Erdogan accuses Israel of sabotaging Iran-US MoU, fueling regional war

The European Union has welcomed additional economic pressure on Tehran, including through the US-led Operation Economic Outcast, but has not formally endorsed every element of Washington’s strategy.

Yet the distinction over formal alignment conceals a more consequential reality: since the United States withdrew from the nuclear agreement in 2018, Europe has increasingly behaved as Washington’s junior partner on Iran.

This alignment predates the current war. Since the late 2000s, Europe has increasingly substituted declaratory diplomacy for autonomous action, defending multilateralism and dialogue while adapting in practice to US policy.

This gap became particularly evident after Trump’s withdrawal from the JCPOA and reimposition of US sanctions on Iran in 2018: despite European opposition, the blocking statute and INSTEX failed to sustain meaningful trade, as almost every major European company abandoned Iran to preserve access to the US market.

This choice was economically rational. The US market and financial system are vastly more important to European companies than Iran. The international dominance of the dollar enables Washington to impose sanctions with effects far beyond US territory.

European banks, insurers, shipping companies and industrial groups remain highly exposed to US regulators and financial markets. Whatever the official position of their governments, companies have overwhelmingly prioritized continued access to the United States over commercial opportunities in Iran.

The weakness of direct EU-Iran trade should not obscure Europe’s remaining economic significance. According to the European Commission, trade in goods between the EU and Iran amounted to €3.7 billion in 2025, comprising €2.97 billion in EU exports to Iran and €760 million in imports from Iran.

This left the EU a significant trading partner for Iran, even though Iran accounted for only around 0.1 percent of EU exports.

These figures also underestimate indirect commercial links. European products reach Iran through Türkiye and, above all, the United Arab Emirates, which serves as a crucial platform for re-exports.

Stronger US pressure on Ankara, Dubai-based traders, logistics companies and regional banks would therefore affect European-origin goods even when European firms have no direct contractual relationship with an Iranian buyer.

“Economic D-Day” is not directed solely against Iran: it is designed to force Iran’s remaining commercial intermediaries to choose between Tehran and access to the US financial system.

Europe’s gradual alignment also has a political and diplomatic dimension. In August 2025, following unsuccessful talks with Tehran, France, Germany and the United Kingdom triggered the UN “snapback” mechanism with US support.

UN sanctions were restored on September 28, prompting the EU to reimpose its own nuclear-related economic and financial restrictions the following day.
The EU formally reimposed those measures on September 29.

After the deadly repression of the January 2026 protests, the EU went further, formally designating the Islamic Revolutionary Guard Corps as a terrorist organization in February and imposing additional sanctions targeting human rights violations, Iran’s missile and drone programs, and Iranian operations on European soil.

This convergence has since extended to the multilateral arena. In September 2026, the United States and the E3 began pressing for an International Atomic Energy Agency Board of Governors resolution reporting Iran to the UN Security Council for the first time in 20 years.

The push has further deepened the confrontation over inspections: IAEA Director General Rafael Grossi said on September 7 that Tehran had told the agency it would not cooperate until there was progress in broader political negotiations, while Iran warned it would take reciprocal action if the resolution was adopted.

Grossi said the agency was receiving no information and had been told Iran would not cooperate without progress in broader political negotiations.

The proposed referral would mark a significant escalation in the nuclear standoff and further narrow the space for Europe’s long-standing ambition to pursue a third way between Washington and Tehran.

The war launched by the United States and Israel on February 28, 2026 initially generated considerable European frustration. European leaders had not been consulted or even properly warned by their principal ally, despite their earlier coordination with Washington over the snapback process.

They called for restraint and respect for international law while expressing concern about the regional and economic consequences of the offensive.

But this dissatisfaction did not produce an autonomous European strategy. Europe lacked the military capabilities, economic leverage and political unity needed to shape the conflict.

The decisive talks involved Washington, Tehran and regional intermediaries such as Pakistan, Oman and Qatar. European governments remained largely peripheral, even as they condemned Iranian attacks against neighboring countries and commercial vessels.

The current hardening of the European position should therefore also be understood in the context of transatlantic relations and the war in Ukraine. For European leaders, preserving US support for Ukraine and preventing a strategic rapprochement between Washington and Moscow remain overriding priorities.

Iran offers them a potential means of demonstrating their usefulness to the Trump administration. By cooperating with Washington on sanctions, nuclear restrictions and regional security, Europeans hope to facilitate dialogue with an administration whose disengagement from Ukraine is their greatest strategic fear.

