Iran remains one of the Middle East’s most influential players, shaping regional politics and global economic trends. For over four decades, the Islamic Republic has operated under strict sanctions, a reality that profoundly affects both its internal governance and international relations. Despite ongoing international pressure, Iran continues to advance its economy while preserving its distinctive cultural identity and national unity.
In this exclusive interview for The Caspian Post, Middle East expert and Iran specialist Vasili Papava-who recently visited Tehran and Qom-shares his firsthand observations on life under sanctions for ordinary Iranians, provides insights into the state of Iran’s economy and agricultural sector, and analyzes the prospects of the nuclear deal alongside the potential impact of a Donald Trump comeback. He also sheds light on the country’s internal political divides, explores the roles of various factions, and explains why resolving the Iranian nuclear crisis has become one of today’s most daunting diplomatic challenges.
- You recently visited Iran. Tell us a bit about your trip. What impressions did you have of Tehran?
- One of the most striking positive aspects I want to highlight after visiting Iran is the country’s unique hospitality. Many tourists note that Iranians are exceptionally warm, friendly, and eager to help, often welcoming foreigners with open arms. It’s not uncommon for Iranians to invite foreign travelers into their homes.
Some of the main attractions in Tehran include its beautiful mosques and the royal palaces of Sa’dabad, Golestan, and Niavaran, as well as the Tehran Bazaar and the Azadi Tower. Overall, tourists are fascinated by Iranian culture, which encompasses literature, art, architecture, and a variety of local traditions.
Saadabad is a Shah's palace located in the Shemiran district of Tehran
- What stood out to you the most in Iran, both from a societal perspective and in terms of the country’s development?
- Many foreigners observe-and I can personally confirm-that Iran’s image in international media often differs greatly from everyday reality on the ground. The portrayal of the Islamic Republic of Iran in global news is frequently over-dramatized and demonized. By visiting Iran, many people discover firsthand that the nation’s culture, behavior, and society are far more open and complex than one might gather from international reports.
- How do you assess the state of Iran’s economy under U.S. sanctions? In your opinion, what measures has Iran taken to cope with their impact?
- The tightening of sanctions against Iran prompted the country’s government to develop urgent measures aimed at stimulating both domestic and external sources of economic growth. Over the years of sanctions, Tehran has managed to shape its economic policy in such a way as to minimize heavy dependence on the West.
For a long time, Iran has used the UAE as a hub to circumvent sanctions. In effect, Dubai serves as the gateway for importing banned goods into Iran, with the exception of oil. Tehran has long reconfigured its supply chains to obtain virtually anything that falls under U.S. or EU sanctions.
After the United States withdrew from the 2015 nuclear deal (JCPOA) in 2018, President Donald Trump announced a “maximum pressure” policy, aiming to reduce Iran’s oil sales to zero by imposing unprecedented sanctions. These new White House sanctions not only prohibit American companies from doing business with Iran but also include “secondary sanctions” that penalize foreign individuals and companies for cooperating with the Islamic Republic of Iran, effectively barring them from U.S. markets.
All these restrictions have been enacted by the U.S. administration at a time when Iran’s oil exports-despite prior stringent sanctions-have reached a six-year record. Iran’s oil sales for the first three months of 2024 stood at 1.56 million barrels per day.
The main reason countries continue to buy Iranian oil is that it’s cheaper. Under sanctions pressure, Iran has been forced to sell its oil at a discounted rate. In October 2023, Reuters analyzed market data and information from firms tracking shipping traffic, estimating that China saved around $10 billion during the first nine months of 2023 by purchasing cheaper oil from Iran, Russia, and Venezuela. Homayoun Falakshahi, a senior oil analyst at Kpler, calculated that Iran currently sells its crude at about $5 below the market price, whereas in 2023, the discount ranged from $12 to $13.
A key question many governments pose is how Iran and China manage to skirt U.S. sanctions amid all these restrictions and international monitoring. There is ample evidence suggesting that, over the years, Iran and China have developed a sophisticated system to circumvent sanctions.
