Iran's economy is sensitive to Trump headlines but its problems run deeper

Business documents and emails obtained by Iran International reveal a layered network of shell companies used to mask the military links and channel the sanctioned oil through foreign intermediaries.

The firm, Sepehr Energy Jahannama Pars, was incorporated in November 2022 in Tehran. Within months, two affiliated companies—Sepehr Energy Paya Gostar Jahan and Sepehr Energy Hamta Pars—were registered in the same building.

Corporate records identify Sepehr Energy Jahannama Pars as the controlling shareholder in both. Registered firms in Iran are required to have four names.

Individuals central to the operation include Majid Azami, Elyas Niroumand Toumaj, Farshad Ghazi, Majid Rashidi, and Mojtaba Hosseini. The US Treasury added Azami and Niroumand to its sanctions list in November 2023. The others have not been designated.

In an appeal sent days after the sanctions were imposed, Azami and Niroumand denied any military affiliation, saying there was a misunderstanding based on similar naming.

They told the US Treasury their companies were involved in civil construction and trade and had been “experiencing harassment from both sides” since the designation.

However, Farsi-language draft contracts and internal memoranda contradict their argument. One agreement 2023 identifies Sepehr Energy Hamta Pars as acting on behalf of the Iranian armed forces' general staff in negotiations with Persian Gulf Star Oil Company.

Another set of shipping documents shows the same military body guaranteeing Sepehr Energy Jahannama Pars’ obligations in chartering vessels from the National Iranian Tanker Company.

To obscure these links, the network appears to have operated through a proxy firm in Hong Kong. In April 2023, Xin Rui Ji was registered there, with a nominal Chinese executive listed in filings. Yet, communications from Xin Rui Ji were routinely copied to Niroumand and other Sepehr managers.

One August 2023 letter requested the National Iranian Tanker Company deliver crude to Xin Rui Ji without a bill of lading—critical for cargo tracking—via ship-to-ship transfer in Singapore.

The transfer of cargo from one ship to another is a method used by the Islamic Republic to obscure its role in the sale of oil and petroleum products in order to evade sanctions.

Often in Malaysian and Singaporean waters, it is relabeled as oil originating from Iraq, the United Arab Emirates, Oman or particularly Malaysia.

The same contact information and domain used by Sepehr Energy appeared on Xin Rui Ji contracts, pointing to a unified operation.

Xin Rui Ji sought buyers across Europe, China, and the Persian Gulf. One such client was the Netherlands-based Gemini Group, which advertises global reach in oil and energy trading. In September 2023, Gemini delayed payment for a crude shipment citing banking concerns and “rumors online about sanctions.”

In one email dated 30 October 2023, Gemini representative Niek Tersteeg confronted his Iranian counterpart Elyas Niroumand about a delayed payment. While citing confusion over contract terms, Tersteeg made clear that the problem was not procedural.

“The only reply we are getting are your statements that your side is governmental,” he wrote.

Tersteeg added: “This morning I personally will call my contacts inside the Government in Tehran to check if they can assist finding a solution.”

The email indicated that Gemini had longstanding experience dealing with sanctioned Iranian entities.

“Let us not talk about the 'commission payments' behind the curtain. In short: please forgive my honesty and directness, we are the ones working, financing, taking all the risks while lots of people are waiting in their rocking chairs for their pockets to be filled,” added Tersteeg in his email.

Five days later, on 5 November, Tersteeg followed up in another message addressed to Niroumand and Majid Azami, both of whom were sanctioned by the US government. He expressed appreciation for their collaboration and emphasized the depth of their partnership: “We are not the enemy. We are true friends and brothers ready, willing and able to take any risk.”

Tersteeg then recounted his own arrest in the Netherlands for dealings with Iran. “I myself was in put jail in 2013 by the Dutch secret service for my trading activities with your beautiful country on special, urgent request of the USA Government.

"They didn’t break me. I kept my mouth shut. After several days the Dutch secret service and Dutch Government found out that I did nothing wrong and they released me from prison with written apologies. The USA Government did not apologize and placed me on certain lists. I am not allowed to travel and enter the USA and Israel. No problem for me.”

Contacted by Iran International, Tersteeg denied any contractual ties with Sepehr Energy. He said personal and commercial links with Iranian officials were confidential.

