Israel says not done yet, won't let Iran rebuild its nuclear capabilities

According to the Statistical Center of Iran, GDP shrank by 0.1% in the spring, ending 17 straight quarters of expansion. Industrial and mining output, which grew 5.9% last spring, fell to -0.3% this year, while agriculture plunged from +2.3% to -2.7%.

Severe water and electricity shortages disrupted production across both sectors, hitting farms and factories alike.

With the so-called snapback of international sanctions due on September 2, Iran faces a narrowing path to growth—and a worrying prospect of rising unemployment and public discontent.

Mounting debt

A separate Central Bank report shows government debt to the bank surged 63% year-on-year as of June, reflecting the administration’s failure to meet revenue targets.

Officials say only 60% of projected revenues were generated in the first five months of the year, worse than in previous years and well short of the levels needed to stabilize public finances.

Since 2018, when President Donald Trump withdrew the United States from a 2015 nuclear deal and reimposed sanctions, about a third of Iran’s annual budget has gone unrealized.

The IMF now estimates public debt at 37% of GDP and climbing. This trend is likely to accelerate if sanctions further limit oil revenues.

Record capital flight

The Central Bank also reported a net capital account of -$21.7 billion for the last fiscal year—the highest on record and 2.5 times greater than in 2020.

Capital flight has been accelerating since 2020, as businesses and households move assets abroad to escape currency depreciation and political uncertainty.

The scale of outflows highlights both a collapse in investor confidence and the inability of the banking system to hold foreign exchange inside the country.

Oil gains vanished

Iran earned $66 billion from oil, petroleum products and natural gas exports last year, a 17% increase. Including non-oil goods, total exports reached $115 billion, $27 billion more than imports.

On paper, that left the goods trade in surplus.

But the services sector recorded a record $12 billion deficit, dragging the overall trade balance for goods and services down to just $13 billion.

Combined with the $21.7 billion in capital flight, much of the hard currency generated by oil exports is effectively leaving the country.

The result is sustained pressure on Iran’s already fragile foreign reserves and further instability in the rial, which hit a record low of 1.08 million to the dollar on Thursday.

The bottom line is that Tehran’s extremely hard-gained oil cash is being wiped out by falling output, runaway debt and unprecedented capital flight—leaving the country perilously exposed just as fresh sanctions loom.

Fars News Agency described the use of online images as “poor judgment” and said it gave rival outlets grounds to call the entire program fabricated. “Labeling all images, including archival ones, as exclusive allowed hostile media to portray the film as fake,” Fars wrote.

The documentary, broadcast on September 24 under the title The Spider’s Hideout, was presented as evidence of an intelligence penetration into Israel. It displayed materials said to be connected to Israeli nuclear facilities, including the Dimona site, along with details about individuals described as involved in the country’s nuclear program.

Intelligence Minister Esmail Khatib appeared in the program, calling the operation “a major infiltration” that yielded “a treasure of top-secret intelligence.” He described the outcome as the result of “months of complex planning and multiple successful operational phases inside the enemy’s structure.”

Since its release, however, attention has centered on the documentary’s reliance on readily available online photos, presented as exclusive visuals. The revelation has fueled ridicule across social media and intensified criticism of the government’s narrative.

The film was promoted as part of a broader presentation that Iran had secured “millions of pages” of Israeli defense documents. Earlier this year, state media reported that Iranian intelligence had obtained “abundant strategic and sensitive information” from inside Israel. At the time, Israeli security analysts told Iran International those assertions were exaggerated and part of psychological warfare.

Observers assess that The Spider’s Hideout is part of an effort to recast Iran’s recent setbacks against Israel, including intelligence and military losses, as victories. The exposure of online-sourced material has instead raised doubts over the credibility of the government’s portrayal, even among domestic audiences.

Speaking in a televised interview, Larijani, head of Iran’s Supreme National Security Council, said Washington has demanded Iran halt all uranium enrichment and curb its missile program.

“The Americans insist we must negotiate, specifically about Iran’s missiles,” Larijani said. “They came and said you shouldn’t have any enrichment at all … They said no missiles, sometimes below 300 kilometers (185 miles), now below 500 kilometers (310 miles)—meaning they want to strip us of key defensive and offensive capabilities.”