This calculation resembles the strategy adopted by several European governments at the beginning of Trump’s second presidency: concede or cooperate on secondary issues to preserve US engagement on the issue considered existential for European security. Iran is thus treated partly as a bargaining instrument within the transatlantic relationship.

This does not mean that European and US objectives are identical. Most European governments remain wary of regime-change strategies, uncontrolled military escalation and the humanitarian consequences of comprehensive sanctions.

They continue to emphasize diplomacy and international law and have not formally subscribed to Washington’s campaign of total isolation. The Trump administration is consequently overstating Europe’s political endorsement.

Yet the practical difference is narrower than European rhetoric suggests. Europe’s declaratory autonomy cannot compensate for its financial dependence, limited military capabilities and reliance on the United States for its own security.

Nor can European governments fully control the commercial decisions of private companies, which overwhelmingly prioritize access to the US market and the dollar-based financial system over limited opportunities in Iran.

Washington may therefore be exaggerating when it says that Europe has joined “Economic D-Day.” But since 2018, the structural alignment it describes has become increasingly difficult to deny.

The latest US strikes on three Iranian oil tankers mark a significant escalation in Washington’s economic campaign against Tehran, moving beyond sanctions and blockade to the physical destruction of vessels used to export Iranian oil.

US forces on September 5 disabled two tankers near Kharg Island and Jask and destroyed a third in the Gulf of Oman, according to US Central Command, which described the vessels as part of a “multibillion-dollar shadow network” supporting the IRGC and its regional partners.

The strikes followed Iranian ballistic missile attacks on US naval forces that caused no American casualties. CENTCOM commander Adm. Brad Cooper warned Washington was prepared to impose an “even higher economic cost” on Tehran.

The significance of the strikes lies less in the loss of three ships than in the change in tactics. Washington has spent years trying to make Iranian oil harder to sell through sanctions, restrictions on financial transactions and pressure on buyers and shipping networks. Since mid-July, the US naval blockade has added a physical barrier.

Now, the vessels themselves are becoming targets.

From financial to physical risk

The shift comes as Iran’s oil exports are already under severe pressure.

Ship-tracking data indicated Iranian crude loadings fell to roughly 220,000–255,000 barrels per day in August, from about 740,000 bpd in July and peaks close to 2 million bpd before the conflict.

For weeks, no meaningful Iranian crude cargoes were able to reach China through the Strait of Hormuz, leaving more oil in floating storage inside the Persian Gulf.

Iran has spent years building a shadow shipping network capable of operating around Western sanctions, relying on opaque ownership structures, reflagging, manipulation of vessel-tracking systems and ship-to-ship transfers to move crude, particularly to China.

Those methods are useful when the main challenge is avoiding financial sanctions or detection. They offer far less protection if the vessels themselves become military targets.

Sanctions forced Iran to find ships willing to evade Washington. The new strategy may force it to find ships and crews willing to risk being attacked.

That could make the shadow fleet more expensive and difficult to operate. Many of its tankers are aging vessels already working outside conventional Western insurance and maritime-service networks.

If owners, crews and operators come to regard Iranian-linked voyages as carrying a serious risk of attack, some may demand greater compensation or decide the trade is no longer worthwhile.

Washington cannot, however, simply eliminate the shadow fleet overnight. The network is dispersed and adaptable. Ships can change names, flags and ownership structures, while Tehran can alter loading patterns or move ship-to-ship transfers farther from areas dominated by US forces.

But every vessel lost imposes another cost. Iran must replace it, find another operator willing to accept the risk or leave more crude stranded in storage.

Floating storage offers only temporary relief. Oil held offshore does not generate revenue until it reaches a buyer, and prolonged disruption can eventually force producers to cut output as storage fills.

The question is therefore not whether three tanker strikes can dismantle Iran’s export system. They cannot. It is whether repeated physical losses can gradually undermine the commercial network that has allowed Tehran to keep selling oil despite years of sanctions.

A wider energy battlefield

That strategy carries an obvious risk: once Washington treats Iran’s oil-export system as a military target, Tehran has a stronger incentive to widen the energy battlefield.

Iran has already used attacks and threats against maritime traffic as a means of imposing costs on its adversaries. The Strait of Hormuz remains central to that strategy because of the enormous volumes of oil and liquefied natural gas that normally pass through it.

