Toplines

The United States is targeting Iran’s sanctions-evasion networks to deepen Iran’s economic isolation and strengthen international sanctions enforcement. US Treasury Secretary Scott Bessent announced Operation Economic Outcast on August 24 aimed to “foreclose every other [financial] option available to the Iranian regime.”[1] Bessent stated that the United States will block every potential source of revenue that funds the Islamic Revolutionary Guard Corps (IRGC) and Iranian regime.[2] The US Treasury Department sanctioned 60 entities, individuals, and vessels on August 24 that enable the regime to procure illicit nuclear and missile technology, conduct cyber operations, and generate oil revenue, for example.[3] Bessent stated that the regime ultimately relies on countries that continue to fund Iran despite the risk funding Iran poses.[4] Bessent emphasized that countries can no longer operate in the ambiguity surrounding Iran’s activities.[5] Bessent added that US officials, including military officials, are engaging with their international counterparts to emphasize that every country has a defined timeline to shut down problematic activities with Iran that the US Treasury has identified.[6] He warned that US Treasury officials “will do so unilaterally” if governments fail to act within these specified timeframes.[7] Bessent replied that “no one is above sanctions” in response to a question about the United States sanctioning the People’s Republic of China (PRC) for its economic ties with Iran — China imported around 90 percent of Iranian oil exports before the US blockade.[8]

These economic steps come as the Iranian economy continues to deteriorate. The Iranian rial fell to a record low of 2.02 million rials to one US dollar on August 24 in anticipation of Bessent’s announcement.[9] Inflation has reached approximately 66 percent. Iranians have experienced a steep decline in their purchasing power and business prospects, according to Iranians speaking to the New York Times on August 22.[10] The rial’s depreciation and the effects of the US naval blockade on the regime’s ability to generate revenue through exports, as well as the regime’s reported foreign currency shortages, likely put immense economic pressure on the domestic Iranian population, including Iranian security forces, who are on a government salary.[11] Bessent addressed Iranian soldiers in his August 24 announcement, stating that “as more of your paychecks stop or are just delayed, ask where your commanders are leading your country, to triumph or to ruin.”[12] Bessent notably compared Iranian security forces’ situation in enforcing a regime crackdown on internal dissent to the falling of the Berlin Wall “when ordinary soldiers decided to not shoot on their own people.”[13] Bessent’s plea to Iranian security forces follows his comments on August 20 that the new policy will set the conditions for ”regime collapse.”[14]

The Iranian regime is attempting to find routes to alleviate economic pain while simultaneously trying to deter and prepare for potential social unrest in response to compounding economic pressure. The regime is seeking alternative methods to alleviate economic pressure and generate revenue amid the looming economic crisis. Iranian Central Bank Governor Abdol Nasser Hemmati and Parliament Speaker Mohammad Bagher Ghalibaf discussed preserving and expanding economic ties between Iran and Iraq with Iraqi government officials and economic experts in Iraq from August 16 to 19.[15] These efforts come amid reports that Iraq and other regional countries are preparing land-based transregional pipelines to circumvent the Strait of Hormuz and weaken Iran’s influence over international energy markets.[16] Iran is also attempting to establish alternative land routes to continue to export its petroleum products amid the US naval blockade.[17]

Iranian officials are also attempting to reassure the Iranian public of Iran’s economic situation, likely in response to regime concerns about the potential for internal unrest. Hemmati claimed on August 24 that previous sanctions on Iran led to a decline in purchasing power but noted that “hardship is not the same as collapse.”[18] Hemmati claimed that Iran has no problem supplying foreign exchange currency to import basic goods.[19] Hemmati admitted to Iranian state TV on August 19 that Iran is facing foreign currency reserve shortages as well as heavy reconstruction costs, however.[20] A Tehran Chamber of Commerce member told an IRGC-affiliated outlet on August 24 that Iranian traders have already shifted their business from the United Arab Emirates (UAE) to the PRC after the UAE announced on August 18 that it would halt all trade and financial transactions with Iran.[21] ISW-CTP previously assessed that the UAE’s decision would further weaken Iran’s already deteriorating economy by restricting both its access to essential imports and its ability to repatriate export revenues and circumvent sanctions.[22] The regime’s messaging appears intended to project resilience and reassure domestic audiences.

