After the 12-day war with Israel, the Islamic Republic of Iran suffered serious economic losses. According to Western analysts, the damage amounted to between 24 and 35 billion dollars, which is equivalent to 6-9 percent of the country’s GDP. Unlike Israel, whose damage is estimated by experts at around 11 billion dollars, Iran entered the armed conflict already in the conditions of a severe financial and energy crisis.

Is Iran heading for an economic collapse comparable to the collapse of the Soviet Union in the early 1990s? Haqqin . az  asked Hassan Mansour, a renowned Iranian economist and professor at the American School of Economics in Paris, about this and other questions.

– Western analysts, including Andreas Krieg, claim that Iran’s economy has entered a phase of uncontrollable decline. Do you agree with this opinion?

– Yes, I generally agree. But it is worth understanding that the decline of the Iranian economy began long before the current conflict, namely from the moment of the proclamation of the Islamic Revolution in 1979. Over the 46 years of the Velayat-e-Faqih regime, the national economy has not been able to emerge from a protracted crisis.

The last time Iran demonstrated sustained economic momentum was between 1963 and 1976, when annual growth rates were around 11.5 percent—what was then called the “Iranian economic miracle.” During that period, per capita income quadrupled, giving a powerful boost to development.

However, the Islamic Revolution wiped out these achievements. Financial and technical resources were plundered, leading industrial enterprises were handed over to incompetent people who had neither knowledge nor understanding of the basics of entrepreneurship, and such key institutions as the Central Bank, the Planning and Budget Department and the Audit Chamber were usurped by self-proclaimed “experts”. In fact, their activities were reduced to systematic robbery of the country under the guise of state policy. During the revolution, factories of such world brands as General Electric and BWV were burned and looted.

Against this backdrop, the energy system was collapsing and the social structure was disorganized. Today, Iran’s economy operates at only 25 percent of its potential. There has been a steady outflow of capital over the past 20 years. According to the Central Bank of Iran, it amounted to $17 billion last year, and unofficial estimates put it at $70 billion.

The country is experiencing an acute shortage of petrol, gas, electricity and water. In addition, the ecological crisis is growing – smog regularly paralyses the work of schools and universities in the largest cities. Before the war, about a million super-rich people lived in the country, but at the same time 60-70 million, that is, the overwhelming majority of the population, lived at or below the poverty line.

– How serious was the damage from the Israeli strikes?

– The losses are quite significant. Dozens of military and administrative infrastructure facilities worth hundreds of billions of dollars were destroyed. This will sharply worsen the financial situation. Annual inflation in Iran today officially amounts to 35 percent, and in the food and beverage sector – up to 80 percent. An aggravation of the economic crisis is inevitable.

– Is there a real scenario for saving the Iranian economy from collapse?

– Last year, I have participated in three international conferences on investment in Iran. According to leading economists, at least 3 trillion (!!) dollars will need to be invested in the economy to stabilize it. Without this, most key industries will be bankrupt. Modernization of the oil sector alone requires about 500 billion, and the gas industry another 200 billion dollars.

Large investments and modern technologies could come from abroad and from developed economies. For example, after modernization, gas from the South Pars field could be supplied to the EU countries.

But Iran is virtually cut off from international capital markets. The country has lost cooperation with oil and gas giants such as British Petroleum, Total and Shell. And without foreign investment and technology, it is impossible to restore infrastructure. Even the gas produced today is insufficient for domestic consumption.

– What exactly is scaring investors away from Iran?

– The main problem is the lack of legal guarantees. No one is sure that their business will not be expropriated. This is why all Saudi companies left Iran overnight. Qualified specialists are also emigrating en masse.

To attract investment, financial transparency, anti-money laundering, compliance with international reporting standards and labor laws, and, of course, independent arbitration are necessary. Until these conditions are in place, there will be no investment.

– The Iranian website “ Blood Oath “ has launched a campaign to raise funds to assassinate US President Donald Trump. Earlier, Ayatollah Makarem Shirazi and Nouri Hamadani issued a fatwa calling on devout Muslims to kill Trump and Netanyahu. How serious are the threats coming from radical Iranian structures?