The documents depict a sanctions evasion structure that operated with strategic cover and foreign complicity, exposing vulnerabilities in enforcement mechanisms meant to isolate Iran’s military-linked commerce.

Most of Iran's floating oil is stored in Singaporean waters, awaiting brokers and buyers for shipment to China.

The drop in Iran's oil exports comes as the government, led by Masoud Pezeshkian, plans for daily exports of 1.85 million barrels this year.

Before US sanctions in 2018, Iran exported 2.5 million bpd. This figure plummeted to 350,000 bpd by the final months of Donald Trump's presidency in 2020. However, Iran’s oil exports gradually increased under his successor.

During a visit to Moscow Iran’s Oil Minister announced that Russia has agreed to export 55 billion cubic meters (bcm) of gas annually to Iran, claiming that this would turn Iran into a regional gas hub.

Mohsen Paknejad said on April 25 that various routes were considered and it was finally agreed that the gas would be delivered via land through the Republic of Azerbaijan, with Russia’s gas handed over to Iran in Astara.

While the Mozdok–Baku pipeline can transfer Russian gas to Azerbaijan, and the Baku–Astara pipeline can transport it to Iran, the combined daily capacity of these pipelines is only about six million cubic meters per day (mcm/d).

By contrast, Iran faces a gas shortfall of approximately 150 mcm/d during warmer months—rising to double that amount in colder seasons.

This means that the proposed Russian gas deliveries to Iran would not even cover a small portion of the country’s gas deficit—let alone turn Iran into a regional gas hub.

Paknejad has described this as the “first phase” of the gas deal, implying that new pipelines will be required to realize the full annual export volume of 55 bcm, which equals around 150 mcm/d.

The key issue here is that Gazprom, Russia’s state-run gas company meant to supply the gashas suffered massive losses of $18 billion over the past two years after losing its European markets following Russia's full-scale invasion of Ukraine.

Gazprom lacks the funds to complete an even more politically desirable “Power of Siberia 2” pipeline to China designed for the same annual capacity of 55 bcm.

Building a new pipeline connected to Russia’s main gas transmission network to deliver gas to Iran would require a stretch of at least 1,000 kilometers, demanding more than $10 billion in investment. If the pipeline were to cross the Caspian Sea, the cost could exceed $20 billion.

Another crucial point is that to become a regional gas hub, Iran must receive large volumes of gas from Russia and sell it to neighboring countries.

But Turkey already receives Russian gas directly via two pipelines, and most of Iran’s other northern and southern neighbors are gas producers or exporters themselves. Iran’s only potential customers would be Iraq, Pakistan, and Afghanistan.

Iraq plans to eliminate its need for gas imports within the next few years. Pakistan, despite a gas deal with Iran signed in 2009, has not built the pipeline due to sanctions.

Under the current contract, Iran would export only 7.5 bcm annually to Pakistan—raising questions about what Iran plans to do with the rest of the gas received from Russia.

Iran suffers from a gas deficit of 150 mcm/d in summer and 300 mcm/d in winter, and it could use Russian gas to meet its domestic needs.

However, 55 bcm of gas is worth around $15 billion, and Iran simply doesn’t have the money to pay for such a massive volume of gas. Even if it did, the government would need to provide enormous subsidies for its domestic use, given that gas prices in Iran’s domestic market are extremely low.

To illustrate, the Iranian government plans to sell 240 bcm of gas to the domestic market this year, earning only about 3,300 trillion rials in revenue—which, at the current exchange rate, amounts to less than $4 billion.

More Hollow Claims of New Oil Deals

Iran’s oil minister also announced that $4 billion in oil contracts have been signed with Russian companies.

Over the past two decades, Russian firms have signed more than a hundred contracts and memoranda of understanding (MoUs) with Iran, but almost none of the projects have ever gotten off the ground.

Paknejad provided few details, merely stating that “four contracts worth $4 billion have been signed with Russian companies for the development of seven oil fields.”

However, three years ago, Mohsen Khojastehmehr, then-CEO of the National Iranian Oil Company, made a similar announcement, saying that “contracts with Russian companies for the development of seven oil fields, worth $4 billion, have entered the operational phase.”

This strongly suggests that the contract Paknejad is referring to had already been signed years earlier—yet no action has been taken by the Russian side, contrary to Khojastehmehr’s assertions.

Back then, Iran and Gazprom had also signed 40 oil and gas memoranda of understanding, none of which led to any contracts or actual projects.

