Originally posted on https://iranforeignpolicy.com/2019/07/24/cash-low-tehran-using-sovereign-wealth-fund-to-stay-afloat/

While boarding Air Force One for the G20 in Japan, President Trump said in an ad hoc interview; “The sanctions are very tough and Iran has to deal with them.” Trump stated he thought the leaders of Iran were making a big mistake, and said; “Iran should do the right thing for their people, if the Iranian leaders care about their people, they’ll make a deal. If they don’t, they are just thinking about themselves, and they are selfish and stupid if they don’t negotiate.”

Are Economic Sanctions Working In Iran?

The sanctions are working and Iran’s economy is experiencing 40-50% inflation as of the date of this article. Iran’s currency, the Iranian Rial, is expected to continue devaluation, and is now considered the most distressed currency in the region. The Iranian government is withdrawing money from its NDF – National Defense Fund at an increasingly faster pace, which is unsustainable according to FDD, researchers on sanctions. Iran has no choice, as sanctions have cut oil and gas revenues by over 50% and the regime’s cash flow is drying up.

One of the most recent U.S. allies to honor the Iranian oil sanctions is South Korea, according to reports from Reuters Business News. South Korea has plenty of other options, as it can buy oil from Russia, Qatar, Saudi Arabia and/or the United States. Iran cannot afford to lose many more customers. At some point the low production volume will be below its break-even point. Iran’s economic crisis is getting worse by the day – currency speculators are betting against the Iranian Rial, and the downturn in the economy is affecting the average Iranian and those in the middle class at a very personal level.

Meanwhile, according to reports from Radio Forda the Iranian regime has been steadily drawing down the NDF, taking out billions for the military, its internal state broadcasting propaganda mechanism, and other expenses. If the US were to sanction the NDF and freeze funds, things could get a whole lot worse. Since Iran’s military has been named a state-sponsor of terrorism due to the regime’s proxy terrorist activities throughout the Middle East, the NDF sanctions can easily be justified. Although that decision has not yet been made, as of the writing of this article, things are happening as we speak with the Iranian crisis.

Will The Iranian Supreme Leader Sit Down With President Trump To Talk?

A meeting of the minds does not appear imminent. Ali Khamenei called the United States ‘the most oppressive regime’ and accused the United States of economic warfare – all this among a flurry of other insults and derogatory statements. Apparently, the Iranian regime is trying to play victim and hopes this will help its case with the international community, yet at the same time attempting to look strong to its own people. Most international relations think tanks believe that Iran will have to capitulate (blink first) and eventually negotiate. That assessment appears to be correct from all the economic data coming out of Tehran.

Tensions remain high as the G20 meeting continues, and the Iranian issue is a hot topic. The problems are not going away and the rhetoric continues. Although President Trump hasn’t drawn any redlines yet, he’s hinted on Twitter; 1.) “Iran can never have a nuclear weapon,” and; 2.) “Iran better not attack anything U.S. again or risk obliteration.”The second Trump tweet is in reference to the U.S. drone that Iran shot down while it was flying in international airspace, and as a reminder to all that the Trump Administration has not taken ‘military action’ off the table. Hard to say how much of that is just tough-talk, but most international diplomacy experts concur with the serious nature of the first item.