BEIRUT (AP) — Iran's economy, already under strain from high inflation, years of Western sanctions, and a significant drop in oil revenue due to ongoing conflict, faces additional instability. The Trump administration is working to pressure other nations into ceasing all financial interactions with the Islamic Republic. A recent decision by the United Arab Emirates to suspend trade relations with Iran has marked a significant step in this strategy, aiming to isolate Tehran further.
Iran's foreign commerce, already limited to a small group of countries, has made it increasingly vulnerable. Essential to the U.S. tactic is China's role as the primary buyer of Iranian oil and its foremost trading partner. Meanwhile, Russia, which is facing its own set of U.S.-led sanctions, may not be able to provide substantial financial backing for Iran during these strained times.
Countries such as Turkey, Pakistan, and Iraq maintain crucial trade relationships with both Iran and the U.S., motivating them to mitigate risks associated with potential secondary sanctions. Treasury Secretary Scott Bessent noted the consequences facing nations that choose to maintain economic ties with Iran, branding the operation against Iran as “Operation Economic Outcast.” He asserted that those aligning with the United States would gain benefits, while nations supporting the Iranian regime should anticipate isolation.
The UAE has previously played a pivotal role in facilitating Iran's foreign trade and payment channels. Despite sanctions, Iran reportedly engaged in $125 billion worth of global trade activities in 2024, according to Trade Data Monitor. The majority of its international trade was concentrated with a few partners, notably the UAE, China, and Turkey, which collectively accounted for nearly 75% of Iran’s merchandise imports and over two-thirds of its non-oil exports.
While Iran may seek alternative partners, experts indicate that transitioning away from the UAE is not feasible in the short term. The UAE's significance stems from its dual role as Iran’s largest supplier and as a financial conduit for Iranian businesses to engage in international transactions. As a re-export hub, the UAE has played an essential role in allowing Iranian customers access to foreign goods.
China, despite its deepening economic ties with Iran, is also weighing its interests in the broader Gulf region, and up to now, it has managed to stay out of the escalating conflict instigated by the U.S. and Israel. Beijing continues to purchase most of Iran's crude oil via opaque channels that help evade sanctions. China's ability to resist U.S. pressure grows from its manufacturing strength and control over critical mineral supplies. Analysts have noted that aggressive actions by the U.S. against major Chinese entities could rekindle trade tensions.
Iranian Parliament Speaker Mohammad Bagher Qalibaf, who was in Iraq during the UAE’s trade suspension, emphasized efforts to enhance cooperation among regional countries independently from foreign interference. However, the dominance of the U.S. dollar in international trade means that Iran's trading partners are unlikely to risk antagonizing Washington. Analysts suggested that countries, including Turkey, would hesitate to aid Iran in evading sanctions due to potential fallout with the U.S.
Of note, Iraq relies heavily on Iran for imports while also striving to strengthen its relationship with the U.S. due to its foreign currency reserves being held under U.S. control. Oman, frequently acting as an intermediary between Washington and Tehran, is now in a precarious position after threats from Trump regarding its ongoing negotiations related to the Strait of Hormuz.
Iran has attempted to explore alternative trade routes, particularly through the Caspian Sea, due to threats to shipping routes in the Strait of Hormuz and ongoing conflicts in the Black Sea region connected to the war in Ukraine. However, the likelihood of significant growth in trade through Caspian routes is uncertain, with countries bordered by the Caspian—that is, Azerbaijan, Turkmenistan, and Kazakhstan—unlikely to participate eagerly.
In conclusion, Iran is expected to encounter profound challenges as it navigates the pressures imposed by the U.S. and its allies, grappling with internal economic difficulties and the need for alternative trade pathways amid a rapidly evolving geopolitical landscape.
