Trump bets on economic squeeze to pressure Iran as Tehran's own failures worsen crisis

President Donald Trump is signaling, at least for

President Donald Trump is signaling, at least for now, that he prefers letting economic pressure mount on Iran rather than immediately expanding military action against Tehran. In a phone interview with Axios on Sunday, Trump said the U.S. is "only semi-negotiating" with Iran, adding that the country is suffering from massive inflation and has no money. The president has repeatedly pointed to the U.S. naval blockade in the Strait of Hormuz as a key factor compounding Iran's financial woes.

This approach marks a shift from weeks of administration rhetoric that hinted at renewed large-scale military strikes. Yet as Washington increasingly highlights Iran's economic distress as leverage, a deeper question emerges: how much of the crisis stems from U.S. sanctions and the blockade, and how much is the result of decades of corruption, mismanagement, and skewed spending priorities by the Islamic Republic itself?

The strain is visible in everyday life. An investigation by the Iranian newspaper Jahan-e Sanat described supermarket workers encountering customers who shoplifted basic groceries or ate food inside stores because they could no longer afford it. Meanwhile, the Treasury Department's "Economic Fury" campaign has targeted Iran's oil trade, shadow banking networks, weapons procurement, and cryptocurrency holdings. Treasury announced on July 29 that it had sanctioned more than 100 vessels linked to Iran's shadow fleet since early 2026.

A Treasury spokesperson said the campaign "has left

A Treasury spokesperson said the campaign "has left the regime desperate for cash," adding that "Iran's economy is in freefall." A U.S. official echoed that the administration retains all options but prefers a diplomatic solution. "The United States is strangling what's left of Iran's economy with one of the most successful naval blockades in history – and Iran would be wise to make a deal," the official said.

Experts argue that Tehran's own choices laid the groundwork for the current collapse. Miad Maleki, a former Treasury sanctions official now at the Foundation for Defense of Democracies, noted that even when sanctions eased and oil revenues rose, Iran directed vast resources toward its military and the Islamic Revolutionary Guard Corps (IRGC). Central Bank data shows military spending as a share of government expenditures jumped from 16% in 1993 to 52% by 2006, while education spending fell from 27% to 15%.

Maleki highlighted the 2020 budget, where the IRGC received roughly $6.96 billion versus $2.73 billion for the regular military. He also pointed to the IRGC's "gray budget," which could add 50% to 100% more to its official outlays. "Ultimately, the responsibility lies not with external pressure but with structural corruption, chronic economic mismanagement, and spending priorities fundamentally detached from ordinary Iranians' needs," he said.

The IRGC's economic empire extends beyond budgets. Its

The IRGC's economic empire extends beyond budgets. Its construction arm, Khatam al-Anbiya, dominates major sectors and profits from opaque channels created by sanctions. Morad Tahbaz, an Iranian-American freed from Evin Prison in 2023, described sanctions as a "huge franchise" for those controlling black-market networks. "The people who are hurt most by all of this are the people of Iran," he said, adding that those profiting from restricted channels may resist a deal. Treasury maintains authorizations to allow humanitarian trade, but the regime's own priorities remain a central obstacle.