The European Union and the United Kingdom have imposed fresh sanctions targeting Iran's shipping and aviation industries, citing the transfer of arms to Russia and militant groups in the Middle East and Red Sea region.
The measures aim to curb Iran’s ability to facilitate drone, missile, and military technology transfers.
The European Union added the Islamic Republic of Iran Shipping Lines (IRISL) and its director, Mohammad Reza Khiabani, to its sanctions list, accusing the company of transporting drones and military equipment for the Islamic Revolutionary Guard Corps (IRGC).
Ports, including Amirabad and Anzali, were also named, with sanctions prohibiting transactions unless for humanitarian needs. The EU's measures also include restrictions on Russian shipping companies accused of carrying Iranian-made arms to aid Russia’s war in Ukraine.
“This additional measure is targeted to the use of vessels and ports for the transfer of Iranian-made Unmanned Aerial Vehicles (UAVs), missiles, and related technologies and components,” read a statement released after the EU Foreign Ministers meeting in Brussels.
Britain also announced on Monday that it has imposed sanctions on Iran’s national airline and shipping carrier, citing Iran’s transfer of ballistic missiles to Russia as the reason for the measures.
The sanctions target Iran Air, the state-owned airline, and the Islamic Republic of Iran Shipping Lines (IRISL), freezing their assets due to their involvement in supplying weapons to Russia for use in its war against Ukraine.
“Iran’s attempts to undermine global security are dangerous and unacceptable,” said British Foreign Secretary David Lammy.
“We reiterate our call on Iran to cease its support for Russia's illegal war in Ukraine.”
As part of the sanctions, Iran Air’s direct commercial flights to and from the UK will face further restrictions. Britain also sanctioned the Russian cargo ship Port Olya-3 for its role in transporting military supplies to Russia.
Iran’s Foreign Minister Abbas Araghchi dismissed the allegations on Sunday, saying that Iran has not transferred ballistic missiles to Russia, referencing Ukrainian President Volodymyr Zelensky’s acknowledgment of the same. However, EU and US officials have maintained that evidence supports ongoing negotiations and weapons transfers.
However, EU and US officials maintain they have evidence of ongoing negotiations and transfers.
These new measures build on previous EU sanctions, including actions against Iranian airlines accused of transporting military equipment. In recent months, European officials have described Iranian-made UAVs and potential ballistic missile deliveries as escalating threats to European security.
The new measures are part of a wider strategy to economically and diplomatically isolate Iran. In September, the United States, citing intelligence shared with its allies, reported that Russia had received ballistic missiles from Iran for use in its ongoing conflict in Ukraine. In response, Washington imposed sanctions on the vessels and companies involved in facilitating the weapons transfers.
While the EU and the UK seek to curtail Iran’s military influence, Iranian officials argue the sanctions lack a legal or moral foundation and threaten to deepen Iran’s alignment with Russia, further entrenching the complex dynamics of the Ukraine conflict.
The strikes on October 26, targeted Iranian military facilities, including air defenses, following missile attacks on Israel by Iran earlier that month.
"In defending our territorial integrity and sovereignty, we seek no one's permission, and any aggression will undoubtedly be met with a decisive response," Foreign Ministry Spokesman Esmail Baghaei said Monday during his weekly briefing.
He also reaffirmed Iran’s support for regional militia groups, underscoring Tehran’s broader strategy in the region amidst ongoing hostilities.
Baghaei also said that the country's nuclear facilities must be protected from any potential attacks by Israel, in compliance with a resolution adopted more than three decades ago by the UN nuclear watchdog, the IAEA.
There is no UN Security Council resolution that bans attacks on nuclear facilities, but the International Atomic Energy Agency (IAEA) did adopt General Conference Resolution (GC(XXXIV)/RES/533) in 1990 that prohibits armed attacks on nuclear facilities, "devoted to peaceful purposes." The resolution also calls for strengthening international cooperation on nuclear safety and radiological protection.
"This resolution is a clear rule that prohibits any threats against nuclear facilities," Baghaei said, but did not mention the wording which says "devoted to peaceful purposes. "Such threats endanger the national security of states, and the United Nations must provide a decisive response to them."
Israel's new defense minister said last week that the Islamic Republic's nuclear facilities are now more exposed than ever, following Israel's October 26 airstrikes that targeted critical Iranian air defense systems.
In his remarks, Israel Katz said the vulnerability of Iranian nuclear sites has made it more plausible for Israel “to achieve the most important goal, to thwart and remove the threat of annihilation from hanging over the State of Israel."
“Our region has been familiar with the law-breaking approaches of the Zionist regime for decades. We will take all necessary actions to protect our nuclear facilities,” said Baghaei on Monday.
It is not clear what nuclear facilities Israel would target, but Iran's underground uranium enrichment sites, producing highly purified fissile material, might not be considered as peaceful.
Iranian authorities have consistently called for Israel's destruction, and until now, refused to call it anything other than “the Zionist entity.”