Further reducing Iranian export revenues could weaken Tehran’s ability to finance the IRGC and allied armed groups while increasing the economic cost of continued confrontation.

But direct attacks on tankers could also reinforce the Iranian leadership’s argument that compromise will not end US pressure and that imposing costs on regional energy flows is one of Tehran’s remaining forms of leverage.

That matters well beyond Iran.

Saudi Arabia and the United Arab Emirates have invested heavily in export routes that partially bypass Hormuz, including Saudi pipelines to the Red Sea and the UAE’s link to Fujairah. But those alternatives cannot fully replace normal flows through the Strait, while Kuwait and Iraq remain particularly dependent on the waterway.

Even without major damage to regional infrastructure, greater insecurity can raise war-risk insurance premiums, freight rates and other costs for commercial operators.

The tanker strikes therefore strengthen Washington’s leverage only if they can impose additional costs on Tehran without triggering a broader contest over the region’s energy infrastructure.

Physical attacks may hurt an Iranian oil-export system that has spent years learning to circumvent sanctions. But they also give Tehran stronger incentives to retaliate against the system through which its neighbors export their own energy.

The strategic gamble for Washington is therefore not simply whether tanker strikes can further squeeze Tehran’s oil revenues. It is whether Iran can be made to bear those costs without deciding that its adversaries’ energy exports should bear them too.

Government spokesperson Fatemeh Mohajerani said Sunday that the third-tier gasoline price would rise to 10,000 tomans per liter from 5,000 tomans, effective September 8.

Monthly subsidized allocations will remain unchanged, with motorists entitled to 60 liters at 1,500 tomans per liter and a further 50 liters at 3,000 tomans.

Mohajerani blamed current conditions and past policies for rising consumption, saying the increase was intended to maintain the balance between supply and demand and strengthen “national resilience.”

The decision comes as Iranian households contend with high inflation, a sharply weakened currency and rising costs for basic goods.

President Masoud Pezeshkian had signaled the increase in late August but gave no date for its implementation. Since then, Iranians have expressed concern that higher gasoline prices could feed through into transport costs and the prices of other goods.

Shortages add to pressure

The price rise comes amid growing strains on Iran’s gasoline supply.

Esmail Saqqab Esfahani, head of Iran’s Energy Optimization Organization, said last month that the country faced a daily gasoline deficit of around 14 million to 15 million liters.

The gap between consumption and production predates the war, but fighting and the US blockade have added to the strain, disrupting supplies when domestic production was already failing to keep pace with demand.

Mohajerani said all additional revenue generated by the increase would be spent on supporting household livelihoods, without specifying how the money would be distributed.

Hossein Samsami, a member of parliament’s Economic Commission, warned last month that raising gasoline prices under current conditions could be like a “spark in a powder keg.”

Memories of 2019

Gasoline prices are among the most politically sensitive economic issues in Iran.

A sudden increase in November 2019 triggered nationwide protests that quickly expanded into broader anti-government unrest.

Authorities imposed a near-total internet blackout and security forces carried out a deadly crackdown in which at least 1,500 people were killed, according to a Reuters investigation.

Iranian officials have shown concern that renewed economic grievances could again spill into the streets. Parliament speaker Mohammad Bagher Ghalibaf said last month that Iran’s enemies could seek to exploit public dissatisfaction over gasoline.

The increase leaves the government trying to curb a widening gap between gasoline consumption and domestic supply without adding to public anger over the cost of living.

Rapidly rising prices are forcing families to think less about what they can afford next year or next month and more about what they should buy today before their money loses more value tomorrow.

“If you are an average Iranian, you know what you can buy today. You might not buy tomorrow — and by tomorrow, I mean 24 hours later,” economist Ali Dadpay told Iran International’s Eye for Iran podcast. .

“This is an economy that right now saving in eggs makes more sense … than saving in tomans,” he said.

An egg now costs roughly 25,000 tomans. But the story is not its dollar value. It is how quickly the purchasing power of the toman is eroding. Money put aside today may buy noticeably less within days.

“You have to tell people the frustration, the anger, the feeling of inability to provide for one’s family or afford healthcare services, pay for prescription drugs,” Dadpay said.

Average monthly income is below $200, by his estimate, while housing consumes an increasingly large share of household earnings.

Meat and other proteins are disappearing from some families’ diets. Even damaged fruit, once bought by the poorest or given to the homeless, is increasingly becoming an option for ordinary households trying to stretch their money.

