US Treasury Secretary Admits Engineering Iran’s Economic Collapse
United States Treasury Secretary Scott Bessent has publicly acknowledged that the US government deliberately engineered a dollar shortage in Iran, a policy designed to destabilize the Iranian economy and trigger widespread protests. The admission, made during a Congressional hearing and further elaborated upon at the World Economic Forum in Davos, Switzerland, reveals a calculated strategy to exert maximum pressure on Tehran.
The economic pressure culminated in significant unrest in Iran during December and January, representing some of the largest antigovernment protests since the 1979 Islamic Revolution. The demonstrations were sparked by a severe economic crisis, beginning with shopkeepers in Tehran shuttering their businesses on December 28, 2025, following a record low for the Iranian rial against the US dollar. The protests quickly spread across the country.
Ayatollah Ali Khamenei’s government responded with force, reportedly resulting in over 6,800 protesters killed, including at least 150 children, in a sweeping crackdown on the movement.
What is a ‘Dollar Shortage’?
A “dollar shortage” occurs when a country lacks sufficient US dollars to finance necessary imports. As the primary currency for global trade – particularly for oil, machinery, and loan repayments – a consistent supply of dollars is crucial for nations to participate in the international economy.
According to Mohammad Reza Farzanegan, an economist at Germany’s Marburg University, the US created the shortage by simultaneously restricting the two primary avenues for foreign exchange (FX) inflow: oil exports and access to international banking. This was achieved through sanctions targeting Iran’s oil sector, effectively penalizing any entity involved in buying or selling Iranian oil.
Given Iran’s heavy reliance on oil revenue, sanctions on its oil exports created a significant FX constraint. By threatening secondary sanctions against any global entity transacting in dollars with Iran, the US effectively trapped existing Iranian reserves abroad and prevented new dollars from entering the domestic market, Farzanegan explained.
Bessent’s Explanation
Responding to questions about Iran at a Congressional hearing last week, Secretary Bessent detailed the US strategy. “What we [have done] at Treasury is created a dollar shortage in the country,” he stated, adding that the strategy reached a “grand culmination in December, when one of the largest banks in Iran went under… the Iranian currency went into freefall, inflation exploded, and we have seen the Iranian people out on the street.”
Bessent further claimed that Iranian leaders were “wiring money out of the country like crazy,” suggesting a loss of confidence in the Iranian economy. Speaking at the World Economic Forum in Davos last month, Bessent asserted that President Trump’s “maximum pressure” campaign had “worked,” leading to economic collapse in December and triggering the protests.
He referenced earlier remarks made at the Economic Club of New York in March of the previous year, where he outlined the White House’s plan to leverage the “maximum pressure” campaign to collapse Iran’s economy. This involved targeting Iran’s oil supply chain and actively working to cut off its access to the international financial system.
The Impact on Iran
By January, the Iranian rial had plummeted to 1.5 million to the dollar, a dramatic decline from approximately 700,000 a year earlier and 900,000 in mid-2025. This currency devaluation fueled steep inflation, with food prices rising an average of 72 percent compared to the previous year.
The US strategy, Farzanegan said, is “particularly devastating because it leverages commercial risk management against humanitarian needs.” He added that Washington’s actions effectively make the Iranian market a “commercial liability” for companies, even those dealing in essential goods like medicine.
A research paper co-authored by Farzanegan and Nader Habibi, published last year, found that US actions had significantly hindered the growth of Iran’s middle class. The study estimated that the middle class would have expanded by an annual average of 17 percentage points between 2012 and 2019 without US intervention. In 2019, the research found a 28 percentage point loss in the middle-class share of the population.
“People lost their purchasing power, and savings were wiped out,” Farzanegan said. “This is a long-term destruction of the country’s human capital.”
US Endgame and Prospects for Success
Bessent’s admission signals a shift towards what he termed “total economic warfare.” “This is economic statecraft; no shots fired,” he said at the World Economic Forum.
While acknowledging the potential for diplomatic complications due to the impact on humanitarian channels, experts suggest that economic coercion of this type is a common tactic employed by the US against countries like Russia, Cuba, North Korea, China, and Myanmar.
However, Farzanegan noted that Iran’s situation is unique due to the prolonged intensity of the pressure, spanning decades since the 1979 revolution. He also pointed to Iran’s established mechanisms for circumventing sanctions, suggesting that the “dollar shortage” will likely result in a continuous game of cat and mouse rather than a decisive economic collapse.
The US and Iran are currently engaged in talks aimed at de-escalating tensions, with the US seeking concessions regarding Iran’s nuclear program, ballistic missiles, and support for regional non-state actors. Some observers believe the ultimate US goal is regime change in Iran, a claim echoed by Bruce Fein, a former US associate deputy attorney general, who stated that economic sanctions alone rarely topple regimes and that military force is often required.
Fein cautioned that the impoverishment of Iranians is unlikely to lead to a successful revolution, as basic survival will likely take precedence over political upheaval.