For years, Iran has voluntarily capped its missile range at 2,000 kilometers, which it says is sufficient to reach its main regional adversary, Israel.

France, Britain and Germany triggered the resumption of UN sanctions against Iran last month through the “snapback” mechanism of a 2015 nuclear deal, accusing Tehran of not conforming to nuclear obligations outlined in the agreement.

The measures are scheduled to take effect September 28. Larijani dismissed their impact, arguing that US sanctions remain far harsher.

“Some politicians in Iran ask why we don’t resolve this sooner. We’re trying to resolve it; we don’t want unnecessary pressure on the country. But is there any politician in Iran who would agree to cut our missile range below 500 kilometers?” he asked.

Supreme Leader Ali Khamenei on Tuesday rejected talks with Washington, calling US President Donald Trump’s demand that Iran end domestic uranium enrichment an “insult” that had earned him a “slap in the face” from the Iranian people.

President Masoud Pezeshkian, addressing the UN General Assembly in New York on Wednesday, denounced Israeli raids on Iran’s nuclear facilities in June as illegal and condemned European powers for reimposing UN sanctions.

Bad terms

Larijani said that Iran is open to dialogue but unwilling to accept terms he called “illogical.”

“The issue is they want us to negotiate. Negotiate, fine—has anyone said don’t negotiate? But if the endgame is already decided, no sensible person will accept it. We’ve tried all paths, but if they insist on these illogical demands, we must stand firm.”

Israel launched a surprise military campaign on June 13, striking military and nuclear sites in Iran. Air raids killed nuclear scientists along with hundreds of military personnel and civilians. Tehran retaliated with drone and missile attacks that killed 31 Israeli civilians and one off-duty soldier.

The United States entered the conflict on June 22, bombing major nuclear facilities including Fordow, Natanz, and Isfahan, before brokering a ceasefire on June 24.

Washington said the strikes set back Iran’s nuclear program by years, though the International Atomic Energy Agency has yet to verify the damage due to lack of access.

The decision, announced by the court on Thursday, came a day after French President Emmanuel Macron met Iranian President Masoud Pezeshkian on the sidelines of the UN General Assembly in New York.

It was not clear why the case was withdrawn or whether it augured progress toward a deal.

The ICJ case, filed in May, accused Iran of violating consular rights of Cécile Kohler and Jacques Paris under the Vienna Convention and subjecting the detainees to torture-like conditions in Tehran’s Evin prison.

France labeled the arrests as "hostage diplomacy," with Kohler and Paris, a teacher and her partner, accused of spying for Israel’s Mossad.

They were detained in May 2022, and Iranian state TV aired a confession from the pair in October of that year.

Human rights groups have accused Iran for systematically extracting confession by force. Tehran denies political motives behind the detentions.

Iran seeks the release of Iranian national Mahdieh Esfandiari, who has been held in Fresnes prison near Paris since March on charges of glorifying terrorism.

During their meeting on Wednesday, Macron said he pressed Pezeshkian for the release of Kohler, Paris and a third French national Lennart Monterlos, as well as compliance with Western demands for greater transparency on its nuclear program.

Pezeshkian, posting on X, expressed optimism about resolving tensions.

The last prisoner swap between Iran and a European country came when Italy freed an Iranian national wanted by the United States for allegedly supplying Tehran with drone technology in exchange for an accredited Italian journalist arrested in Iran.

A delegation in Washington this week voiced New Delhi’s position in meetings with US officials, stressing that simultaneously cutting Russian, Iranian and Venezuelan flows would risk driving up global prices, the reported cited people familiar with the talks as saying.

India, the world’s third-biggest crude importer, meets nearly 90% of its oil needs from abroad. Its refiners have relied on discounted Russian barrels to ease costs after sanctions curbed Moscow’s wider trade, while Iranian and Venezuelan oil could offer similar discounts.

Commerce Minister Piyush Goyal said this week India wanted to increase US oil and gas purchases, but added that “our energy security goals will have a very high element of US involvement.”

India halted Iranian oil imports in 2019 and stopped buying Venezuelan crude this year as US sanctions tightened.

Replacing those supplies with Middle Eastern barrels would be more expensive, officials said.