“We are not approaching an economic disaster,” Dadpay said. “We are in the middle of an economic disaster.”

Economic pain, political anger

The erosion of Iran’s middle class has been underway for years, but the pressure is accelerating. Saving itself has become less about building wealth than preserving purchasing power, with gold and foreign currency used to make sure today’s earnings can still pay for necessities weeks or months from now.

“This is an economy that has stopped to invest in its future,” Dadpay said.

The political question is what happens when years of impoverishment collide with shortages, unemployment and declining public services.

Iranian authorities appear increasingly concerned about that possibility. Officials have identified gasoline, unemployment and livelihoods as potential triggers for unrest.

Judiciary chief Gholam-Hossein Mohseni-Ejei has threatened a tougher response to renewed protests, while leaked Basij audio has exposed concerns about further unrest.

Strategic forecaster Kamran Bokhari cautioned against treating economic deterioration as evidence that political rupture is imminent. Economic misery alone does not bring down governments, particularly those with an extensive coercive apparatus.

“It’s a meltdown and we’re watching it in real time,” Bokhari said.

For now, people can still adapt. Stores open, supply chains continue to function and families cut spending, change what they eat and plan around what they can afford over the next few weeks rather than the next few years.

But adaptation has limits.

You cannot eat paper

Tehran can continue paying its forces, at least in nominal terms.

Iran is a large economy of roughly 90 million people, with extensive borders and black-market networks capable of keeping some goods moving. The government can prioritize spending and print more money.

What it cannot print is the food, medicine, fuel and other goods that money is supposed to buy.

“When there are not enough products in the society, when there is not enough bread and butter for people, then the money is not going to solve the problem,” Dadpay said. “It’s just paper. You cannot eat paper.”

That creates a problem for a government relying heavily on material benefits to maintain loyalty. A higher salary offers diminishing protection against discontent if inflation rapidly destroys its purchasing power or shortages mean there is less available to buy.

Gasoline captures the contradiction particularly well.

Iran possesses enormous oil and natural gas reserves, yet Iranians have faced fuel shortages and long lines at filling stations. Dadpay traces the problem partly to decades of cheap subsidized gasoline, inefficient domestic cars, fuel smuggling and limited competition.

For years, there was still enough wealth to keep that system functioning.

Dadpay compared it to dividing a cake. Different groups could continue receiving a piece even as the cake became smaller. Now, he said, “there is no cake.”

Few easy ways out

Even an easing of external pressure would not necessarily resolve the deeper problems.

Powerful economic networks tied to the IRGC have benefited from monopolies and restricted competition, while greater foreign investment and competition could threaten those interests.

For Bokhari, that helps explain why Iran’s crisis is about more than sanctions, war or access to money.

“The kind of reforms needed means that this regime will not be what it is today,” he said.

Neither economist nor forecaster is putting a date on political rupture. Economic deterioration can persist for years, and the Islamic Republic has repeatedly demonstrated its willingness to use force to contain unrest.

But the immediate crisis is less abstract. Families are getting poorer, shortages are adding to the strain and money itself is becoming increasingly unreliable as a store of value.

Dadpay’s measure of that decline is strikingly simple. “This is an economy that right now saving in eggs makes more sense … than saving in tomans.”

Within six weeks, two of Iran’s neighbors have opened their markets to the satellite internet service. Iraq authorized Starlink on July 17. The United Arab Emirates granted it a 10-year general license on Aug. 28, and public sales began on Sept. 3.

SpaceX reportedly waived subscription fees for terminals operating inside Iran during the January 2026 internet shutdown, leaving access to the illegal hardware itself as one of the main obstacles.

Until now, Starlink terminals reaching Iran have largely had to pass through black-market supply chains involving multiple intermediaries. Legal sales in two nearby countries could shorten those chains, increase the supply of terminals and ultimately drive down prices inside Iran.

A standard Starlink kit now sells for around $400 in the UAE. At the end of August, the same model was selling for around $2,100 on Iran’s black market, while the smaller Starlink Mini was selling for around $1,850, according to data collected by Starlink4Iran.

During the January shutdown, the price of a standard kit surged to around $3,000, while the Mini reached around $2,300.

100%

The premium reflects more than profit. Equipment entering Iran passes through intermediaries facing the risks of confiscation and punishment, along with the costs of moving devices covertly across the border.

