“Destabilizing the Regime Without Military Operations”: U.S. Maritime and Economic Pressure Paralyzes Iran’s Oil Exports, Raising Fears of Internal Power Struggles Under Prolonged Pressure

“Large-Scale Military Operations Against Iran Unnecessary”: U.S. Secretary of State Stresses Impact of Economic Sanctions
Iran’s Crude Oil Exports Effectively Halted, Prompting Warnings of Foreign-Currency Inflows Drying Up
Fears Grow Over Internal Power Struggles and Public Disaffection in Iran, With a Possible Reshuffling of the Regime Also Emerging

.U.S. Secretary of State Marco Rubio said large-scale military operations against Iran are not immediately necessary, judging that existing economic sanctions and a naval blockade are already exerting substantial pressure. Indeed, Iran’s fiscal and foreign-exchange conditions have been deteriorating rapidly since the war began, amid a plunging rial, soaring prices and a halt in crude oil exports. Some observers even suggest that prolonged pressure could turn economic hardship into public disaffection and conflicts within the leadership, shaking the very foundations of the regime’s rule.

U.S. Confident in Impact of Economic Pressure on Iran

According to AFP, Bloomberg and other news agencies on the 10th, local time, Rubio told reporters at a Group of Seven (G7) foreign ministers’ meeting in Paris, France, that day: “The economic operation against Iran is having such a devastating effect that there is no need to launch large-scale combat operations right now.” He added, “President Donald Trump has also concluded that large-scale military operations are not necessary at present,” explaining that “we are achieving the same objectives through economic means.” Emphasizing that U.S. economic sanctions and the naval blockade were restricting Iran’s energy exports, he claimed, “Iran has never faced a situation in which it has been unable to sell energy on international markets as it is now.”

Rubio nevertheless maintained that the United States could respond militarily if Iran crossed its “red lines.” Although he did not specify the criteria for intervention, he warned that Iran would pay a “terrible price” if it expanded its military actions or attacked civilian infrastructure in the Gulf region. He added, “The U.S. military is ready to carry out devastating strikes whenever necessary,” and said, “We simply judge that there is no need to do so at present.”

Iran’s Economy on Shaky Ground

The United States is expressing such confidence because Iran has indeed suffered considerable economic damage since the war broke out. Iran was already in a severe economic downturn before the armed conflict began. According to the World Bank (WB), Iran’s real gross domestic product (GDP) fell 2.8% last year from the previous year, while consumer price inflation reached 42.2%. This reflected the cumulative effects of prolonged U.S. sanctions, chronic fiscal and monetary instability, energy shortages and other adverse factors. The war that broke out in late February further intensified the crisis. Initially, the Iranian government introduced measures to ease financial anxiety, including raising bank withdrawal limits and suspending penalties for overdue small loans. But airstrikes, supply-chain disruptions and internet shutdowns combined to spread the economic damage rapidly.

Price and currency instability also flared up almost immediately. The Iranian rial plunged from around IRR 1 million per USD last September to IRR 2.66 million per USD as of the 10th, while the average inflation rate over the preceding 12 months surged to 76.8%, according to official statistics released last month. Year-on-year inflation also approached 88.7%, and prices for some daily necessities and cigarettes more than doubled from a year earlier. Household hardship has also reached extreme levels. The average monthly wage for Iranian workers is just USD 125, but basic household living expenses have reportedly risen to around USD 450 a month.

Operation Economic Outcast Deals a “Crushing Blow”

These economic difficulties intensified in particular as the United States stepped up “Operation Economic Outcast” against Iran. Launched by the U.S. Treasury Department on August 24, the operation is a government-wide sanctions campaign aimed at weakening the ability of the Iranian government and the Islamic Revolutionary Guard Corps (IRGC) to raise funds by blocking Iran’s crude oil exports and international financial transactions. With the launch, the United States expanded the operation’s scope to five sectors—digital assets, technology, gold, aviation and shipping—and added around 60 targets, including companies, individuals and vessels supporting Iran’s sanctions evasion, to its sanctions list.

Last month, the U.S. State and Treasury departments jointly imposed additional sanctions targeting the so-called “shadow fleet” that transports Iranian crude oil overseas. The State Department designated 10 companies, 6 individuals and 5 vessels for sanctions, while the Treasury Department also imposed restrictions on 17 companies and associated vessels. Pressure continued on overseas companies and financial institutions supporting the shadow fleet’s operations. On the 15th of the same month, Iraqi banks and offshore financial networks that facilitated Iran’s dollar transactions were brought under the restrictions. On the 21st, law firms based in Panama and Greece that helped establish shell companies used to transport Iranian crude, along with shipping agencies in Singapore and the United Arab Emirates (UAE), were also designated.

Table 1. Economic Impact of the Halt in Iran’s Crude Oil Exports

Iran’s Crude Oil Export System in Crisis

The continuing U.S. naval blockade, combined with economic sanctions, has effectively halted crude oil exports, a cornerstone of Iran’s economy. Energy intelligence firm Vortexa said Iran’s seaborne crude oil exports plunged from an average of 230,000 barrels a day in early September to 0 barrels in the second week of that month, and that this situation continued into the beginning of last month. United Against Nuclear Iran (UANI) subsequently estimated that Iran’s petroleum-related exports averaged 15,806 barrels a day last month, down approximately 69% from 50,789 barrels in September. Even that volume consisted of liquefied petroleum gas (LPG) carried aboard a single small tanker, with no crude oil exports recorded. Shipments to China, Iran’s largest export destination, also totaled 0 barrels in both September and October.

Market observers predict that if the current situation persists, Iran’s fiscal and foreign-exchange crisis could deepen further around the end of the year. On the 22nd of last month, global energy analytics firm Kpler assessed that “if the U.S. naval blockade remains in place, inflows of revenue from Iran’s crude oil and condensate exports could stop around mid-December.” Iran had been securing foreign currency by selling crude from tankers positioned outside the blockade zone in advance, but according to Kpler’s analysis, those supplies were fully depleted in the middle of last month. Given that payment typically takes 1–2 months after crude oil delivery, foreign-currency inflows could plunge from mid-December, when even payments for previous sales would cease to arrive.

Could Iran’s Leadership Lose Its Grip?

Some observers suggest that if this economic pressure persists, Iran’s crisis could become a threat to the regime’s survival. Their analysis is that if blocked crude oil exports weaken the state’s ability to secure fiscal revenue and foreign currency, and public disaffection deepens, dissatisfaction with the leadership could grow within key power institutions such as the military. The possibility of internal power struggles, including a military coup or a change in leadership, would then be difficult to rule out. Indeed, Reuters reported in August, citing Iranian government officials, that Iran’s leadership was concerned about the risk of large-scale anti-government protests and instability stemming from economic sanctions.

There is also a view, however, that Iran’s leadership is unlikely to yield to U.S. pressure to prevent instability. For the Iranian regime, fully accepting U.S. demands is a momentous decision that could lead to an immediate loss of power. Continuing to resist, even at the cost of economic damage, may therefore be more conducive to preserving the regime. On this point, a foreign affairs expert said, “Iran is unlikely to raise the white flag immediately, but it is also true that prolonged resistance compounds economic hardship and social discontent.” The expert added, “Ultimately, the U.S. economic blockade is likely to gradually weaken the existing leadership’s foundations of rule and trigger an internal reshuffling of power.”