– First of all, let’s see who issued these fatwas. Makarem Shirazi and Hamadani are dollar billionaires. The Shirazi clan, including their children and relatives, is engaged in the monopoly import of sugar into the country. I would like to note in this regard that Iran is the world’s largest importer of sugar. So no one except a limited circle of religious figures takes the words of these people seriously. In reality, any influential mullah can issue a fatwa, cancel it and reissue it at his own discretion…

 – So, the mullahs have a rather powerful instrument in their hands, don’t they?

 – In a certain sense, of course. It should be understood that fatwas are also a tool in the international financial business. According to one of the oldest banks in the world, Barclays, when a financial instrument such as a halal option is created, its creators must obtain a fatwa from the mufti confirming halalness. Therefore, everything begins with an offer of a gift to the mufti, after which the bargaining continues until the fatwa is accepted. But it also happens that one mufti declares the option halal, and another states that he doubts it. This is how fatwas are issued in a competitive market. I believe that the official Iranian authorities will reject fatwas about the assassination of the US President and the Israeli Prime Minister. But the American and Israeli authorities will take them seriously, and therefore the IRI leadership will have to pay a high price for them.

 – Israeli Foreign Minister Gideon Saar has already called on European countries to restore sanctions in connection with Tehran’s refusal to cooperate with the IAEA…

 – This is related to the JCPOA – the Joint Comprehensive Plan of Action on the nuclear program. The agreement includes the SNAP-BACK mechanism – automatic restoration of sanctions in case of violation of the terms.

 Let me remind you that the JCPOA was signed in 2015 by Russia, the United States, China, Great Britain, France, Germany and Iran under Barack Obama. Later, Donald Trump withdrew the United States from the deal. The agreement expires in October 2025. And if London, Paris and Berlin activate the SNAP-BACK mechanism, Iran will find itself in complete international isolation. And this will be a catastrophic blow to the economy. Therefore, in the time remaining until October, Iran will do everything possible to convince European countries not to apply the SNAP-BACK clause. But I think the final word will be Trump’s, who advocates increasing sanctions pressure on Iran, since the ayatollahs did not agree to place their nuclear program under the supervision of the IAEA.

 Before Trump’s return to the White House, Iran was able to trade with Russia and China, something that the current president’s predecessor, Joe Biden, effectively turned a blind eye to and allowed Moscow and Beijing to economically support Iran. But now Trump is consistently destroying shadow economic ties with Iran. From time to time, he imposes sanctions on dozens of companies selling Iranian oil. Trump has effectively destroyed the entire shadow fleet, consisting mainly of Chinese companies, that delivered Iranian oil to China.

 – What strategy do you think Iran will choose in the next two to three years?

– There is a power struggle going on within the elite. Former President Hassan Rouhani and Ayatollah Khomeini’s grandson Hassan, with the support of some of the clergy, are proposing a model of a secular state in which the government will be above the religious leadership. Their idea is to keep the post of supreme leader as symbolic, while the country will actually be governed by a civilian cabinet.

According to official data, 72 percent of Iranians support the separation of religion and state. However, the population does not trust either Rouhani or Khomeini, since these people are part of the existing system. The people demand real changes, not a change of signs. The positions of supporters of the republican model, secular democracy and federalism are growing stronger in society. The consensus between the opposition forces (monarchists and republicans) is to hold a constituent conference and a referendum on the future structure of the country.

– How rational is Iran’s current nuclear strategy?

– Iran produced 367,433 gigawatt-hours (GWh) of electricity in 2024, of which nuclear energy accounts for less than 1.5 percent. By comparison, Turkey produces four times as much nuclear energy, and that’s at plants built and operated by Russia.

Iran has spent about a trillion dollars on its nuclear program, but is receiving virtually no economic return. Moscow and France are ready to supply Iran with uranium for 20 years. However, Tehran insists on a full cycle of uranium enrichment, which raises serious suspicions in the world community. Refusal to cooperate with the IAEA only worsens the situation and pushes Iran into international isolation.