Many analysts agree that the primary pillars of this trading system are “dark fleet” tankers, “hidden” refineries, and local Chinese banks with minimal international ties. These three factors play a vital role in transporting and processing oil, as well as in facilitating China’s payments to Iran. They essentially allow Tehran to “completely bypass Western shipping and banking systems, as well as trade in Western currencies.”
Transporting oil from Iran to China is the first major hurdle due to constant vessel and tanker tracking by both private and governmental organizations. Iran and China use a network of tankers with complex and opaque ownership structures to hide their precise locations.
A key part of this combined scheme involves the services of third countries, one of which is Malaysia. According to customs data, Chinese imports of Malaysian crude oil increased by 54% in 2023 compared to the previous year. The volume of Malaysian oil exports to China “exceeds Malaysia’s total crude production capacity, so one can infer that the oil Malaysia exports under its own name is actually Iranian crude.” This indicates the involvement of third parties and intermediaries, reportedly based mostly in Malaysia or Middle Eastern countries.
“Hidden” refineries consist of numerous small, semi-private enterprises in China that purchase Iranian oil instead of the large state-owned companies. Major Chinese firms operate internationally and need access to the U.S. financial system, whereas these small, private refineries do not conduct significant overseas business, do not trade in U.S. dollars, and do not rely on foreign investment. In January 2024, Reuters quoted trade sources stating that these “hidden” refineries purchase around 90% of Iran’s exported oil under the guise of imports from Malaysia or the UAE.
China is undoubtedly aware of the risks associated with buying sanctioned Iranian oil. Consequently, large and significant banks do not participate in these transactions; instead, smaller banks are used-ones that engage in little to no international operations. There are multiple reports indicating that Chinese companies pay for Iranian oil in yuan rather than dollars.
There is also considerable evidence that Iran uses a network of exchange offices to convert oil revenues, thereby concealing them from international financial networks.
While the methods Iran employs to sell oil to China are complex and, in many cases, opaque, one thing is clear: The United States has not succeeded in closing all the loopholes that enable Iran to circumvent sanctions and continue selling its oil.
Reaching a six-year high in oil sales demonstrates that Iran has mastered the intricacies of the “game” imposed by Western sanctions. At present, many figures within Iran’s military and political leadership are already under some form of sanction. Consequently, the imposition of new sanctions is largely symbolic and does not significantly disrupt Iran’s operations.
- How do ordinary Iranians live? Is the impact of these sanctions visible in the everyday lives of regular citizens?
One of the mosques in the city of Qom
- The sanctions regime and economic restrictions do have a noticeable impact on the country. They are also something that tourists quickly notice. These limitations can affect people’s ability to use international credit cards or access certain financial services.
Iranians have been living under strict sanctions for more than 40 years. One could say that living under sanctions has become somewhat habitual for ordinary Iranians. Washington’s sanctions have also affected the trade of gold and precious metals. Tehran is banned from trading certain metals, natural minerals, and industrial raw materials, and there is a prohibition on importing Iranian food products and carpets into the United States. Without question, one of the most painful measures for Iran has been the ban on the export of hydrocarbons. Parallel to all this, international banking operations with Tehran have largely been cut off.
As for other sectors fueling the country’s economy, agriculture occupies a special place.
Agriculture is a crucial part of Iran’s economy. The most fertile lands suitable for cultivation are located in the western and northwestern parts of the country.
According to a 2019 report from the Food and Agriculture Organization of the United Nations (FAO), Iran ranks among the top ten countries in the world in terms of agricultural production.
FAO experts believe Iran has the potential to produce enough agricultural products to meet the needs of both its own population and neighboring countries, including those bordering the Persian Gulf. However, water availability remains the primary challenge for Iran’s agriculture.
Almost one-third of Iran’s land is suitable for agriculture, but due to poor soil quality and inadequate water distribution in most areas, only about 12% of the country’s land is actually used for farming.
• In 2017, agriculture accounted for an estimated 9.6% of Iran’s GDP.
