MICHEL MARTIN, HOST:
The U.S. blockade of the Strait of Hormuz is meant to pressure Iran by depriving it of its biggest moneymaker, oil exports. Those exports have plummeted, costing Iran hundreds of millions of dollars in oil sales. NPR international affairs correspondent Jackie Northam reports on Iran's economy.
JACKIE NORTHAM, BYLINE: By any measure, Iran's economy was struggling before the war because of years of financial mismanagement and punishing international sanctions. But Iran was always able to limp along because of exports of oil, petrochemicals, steel. This time is different.
ESFANDYAR BATMANGHELIDJ: First off, you have the disruptions to maritime trade first from Iran's own decision to close most maritime traffic in the Strait of Hormuz, and now from the additional disruptions related to the U.S. blockade.
NORTHAM: Esfandyar Batmanghelidj is CEO of the Bourse & Bazaar Foundation, a London-based think tank focused on Iran's economy.
BATMANGHELIDJ: I think even more consequentially, the fact that the U.S. and Israel very deliberately targeted civilian infrastructure and industrial facilities across the country, that has been very devastating for general economic output.
NORTHAM: Oil and gas facilities, steel and aluminum plants, bridges, and ports, and factories were damaged or destroyed by the U.S. and Israel. But the regime has also maintained an internet blackout in Iran throughout the conflict that's hurting thousands of small businesses, says Benjamin Radd, a senior fellow at the UCLA Burkle Center for International Relations.
BENJAMIN RADD: There are Iranians who are selling products, you know, promoting themselves, cafe owners, business owners who use Instagram very much as a way to communicate and to advertise and to promote what they do.
NORTHAM: Djavad Salehi-Isfahani, a professor of economics at Virginia Tech, says a lack of cash flow could impact vital food imports.
DJAVAD SALEHI-ISFAHANI: Iran is expected to import close to 5 million tons of wheat this year.
NORTHAM: Djavad Salehi-Isfahani says Iran will need money to buy that.
SALEHI-ISFAHANI: If it runs out of cash because it can't sell any oil, it would have to borrow money. Will the Chinese be able to extend them credit? The Chinese are obviously not happy with this war, so they may use that as a way of pressuring Iran to sign a peace agreement.
NORTHAM: Iran's economy has weathered near continuous sanctions since the Iranian Revolution in 1979. Suzanne Maloney, an Iran specialist at the Brookings Institution, says the country over the years has built an entire economy reliant on smuggling, bartering, and the black market.
SUZANNE MALONEY: It really is - you know, has shaped the economy, and this is an economy that is going to have a greater degree of endurance as a result of those networks.
NORTHAM: The Bourse & Bazaar Foundation's Batmanghelidj says a debate underway now is, at what point does Iran have to reduce production at its oil wells because it's not able to export oil?
BATMANGHELIDJ: If you're not selling that oil, you have to store the oil. I think the consensus from energy analysts is that there's maybe around two months of storage.
NORTHAM: At that point, Iran will likely start shutting oil wells. Maloney, with the Brookings Institution, says they are some of the oldest oil fields in the world and could suffer permanent damage if they're shut off. She says, even given the serious consequences of risking its main export, it's unlikely the Iranian regime will buckle and give in to U.S. demands.
MALONEY: What we've seen is that this is a regime that is willing to endure significant pain and impose significant constraints on its own population in order to try to maintain what they believe is an upper hand in the conflict.
NORTHAM: Maloney says the regime is betting the U.S. will feel more pressure over the global economy and American politics and back down first.
Jackie Northam, NPR News.
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