Trump Claims Iran Near Collapse, Former Central Bank Advisor Rejects Assertion

In response to the US's "economic encirclement" and the severing of diplomatic ties with the UAE, a former advisor to the Central Bank of Iran pointed out that the actual situation on the ground is not as bad as it seems, and that Trump's actions are actually consolidating power for Iranian hardliners...

As comprehensive ceasefire negotiations break down, Washington's economic encirclement of Tehran is escalating rapidly. US President Trump publicly announced on Thursday that he would wage "an unprecedented economic war and isolation" against Iran.

In his speech, Trump declared vehemently that the current Iranian regime was "on the brink of collapse." This marked the official entry into the highest-pressure phase of the "economic fury" campaign launched by the US government in April of this year, aimed at cutting off its terrorist financing and revenue streams.

On the same day, Trump issued a stern warning to the international community, stating that any country providing Iran with an economic "lifeline" would face extremely severe economic repercussions. He reiterated his firm stance against allowing Iran to acquire nuclear weapons.

To completely shut down funding channels, he clearly outlined the underground networks that must be blocked immediately, including oil smuggling, currency swap lines, cash transfers, foreign exchange institutions, ship registration, and cover companies.

However, the US's extreme pressure strategy and its assessment of the situation have been directly questioned by economic experts familiar with the inner workings of Iran. Mehrdad Sepahvand, a former economic advisor to the Central Bank of Iran, refuted Trump's assertions on Thursday, stating directly: "We should be cautious about the view that the Iranian economy is on the verge of complete collapse."

Sepahvand, the current head of Daric Investment Group, said that while the Iranian economy is indeed deteriorating under increasing sanctions, it is far from collapsing . He emphasized that local shops remain stocked with food and basic necessities, showing no signs of panic buying.

Despite severe funding imbalances in the banking system and even destructive cyberattacks, public confidence in the financial system remains strong. Sepahvand stated that there have been no major bank runs so far.

In his grand narrative of despair, he points out the resilience of the Iranian underclass: "Although hope has clearly diminished, it has not completely disappeared. So the situation around us is not as bad as we imagined."

The UAE's severing of diplomatic ties has severely damaged trade, making the US-Iran war increasingly difficult to end.

Compared to the US's long-range sanctions, the rapid deterioration of the surrounding geopolitical situation is delivering a more devastating direct blow to Iran . As Iran's largest source of imports before the war, the UAE retaliated on Wednesday by severing diplomatic ties.

The United Arab Emirates has officially announced a complete suspension of all trade and financial ties with Iran following attacks by two ballistic missiles fired from Iran. This effectively severs one of Tehran's most vital external economic arteries.

Sepahvand acknowledged that the UAE has always been Iran's main financial gateway. This breakdown in bilateral relations will inevitably put significant pressure on the Iranian exchange rate, increase trade costs, and further exacerbate domestic inflation over the next two quarters.

In assessing the destructive power of this geopolitical black swan event, he offered a pessimistic quantitative forecast. Sepahvand stated, "Our current estimate is around -5%, and (the UAE sanctions) could worsen the situation further."

Macroeconomic data has already revealed the profound suffering brought about by this conflict. According to World Bank statistics, Iran's GDP is estimated to have shrunk by 2.7% in the year ending March of this year.

The out-of-control inflation is particularly alarming. World Bank data shows that Iran's overall inflation rate soared to 62.2% in February this year, with food price inflation hitting a record high of 99%.

The devastation the war has inflicted on the labor market is equally staggering. According to estimates from an Iranian official cited by The New York Times, the ongoing war has already cost the country as many as one million jobs.

Regrettably, Washington's dual economic and political pressures aimed at weakening the Iranian regime are producing the opposite internal political effect . Extreme external pressure has instead provided an opportunity for hardliners within Iran to consolidate power.

Sepahvand warned that hardliners within the system are actually taking advantage of the current crisis, which directly makes the prospect of reaching any diplomatic agreement with the United States even more difficult.