Oil, gas and Iran economic analyst
A 25 percent tariff on US imports from any country that trades with Iran appears aimed at punishing third countries, but it is likely to hit Tehran far harder.
The proposed secondary tariffs were announced by President Donald Trump earlier this week in response to a violent crackdown on protesters in Iran.
Some commentators have questioned whether such measures could be enforced, pointing to Iran’s trade links with more than 140 countries. Others have focused on China’s open opposition, noting that Beijing is Iran’s largest trading partner.
Yet recent experience suggests that secondary tariffs can be far more damaging to the sanctioned country than to those doing business with it.
What past examples say?
A telling precedent is the United States’ action against India over its imports of Russian oil in late August last year. Although the mechanics differed, the effect became clear within months.
By late 2025, Russian crude was selling at discounts of up to $20 to $30 per barrel compared to discounts of around $3 per barrel in summer and $10 in autumn. Even at a discounted price, Russia’s oil exports to India fell by 29 percent in December compared with the previous month.
The pain, in short, was absorbed primarily by Russia, not India.
US Census Bureau data show that despite the imposition of 25 percent tariffs on Indian goods, India’s exports to the United States did not decline significantly. Cheap Russian oil helped Indian refiners remain competitive.
China’s experience tells a similar story. While Chinese exports to the United States fell by about 20 percent in 2025 under US tariffs, China’s total global exports grew by 5.5 percent. Supported by discounted Russian oil and gas, Beijing posted a record $1.2 trillion trade surplus.
Taken together, these cases suggest that secondary tariffs tend to extract concessions from the sanctioned exporter rather than meaningfully penalizing its trading partners.
How secondary tariffs on Iran would work?
Washington has yet to publish detailed guidance on how the proposed 25 percent tariff would be applied. Still, Trump’s public statements indicate that the measure would not be limited to countries purchasing Iranian crude oil.
As with its oil exports to China, Tehran would likely be forced to lower prices across a wide range of goods so that buyers can offset the cost of tariffs imposed on their exports to the United States.
Even if secondary tariffs were applied only to buyers of Iranian energy and petrochemical products, the impact would be severe.
According to data from the commodity intelligence firm Kpler, seen by Iran International, Iran currently exports around 1.3 million barrels per day of crude oil—almost all to China.
It also exports more than half that volume in refined petroleum products, primarily to the United Arab Emirates, Turkey, Iraq, India, and Pakistan.
Annual revenues from liquefied petroleum gas exceed $10 billion, fuel oil generates roughly $7 billion, and gas exports about $5 billion. When petrochemical shipments are included, income from these products roughly matches Iran’s crude oil earnings.
Here, too, vulnerabilities are mounting.
Iran’s 25-year gas supply contract with Turkey is set to expire in five months, with no indication that Ankara intends to renew it. Gas deliveries to Iraq have also been halted because of domestic shortages, prompting Baghdad to seek alternative suppliers.
Tehran shouldering the costs
The United Arab Emirates—the largest buyer of Iranian fuel oil and a major importer of Iranian LPG—maintains extensive economic ties with the United States, making it unlikely to risk exposure to secondary tariffs.
Other Asian buyers, including India, Singapore, Malaysia, and Pakistan, import Iranian products in volumes too small to justify jeopardizing access to the US market.
The most likely outcome is that Iran will once again be pushed to rely overwhelmingly on China, offering steep discounts to preserve market share.
If implemented, secondary tariffs would not isolate Iran’s trading partners so much as narrow Iran’s options, deepen its dependence on a single buyer, and erode its earnings at a moment of acute domestic and fiscal strain.
In that sense, the policy may prove more damaging than conventional sanctions—by forcing Iran itself to absorb the cost of maintaining its already limited presence in the global economy.
In recent weeks, millions have taken part in an unprecedented challenge to the Islamic Republic — and under a nationwide communications blackout, at least 12,000 people have been shot dead in what amounts to the largest mass killing of Iran’s contemporary history.
The collapse of the rial may have ignited the protests, but this wave of defiance runs far deeper than exchange-rate volatility. It reflects a society exhausted by decades of strategic deprivation.
The poverty pushing millions to the brink is not simply the result of policy error or mismanagement. It is the by-product of a conscious political choice: a calculated trade-off.
Tehran and its defenders routinely blame sanctions. Western analysts point to corruption or incompetence. Both explanations miss the governing logic at work.
What defines the Islamic Republic’s decision-making is not a lack of alternatives, but a rigid hierarchy of priorities: ideological integrity and regional reach consistently outrank broad-based prosperity.
In this calculus, economic crisis is not an unintended detour from the leadership’s path; it is the terrain on which that path has been chosen.
Fear of external influence and so-called “cultural invasion” reinforces this worldview. Supreme Leader Ali Khamenei has repeatedly framed material prosperity and deep integration with global markets as vulnerabilities that erode faith and weaken resistance.
His much-touted “Resistance Economy” is not designed to escape sanctions, but to endure them. It promises resilience, not growth; survival, not transformation.
That trade-off cascades through policy. The drive for agricultural self-sufficiency, promoted as revolutionary virtue, has drained aquifers and destabilized rural livelihoods, as water-intensive crops and inefficient irrigation exhaust already scarce groundwater.
Meanwhile, a maze of subsidies, multiple exchange rates, and import restrictions creates rents that enrich well-connected actors while suffocating independent enterprise. These distortions are tolerated—even sustained—because they preserve political control and reward loyalty over innovation.
Even when officials acknowledge the scale of failure, they remain bound by the same red lines that produced it.
The water crisis lays this contradiction bare. Faced with mounting shortages, authorities warn of “water bankruptcy” and champion desalination plants and transfer megaprojects as proof of resolve, while continuing to treat self-sufficiency in water-intensive crops as a strategic achievement rather than a structural mistake.
The result is improvisation without reform: capital flows to spectacular projects that buy time, while the incentives driving depletion and waste remain untouched.
In such a system, rising living standards are irrelevant. Economic pain does not trigger reform because reform risks undoing the political architecture that keeps the Islamic Republic intact.
On the streets today, that logic is meeting its reckoning. Protesters are not merely rejecting inflation or unemployment; they are rejecting the premise that their suffering serves a higher purpose.
In recent remarks, Khamenei praised young people who aspire to “meet their maker” and embrace sacrifice over material advancement. Yet the chants echoing across Iranian cities demand something else entirely: dignity over obedience, participation over submission, a future to build rather than one to forfeit.
Confronted with this unrest, the leadership retreats to its familiar narrative of foreign plots, dismissing protesters as agents of outside powers. That rhetoric cannot conceal the deeper confrontation underway: two visions of national purpose that cannot coexist within a single political order.
One demands a society willing to trade its welfare, opportunities, and youth for an ideological project. The other, facing bullets and batons, is signaling that this exchange—their lives for the regime’s vision—is no longer acceptable.
For a generation that refuses to be treated as collateral, the Islamic Republic and its leader have no answer.