• In 2020, it accounted for around 9.7% of the country’s GDP.
• According to official statistics from 2020, 18% of the population was employed in the agricultural sector.
Despite its importance, Iran’s agricultural sector faces multiple hurdles on its path to achieving full self-sufficiency.
The escalation of tensions with the United States, the new round of sanctions against Iran in 2018, as well as the global pandemic and falling oil prices have all negatively impacted the country’s economic outlook-particularly its agricultural sector.
The reintroduction of U.S. sanctions in November 2018 and the further tightening of these sanctions in May 2019 significantly undermined new growth opportunities for Iran’s agricultural sector. The new sanctions made it harder for foreign capital to enter the country and complicated the trade of agricultural products.
Sanctions affect Iranian agricultural production in two primary ways:
1. Reduced Foreign Capital: Less foreign capital flows into the sector due to sanctions.
2. Limited Access to Technology: Iran has difficulty improving crop yields because it lacks access to the latest technologies.
Growth in Iran’s food and agricultural trade will likely remain limited in the coming years as a direct result of sanctions. The sanctions specifically restrict financing in this sector and impede supply chain development. It has become difficult to import chemical fertilizers and agricultural machinery, which-unlike food products and seeds-are subject to sanction restrictions. Indian and Chinese companies partly compensate for the absence of Western firms in this sector.
- What expectations do Iranians have regarding Donald Trump’s potential return to power? Are there concerns among the local population about a harsher sanctions policy?
- According to Israeli officials, Trump supports increasing pressure on Iran but is at the same time against a military option. He does not intend to start his second term with a new war in the Middle East.
If we look at Donald Trump’s statements on Iran, it seems likely that he would prefer to achieve a solid agreement with Tehran-one that prevents Iran from obtaining nuclear weapons-and believes he can reach an understanding with Iran, suggesting that a new nuclear deal could be on the table. However, this does not rule out the possibility of a military solution to the “Iranian nuclear issue.”
U.S. officials who handle the “Iranian dossier” argue that the “best approach is one aimed at changing Iran’s security policy through diplomacy, coupled with the willingness and readiness to use military force if Tehran refuses to adequately address the concerns of the United States and the West.”
- Is the possibility of resuming nuclear deal talks with the U.S. being discussed in Iran?
After the agreement reached in 2015 between the permanent members of the UN Security Council plus Germany on one side and the Islamic Republic of Iran on the other, the U.S.’s unilateral withdrawal from the deal in May 2018 was followed by the reinstatement of sanctions against Tehran.
The sanctions imposed after 2018 were some of the toughest measures ever enacted, and many experts noted they were indeed the harshest sanctions Washington had ever placed on Iran.
These actions by the Trump administration led to higher food prices and a sharp devaluation of the national currency, the rial.
Regarding the nuclear deal, the International Atomic Energy Agency (IAEA) has repeatedly confirmed that Iran continues to meet its obligations under the agreement.
Prior to 2015, sanctions against Iran were primarily imposed with the consent of the international community, the UN, and the European Union. However, the current sanctions do not have universal international support. Washington has already encountered some difficulties fully implementing its sanctions package. While large international companies cannot risk doing business with Iran, mid-sized and smaller companies in Europe and Asia continue to maintain trade relations with Iran.
- Is there public anxiety about the current geopolitical situation and the potential escalation of tensions in the region?
Mosque of the 11th Shiite Imam Hasan al-Askari, city of Qom
- Tensions and disagreements between Iran and the United States intensified after Donald Trump stressed the need to prevent Iran from obtaining nuclear weapons. Iran’s nuclear program has made significant advances, yet internal divisions persist regarding how best to approach negotiations. Reformists want to reach a limited agreement with the West to reduce tensions and differences, whereas conservatives express deep distrust and emphasize the need for measures to restore shaken confidence.
In an interview with Fox News on January 23, Donald Trump underlined that his main goal is to prevent Iran from obtaining nuclear weapons. Notably, in this interview Trump did not mention other sensitive issues such as Iran’s regional policies, its strained relationship with Israel, or more contentious topics like regime change or military action against Iran.