The regime is simultaneously preparing for the possibility of renewed social unrest, which is consistent with its longstanding approach to suppressing dissent rather than addressing the underlying economic grievances that drive the unrest. The regime’s brutal crackdown on the Iranian population in December 2025 and January 2026 effectively suppressed the protest movement for the time being.[23] The regime will likely employ a similar response in the event of renewed protest activity. IRGC, Basij Mohammad Rasollah Corps, and Law Enforcement Command — the regime’s key institutions responsible for protest crackdowns commanders from Tehran Province — met on August 23 and announced an upcoming internal security exercise, “Janfada” [self-sacrifice], with 313,000 personnel to “bolster security.”[24] The regime likely chose 313,000 to invoke a religious reference, as 313 holds symbolic significance in Shia Islam — 313 individuals are meant to accompany Imam Mahdi upon his return.[25] The exercise likely serves to demonstrate to the domestic population the regime’s capacity for mass mobilization within Iran. The regime seeks to project strength, control, and its latent capacity to suppress its people. Iranian exercises have traditionally served to signal capability and resolve rather than to train forces.[26]

Regime officials and outlets are issuing threats against foreign states, likely to deter them from complying with the US economic campaign against Iran. Iranian Supreme National Security Council Secretary Major General Mohsen Rezaei threatened on X on August 23 to designate any country that complies with US sanctions as an enemy.[27] Iranian military action would be consistent with Iran’s previous use of force against countries to drive them away from the United States.[28] An outlet affiliated with the Supreme Leader’s Office reinforced Rezaei’s threat on August 23 and warned that Iran would launch retaliatory attacks against the interests of such states.[29] The op-ed published an image of metal cages over reported Emirati fuel storage tanks, which is an implicit Iranian threat against Emirati energy infrastructure.[30] The UAE is the only Gulf country to have announced the severing of financial ties with Iran at the time of this writing.[31]

The Iraqi federal government and some Iranian-backed militias are likely attempting to reach an agreement to integrate militia elements operating outside the Popular Mobilization Forces (PMF) into recognized PMF units. The director of an unspecified Shia Coordination Framework leader’s office leaked on August 24 that the Zaydi government and unspecified framework members had reached an agreement under which the militias would surrender their weapons to the PMF.[32] An Iranian-backed Iraqi militia-affiliated parliamentarian said in a media statement on August 24 that disarmament discussions between the Iraqi government and militias will focus on integrating militia fighters into the PMF.[33] The Iraqi media discussions suggest that this move would, in effect, mean that the Iranian-backed militia-controlled PMF would accept the weapons from Iranian-backed militias operating outside the state. It is not clear how exactly individual fighters would be “integrated” into the PMF, but some militias have fighters operating both inside and outside state auspices.[34]

This reported plan comes as some Shia Coordination Framework members have urged the Iraqi government to postpone the September 30 disarmament deadline, possibly to allow time for the Iraqi parliament to pass the PMF Service and Retirement Law.[35] A framework source told Iraqi media on August 23 that the process of transferring militia weapons to PMF-controlled warehouses would only begin after US forces leave Iraq and parliament approves the PMF Service and Retirement Law.[36] Zaydi’s September 30 deadline for disarmament currently corresponds with the planned withdrawal of US-led international coalition forces from Iraq.[37] An informed framework source told Iraqi media on August 23 that the framework will refer the PMF Service and Retirement draft Law to the Parliament Security and Defense Committee in the coming days.[38] The exact text of the current draft PMF Service Law is not public, but the framework source stated that the draft law guarantees PMF members’ rights and covers PMF ranks, career progression, retirement mechanisms, as well as the PMF’s “general structure.”[39] Parliamentary committees must review and approve draft laws before Parliament can convene and vote on the laws, which can take several weeks, if not months.[40]