Iran waits out Washington as sanctions bite but informal trade networks hold

With a US naval blockade effectively cutting off Iran's oil exports and inflation soaring to 90 percent, Tehran is playing a waiting game — banking on decades of experience evading American sanctions to outlast Washington's resolve.

According to CNN on Tuesday (local time), Iran's economy has been pushed to its worst crisis yet by the combined pressure of the US maritime blockade and sanctions. In September, crude oil loaded at Iranian ports fell to zero barrels for the first time since records began in 2013.

Iranian crude stockpiles held outside the blockade zone have also fallen by more than half, dropping from 100 million barrels in July to 45 million barrels recently. Oil production has slid to around 2 million barrels per day — roughly half of normal output — barely enough to meet domestic demand.

Prices have surged as well. Iran's inflation rate hit 90 percent annually last month. Adnan Mazarei, a senior fellow at the Peterson Institute for International Economics, said Iranians spend cash the moment they receive it. "Otherwise the value of the money immediately falls," he said. Mohsen Rezaei, secretary-general of Iran's Supreme National Security Council, acknowledged that the country's economy is now at "the most dismal level in history."

Even so, experts say the Iranian government is unlikely to capitulate in the short term. The informal trade networks Iran has built over decades of circumventing US sanctions remain operational.

Iran has continued moving oil overland through Kazakhstan and Russia, via Caspian Sea waterways, and by disguising Iranian crude as Iraqi oil. Ship-to-ship transfers in international waters — where cargo is moved onto vessels from other countries — are also used.

Covert financial transactions routed through trustees in neighboring countries are another tool for evading sanctions. Charlie Brown, a senior adviser at the United Against Nuclear Iran advocacy group, said Iran continues to conduct transactions using dollars and cryptocurrency to avoid detection.

Michelle Bruhard, head of policy and geopolitical risk at shipping intelligence firm Kpler, said Iran is "very good at running a state with no resources," and raised the possibility that money is still flowing into Iran from outside through some channel.

The Iranian government's ability to insulate itself from the population's economic suffering also enables a prolonged standoff. "Life is becoming more miserable for Iranians, but the Iranian government has an enormous capacity to tolerate the suffering of its people," Mazarei said.

The burden on the United States and its partners, meanwhile, is growing. The US military is pouring vast resources into the blockade and vessel-escort operations, while insurance premiums and operating costs for ships transiting the Middle East have surged.

Daily operating costs for very large crude carriers have climbed to $1.6 million, driven by rising crew costs and insurance premiums — 24 times the level of last year. The longer the blockade continues, the higher the costs become not only for Iran but also for the United States, its partners and the global shipping industry.

Iran's negotiating leverage has weakened somewhat as oil shipments through the Strait of Hormuz — which Tehran effectively controlled in the early stages of the war — have largely recovered. But Iran is calculating that Washington also faces significant political and economic costs in sustaining the current high-intensity blockade indefinitely.

CNN assessed that this structural dynamic may leave the Iranian government in a stronger negotiating position than its visible economic distress would suggest.

"We will be in a precarious, near-war state for a long time," Mazarei said. "Just as you cannot pinpoint the exact temperature at which a patient will die, there is no mechanical tipping point at which Iran collapses."

Bruhard similarly assessed that Iran has not yet reached the "tripwire" that would threaten the regime's survival.