Given Iran’s repeated statements that it does not intend to develop nuclear weapons-and the Supreme Leader Ayatollah Ali Khamenei’s fatwa banning the use of such weapons-there remains a possibility for some sort of agreement between Tehran and Washington. The election of the reformist Masoud Pezeshkian as President of Iran also demonstrates Tehran’s desire to return to the path of diplomacy and reduce international tensions.
The situation surrounding Iran’s nuclear program is becoming increasingly complex, especially given the shifts in the country’s nuclear stance in recent years. While Tehran has repeatedly declared that it has no desire for nuclear weapons, and the Supreme Leader issued a fatwa banning them, recent regional and international events have added new momentum to the notion of nuclear deterrence.
Israel’s hardline stance on Tehran’s nuclear program also drives Iran to enhance its nuclear capabilities. These factors clearly show that resolving the Iranian nuclear crisis has become an even more intricate and delicate issue. Recent developments in Iran’s nuclear program, such as high-level uranium enrichment and the installation of advanced centrifuges, have introduced new complications to negotiations, likely making them more prolonged and challenging.
Nonetheless, any long-term agreement on Iran’s nuclear program must be part of a broader regional strategy that goes beyond the nuclear issue alone. This strategy should address Iran’s broader security concerns, including external threats and regional instability. Only by substantially reducing these anxieties can Iran’s incentive to pursue nuclear deterrence be weakened and a fresh escalation of tensions in the region be averted.
On Iran’s domestic front, different political factions have varying opinions on how to deal with Washington and conduct nuclear negotiations. The reformist faction, led by Masoud Pezeshkian’s administration, emphasizes the need for a proactive and preventive approach toward the United States. From their perspective, Iran must shape the negotiating conditions to its advantage and, through diplomatic initiatives, create new avenues to ease tensions and lift sanctions.
The conservative wing, on the other hand, takes a more cautious and confrontational stance. This faction believes that since it was the United States that withdrew from the JCPOA in 2018 and violated its commitments, Washington must first take practical steps to rebuild trust before Iran will be inclined to reciprocate. Conservatives also firmly oppose trading away Iran’s nuclear influence for promises of sanctions relief, which they argue are not guaranteed in the long term. Furthermore, they highlight Iran’s strategic cooperation with Russia-especially in military and security matters-as a way to bolster deterrence and balance out threats from the U.S. and Israel.
From the reformists’ point of view, signing an agreement with Iran at a time when the war in Ukraine has become a major challenge for Washington could be seen as a highly beneficial and relatively easy diplomatic win for a new Trump administration. They speculate that a limited deal, similar to Trump’s agreement with North Korea, could serve as a springboard to de-escalate tensions between Tehran and Washington. Such a limited agreement might include symbolic measures-like a meeting between Donald Trump and Masoud Pezeshkian-and could pave the way for more comprehensive talks later on. Under this framework, key issues like Iran’s nuclear program, sanctions relief, and even delicate regional matters could be addressed in subsequent stages.
Concurrently, Tehran has initiated negotiations with the European Union and three European countries (the UK, France, and Germany). Iran’s main goal in these discussions is to avoid reinstatement of UN Security Council sanctions before the October 2025 deadline. This move goes beyond a purely defensive strategy and sends a clear message to Washington: “Iran is serious about reaching an agreement.”
Historically, the initial path to the JCPOA was paved by negotiations with Europe, and only at later stages did the United States join the process. Currently, it seems more logical for Washington to join multilateral talks with Europe, because an attempt at direct bilateral negotiations with Iran might prompt the EU to trigger a snapback of sanctions. This poses a diplomatic risk for Washington, especially now that relations between the U.S. and the EU have become more complicated and uncertain. At the same time, the most realistic path forward could be a limited bilateral agreement between Iran and the United States, which could then lead to broader negotiations with the other JCPOA parties. Given the political will among major global players, it appears the time has come for all sides to take practical, meaningful steps to lower tensions.