At the time, Iranian oil officials under President Ebrahim Raisi described the MoUs as being worth “$40 billion”, calling them “the largest deal in the history of the country’s oil and gas sector.”

Unlike formal contracts, MoUs do not carry any binding legal obligations, nor do they typically have a defined financial value—they are merely frameworks for studies and future negotiations aimed at signing actual contracts.

"This year, we will definitely pursue the removal of zeros," Farzin told an annual monetary and foreign exchange policy conference in Tehran. "It has been tried in about 70 countries such as Russia, Turkey, and Germany, and proven effective when implemented at the right time."

The announcement marks the clearest signal yet that Iran is moving forward with the redenomination plan first proposed in 2019 and approved by parliament in 2020.

The new currency system would peg one toman to 10,000 rials, aligning official usage with the informal practice already common among Iranians, who long abandoned the rial in everyday transactions.

Farzin stressed that the plan is being accompanied by broader reforms in the banking system, following the ratification of new legislation earlier this year.

"This is a year of transformation," he said. "We are moving from an old model of banking governance to a new one, underpinned by a series of newly approved laws and regulations."

Still, the move comes amid persistent economic headwinds. Iran’s inflation rate has hovered above 40% in recent years, and the national currency has lost more than 95% of its value over the past four decades.

A 10,000-rial note, once worth around $150 before the 1979 revolution, is now valued at less than 10 US cents.

Critics argue that striking zeros from the currency without addressing Iran’s underlying economic challenges—such as fiscal imbalances, monetary instability, and international sanctions—may prove cosmetic.

“The problem is not the four zeros, but the persistent inflation and monetary mismanagement,” economist Jamshid Assadi said in an earlier analysis. “Without reforms to central bank independence, fiscal discipline, and financial transparency, the redenomination will not have a lasting effect.”

Past experiences in countries like Zimbabwe, Venezuela, and Argentina have shown that currency redenominations alone do little to stabilize economies without deeper structural reforms. Conversely, countries such as Turkey and Germany only succeeded after implementing broad fiscal and institutional changes.

Iran’s caretaker Economy Minister Rahmatollah Akrami echoed some of these concerns at the same conference on Monday, warning that limited independence of the Central Bank, unclear inflation-targeting frameworks, and a lack of transparency have all contributed to Iran’s recurring macroeconomic instability.

“The effectiveness of monetary policy tools is limited in the absence of institutional strength,” Akrami said, urging a “redefinition of the Central Bank’s role” within Iran’s economic governance.

The new currency rollout is expected to span up to a few years, during which both the rial and the toman will circulate simultaneously. The Central Bank will oversee the withdrawal of rial notes and coins and their replacement with the new toman units.

While the psychological effect of dealing with smaller numbers may ease some frustrations for the public, analysts warn that without tackling deeper problems—such as rising liquidity, declining purchasing power, and a weakening private sector—the benefits of redenomination will be limited.

As global sanctions continue, not only for Iran's nuclear program, but for the country's human rights abuses and support of Russia's war on Ukraine, the economy is in its worst condition since the founding of the Islamic Republic.

Over one third of Iranians live below the poverty line with unemployment plaguing the population.

“The real question is whether this is meaningful reform—or just another economic shock dressed up as policy,” wrote Iran’s Jahan-e Sanat daily back in 2019 when the reform was first proposed.

The talks, facilitated by Omani officials and held behind closed doors in Muscat, come amid escalating rhetoric from both capitals and ahead of a high-stakes Middle East trip by US President Donald Trump.

Before departing for Muscat, Iranian Foreign Minister Abbas Araghchi said Tehran had submitted a proposal intended to reassure the international community of the peaceful nature of its nuclear activities. He warned, however, that the talks would fail if the United States continues to push beyond nuclear weapon-related commitments.

“If demands exceed assurances against nuclear weapons, the talks could stall,” Araghchi told reporters in Tehran. “We hope the other side comes with a clear negotiating logic. Talks should remain at the table, not in the press.”

He added, "Iran has well-known positions based on clear principles... We hope to reach a decisive stance in Sunday's meeting.”

Araghchi also accused the United States of adopting contradictory positions. “There are actors pushing for conflict—we understand this, but it is their problem,” he said. “If there are concerns, we are ready to build trust.”

The latest discussions follow weeks of diplomatic shuttle visits and were initially scheduled to take place in Rome on May 3 but were postponed for logistical reasons.

