After six years of U.S. “maximum pressure,” Iran’s economy continues to defy dire predictions of economic collapse that motivated Trump’s hasty 2018 withdrawal from the Iran nuclear deal (also known as the JCPOA). The Biden administration’s continuation of the same policy since 2021 is similarly based on the logic that the weaker Iran’s economy is, the more likely Tehran will bend to Washington’s will. The economy’s resilience is evidenced by the fact that in the first nine months of the Iranian fiscal year (March 21 to December 20, 2023), GDP grew by a 6.7% annual rate, and it is very likely to finish the year in two months with a growth rate exceeding the World Bank and IMF forecasts of about 4%.

The COVID-19 crisis has no silver lining, and the virus is unresponsive to the instruments of power that the Islamic Republic has amassed.

Earlier this month, Iran further expanded its nuclear enrichment program, taking another step away from the nuclear accord it had signed with world powers in July 2015. Since President Trump withdrew the U.S. from the accord, on May 2018, and re-imposed U.S. sanctions, Iran’s economy has lost nearly 10 percent of its output. Although the economy appears to have weathered the initial storm, time is not on Iran’s side and its leaders see the gradual resumption of enrichment as a way to end the current stalemate without caving to U.S. demands.

In the past 10 years, oil exports have averaged about $67 billion in Iran. Last year, they dropped by two-thirds, and they are expected to drop below $30 billion this year.  There are reasons to believe that, with appropriate policies, the country can live with this level of oil exports, albeit at a reduced standard of living, and even do itself some good in the long run by reducing its dependence on oil.

Iran has been there before. In 2012, when President Obama ratcheted up U.S. sanctions against Iran, oil exports dropped by 27.5 percent, and GDP fell by 6.2 percent. In 2015, sanctions and the collapse of oil prices further reduced oil exports to $32 billion, a decade-long low, and GDP declined by 1.6 percent. If Iran’s leadership is to successfully resist U.S. demands, it must do more than find ways to evade sanctions. A lot depends on its ability to adopt a plan that reduces the economy’s dependence on oil, while distributing the burden of restructuring equitably across social groups.

For the Islamic Republic, resistance to Washington has become a cultural norm, and it considers independence (esteghlal) as the main achievement of the 1979 revolution.  According to Secretary of State Mike Pompeo, Iran would have to meet 12 conditions before the United States will renegotiate the nuclear deal and consider removing its sanctions. These conditions, which are nothing short of surrender on Iran’s part, are either set to force Iran out of the nuclear deal and therefore trigger the return of UN sanctions, or they are a thinly veiled call for regime change.

Unlike the socialist revolutions of the last century, the Islamic Revolution of Iran did not identify itself with the working class or the peasantry, and did not bring a well-defined economic strategy to reorganize the economy. Apart from eliminating the interest rate from the banking system, which was achieved in name only, the revolution put forward few specific economic policies that could be called an Islamic economic development strategy. To be sure, its populist and pro-poor rhetoric was quite distinct from the Pahlavi regime it replaced, but its actual policies could be found in the toolboxes of most developing countries and international organizations.