Legal markets next door will not eliminate those risks. But they could reduce the number of intermediaries involved and make terminals cheaper and more plentiful.

A new route from Iraq

The potential impact is particularly significant in Iraq, which shares a long land border with Iran and has extensive trade and passenger traffic with its neighbor.

Ahmad Ahmadian, an internet freedom activist and director of the nonprofit Holistic Resilience, which works to expand Iranian access to Starlink, said Erbil has already been an important source of communications equipment reaching Iran through informal channels.

Legalization could broaden that network to include traders and people who regularly travel between the two countries, he said.

During periods such as Arbaeen, the annual Shiite pilgrimage when millions of travelers move between Iran and Iraq, thoroughly inspecting everything they carry becomes more difficult, Ahmadian said.

Ahmadian expects some travelers to bring Starlink equipment into Iran for their own use or resale. The devices, he said, could even become a kind of “souvenir” brought back from Iraq.

The smaller Starlink Mini could prove particularly attractive. Roughly the size of a laptop, it is easier to transport than a standard dish, although its official availability in Iraq has yet to be confirmed.

There are still significant obstacles to an Iraqi Starlink market.

The license was issued by Iraq’s Communications and Media Commission, but the Communications Ministry says it has not signed a separate agreement with SpaceX and has raised objections over pricing and routing traffic through Qatar.

The Kurdistan Region has separate regulations, and as of early September no final agreement with SpaceX had been announced.

According to Iraqi officials, around 40,000 unauthorized terminals were already operating in the country before the license was issued, reportedly serving around 200,000 people, including government and security users.

Regulatory disputes may therefore slow the development of the legal market, but they are unlikely to eliminate an existing network of sellers, installers and users.

The UAE offers another potential source.

Starlink equipment was already available in Dubai’s free-trade zones before the general license was issued, and some terminals in Iran have previously been sourced there through intermediaries. Legal public sales could make the equipment easier to obtain.

One dish, many users

More terminals inside Iran would not necessarily benefit only those wealthy enough to buy one.

Some Starlink owners already share their connections with other users, including through VPN and other circumvention services.

Tools such as NasNet Connect can use Iran’s own National Information Network, or NIN, to connect users to a local gateway whose route to the international internet is provided by Starlink. That matters because Iranian authorities have repeatedly cut access to the global internet during periods of unrest and crisis while leaving the NIN and approved domestic services functioning.

A user’s connection to the local gateway can therefore still travel over Iranian telecommunications infrastructure, while the gateway’s route to the outside world exits through Starlink, beyond conventional international connections controlled by the state.

For relatively light uses such as messaging and web browsing, a single terminal can potentially support around 20 to 30 users, according to Ahmadian. Video calls, streaming and large downloads substantially reduce that number.

There is also a financial incentive.

Dish owners can sell VPN or other internet access to recover their costs or even generate income. If cheaper hardware reduces the initial investment, more terminals could potentially become gateways for groups of users rather than individual connections.

None of this makes such networks invisible. Iranian authorities can attempt to identify servers and dishes, disrupt communications and interfere with satellite signals.

But a growing number of privately operated connections would make the task of sealing Iran off from the international internet more complicated.

Free, for now

There is another important limitation: a Starlink terminal bought legally in Iraq or the UAE is not guaranteed to work once brought into Iran.

SpaceX retains control over which terminals are activated and whether they remain connected. It reportedly waived subscription fees for terminals operating in Iran during the January 2026 blackout but did not say how long the arrangement would last.

Ahmadian said active terminals in Iran have continued to operate without subscription charges in recent months. Some accounts previously disconnected for non-payment have also been restored, he said.

It remains unclear whether that policy will continue indefinitely or whether newly arrived terminals bought in Iraq or the UAE will automatically receive free service.

Using Starlink also carries significant personal risk inside Iran. The Islamic Republic considers the equipment illegal and has sought to disrupt satellite connections, locate terminals and punish users.

Nor can satellite internet come close to replacing Iran’s conventional internet infrastructure. Even if black-market prices fall substantially, the hardware will remain beyond the reach of many households.

But for journalists, activists, businesses and families who have lived through repeated internet shutdowns, Starlink increasingly serves as something different: a backup route to the outside world when Tehran cuts conventional connections.

The arrival of legal Starlink markets in Iraq and the UAE does not take Iran’s internet kill switch out of the government’s hands. But it could mean fewer doors close when the switch is thrown.