Iran has emphasized that its delegation is operating “in accordance with directives and frameworks issued by the country’s decision-making hierarchy,” according to Foreign Ministry spokesman Esmail Baghaei.

“The team is committed to preserving Iran’s valuable achievements in peaceful nuclear energy while pursuing the removal of unjust economic sanctions,” he said.

Tensions have mounted in recent days following comments by US envoy Steven Witkoff, who told Breitbart News last week that Washington's red line remains “no enrichment,” effectively calling for the dismantling of Iran’s nuclear infrastructure in Natanz, Fordow, and Isfahan.

Iranian state media and outlets affiliated with the Islamic Revolutionary Guard Corps (IRGC) reacted sharply to Witkoff’s remarks. The hardline Javan newspaper dismissed them as coercive, saying: “This is no longer called negotiation, it’s a stick.”

A member of Iran’s negotiating team told Lebanon’s Al Mayadeen network that Tehran would walk away if the US deviates from previously agreed frameworks.

A separate source quoted by Iraq’s Baghdad Al-Youm said the talks could “fail before they even begin” if Washington refuses to acknowledge Iran’s right to peaceful uranium enrichment.

Iran, which has consistently maintained that its nuclear program is peaceful, says it will not relinquish its enrichment capabilities. “The blood of our nuclear scientists has been shed for enrichment. This right is not negotiable,” Araghchi said before leaving for Muscat on Sunday.

Iran has accelerated its enrichment activities since 2019, exceeding limits set under the 2015 nuclear deal, which the US exited unilaterally in 2018. The UN nuclear watchdog has confirmed Iran’s enrichment of uranium to levels approaching weapons-grade, a move Tehran says is reversible if sanctions are lifted and credible guarantees are provided.

Trump has signaled openness to a diplomatic resolution but also warned of potential military action if diplomacy fails.

Trump is scheduled to visit Saudi Arabia, Qatar, and the United Arab Emirates from May 13 to 16. Analysts say the outcome of the Muscat talks could influence the trajectory of regional diplomacy and the future of Iran-US engagement.

Iran’s Islamic Republic newspaper on Saturday questioned the absence despite Tehran’s growing alignment with Moscow and ongoing coordination on nuclear talks with the United States.

“Despite Putin’s boasts of friendship with Iran, Iran was missing from the ceremony where he thanked North Korean soldiers for supporting Russia in the war against Ukraine,” the paper wrote, referring to the Friday parade in Moscow marking the Soviet and allied victory over Nazi Germany.

More than two dozen world leaders, including Chinese President Xi Jinping and North Korea’s top military officials, attended the event alongside Russian President Vladimir Putin.

Iranian President Masoud Pezeshkian did not attend, and no high-level Iranian delegation was publicly present. In February, Iran’s ambassador to Moscow, Kazem Jalali, told TASS he would attend the event in his diplomatic capacity, but said participation by senior Iranian officials was still under discussion.

Iranian-made drones

The parade, one of Russia’s most politically symbolic events, featured a display of drones used in Ukraine, including the Geran-2 — a loitering munition based on Iranian designs. Their inclusion underscored growing military cooperation between Moscow and Tehran, even as Iran denies supplying drones for battlefield use.

The absence of senior Iranian officials drew attention in Tehran, where Russia is regarded as a strategic partner and a channel for backdoor diplomacy. Both Iranian and US officials have been in contact with Russian intermediaries in recent weeks as indirect nuclear talks continue.

The Kremlin has also positioned itself as a go-between, with Moscow agreeing to help the US communicate with Iran on its nuclear program and regional activities, according to a Bloomberg report in March, later confirmed by the Kremlin.

Despite this, some Iranian officials and analysts are voicing concern. Former Iranian ambassador to Russia Nematollah Izadi warned that Russia “cannot be an impartial mediator,” citing its own geopolitical stakes in US–Iran tensions.

“They are eager to mediate, but whether they can do so effectively is doubtful,” he told ILNA news agency in March. “They have their own interests. If Iran fails to maintain balance, all its foreign policy eggs will end up in Russia’s basket—and most likely China’s as well.”

Russia and Iran recently signed a strategic cooperation agreement covering defense, energy, and trade. Yet, the Islamic Republic paper warned that appearances like Iran’s absence at the Victory Day parade risk making the partnership appear one-sided.