month forecast a contraction of 1.7% in 2025 and 2.8% in 2026, a sharp decline from the 0.7% growth it had projected in April for next year. 

Although Tehran still relies heavily on oil exports to China, its largest customer and one of the few countries still doing business with it despite Trump's ‘maximum pressure’ policy, doubts remain about the sustainability of that trade. 

Shokri said that if China seeks to ease tensions with the Trump administration, it could harden its stance on Iranian oil, demanding bigger discounts or reducing imports altogether. 

Few Iranians can escape the hardships that come with it. A sense of despair is spreading throughout society, affecting urban professionals, bazaar merchants and rural farmers alike. 

The clerical elite is increasingly concerned that growing public distress could reignite the mass protests that have erupted periodically since 2017 among low- and middle-income Iranians, an Iranian official said. 

Many businesspeople fear deeper international isolation and more Israeli air strikes if diplomacy fails to resolve the nuclear standoff.