Responding to inquiries about European nations' willingness to negotiate, Baghaei said Iran is open to discussions. "We have never abandoned negotiations on the nuclear issue," he said. "The revival of the JCPOA has been an ongoing process, and Iran has consistently demonstrated its goodwill in these efforts."
Iran's nuclear talks during the Biden administration, centered around reviving the 2015 Joint Comprehensive Plan of Action (JCPOA), remain a focal point of international diplomacy. The agreement aimed to limit Iran's nuclear activities in exchange for sanctions relief, but its future is now uncertain since the US withdrew in 2018 and reimposed sanctions, prompting Iran to gradually breach its commitments. Recent negotiations have faced significant hurdles, including disagreements over sanctions relief, verification mechanisms, and guarantees against future US withdrawal. While Iran insists its nuclear program is peaceful, Western powers express concern over its enrichment of uranium to near weapons-grade levels.
Baghaei pointed to a recent visit by the International Atomic Energy Agency (IAEA) Director-General Rafael Grossi as evidence of what he called Iran’s constructive approach.
"The visit was productive and positive, leading to constructive agreements. We expect the opposing parties to recognize Iran's positive approach and let the process proceed on a technical path, free from political pressure," he added.
He went on to say that ambiguities in Iran’s nuclear program raised by the IAEA lack a clear basis and were thoroughly discussed during Grossi's visit.
"Iran remains committed to ensuring that the Agency can operate without the disruptive and malicious pressures exerted by certain parties," Baghaei said, stressing the importance of allowing the IAEA to work independently of external political influences.
Iran's relationship with the IAEA has been fraught with tension in recent years, particularly over issues of transparency and compliance with nuclear agreements. The IAEA has repeatedly raised concerns about Iran's enrichment of uranium to near weapons-grade levels and its lack of cooperation in granting access to key sites. Tehran, in turn, accuses the IAEA of being influenced by political pressures from Western powers and insists that its nuclear activities are peaceful and within its sovereign rights.
The report, released on Saturday, attributed the trend to decades of double-digit inflation, which has significantly worsened since 2019, topping 40 percent. Whaqt triggered the jump in inflation was US economic sanctions imposed in 2018.
Food poverty in Iran surged from 18 million people in 2017 to over 26 million by 2020, the report said, noting that with the current inflation rate discussions about investment, economic growth, and poverty reduction is impractical.
The report argues, "Given the current circumstances, monetary and fiscal policies should focus on stabilizing inflation rather than pursuing significant reductions. Expecting a substantial decline in inflation through specific monetary and fiscal measures is unrealistic."
The Chamber of Commerce Research Center also admitted that the government’s measures and policies to curb the sharp devaluation of the national currency and support production had limited success. Since 2018, Iran's rial has fallen more than 15-fold against the US dollar as sanctions reduced Tehran's oil exports.
“Considering the pressures on Iran's economy due to sanctions, negative economic prospects, and the severe damage to production and investment, as well as the limited success of monetary control policies, it would be better not to overly focus on strict contractionary policies... Instead, efforts should be directed toward managing inflation and achieving price stability to stimulate production,” read the report.
According to a recent report by the parliament’s research center, Iran's poverty rate increased by 0.4 percent in the last Iranian year (ended March 2024) compared to a year earlier, reaching 30.1%. This means that at least one-third of the population was unable to meet their basic needs and lived below the poverty line.
Additionally, a report by Ham-Mihan newspaper in Tehran said Sunday that more than half of Iranian households live below the relative poverty line, often resorting to installment purchases for basic necessities like meat, dairy, and household items.
The study by Iran's Chamber of Commerce also highlighted systemic issues fueling inflation, such as government inefficiency, excessive spending on public sector, and reliance on printing money to cover budget deficits.
To offset budget deficits and secure loans from financial institutions, the Iranian government has pressured the Central Bank to print unsupported money. According to IMF figures, liquidity in Iran has surged annually by 25-40% in recent years, with projected increases above 27% this year and next.
This increased liquidity has fueled runaway inflation. Over the past several years, Iran has consistently ranked among the top 10 countries with the highest inflation rates, and next year it is expected to have the sixth-highest inflation globally.
India has taken over as the dominant player in the global carpet market, capitalizing on Iran’s declining exports and securing the US market, which accounts for 44% of global carpet imports, Morteza Haji Aghamiri, chairman of the Carpet Commission at Iran’s Chamber of Commerce, told the Iranian Labour News Agency (ILNA).
Aghamiri added that Iran’s carpet exports, valued at $426 million in 2017, had plummeted to just $39.7 million by March 2024.
Official reports last March revealed that Persian carpet exports had reached their lowest level in 24 years. This decline, however, has been years in the making. In 1994, Persian carpets generated over two billion dollars for Iran, yet by 2019, exports had dropped to $69 million, plummeting further to just two million dollars in the second quarter of 2020.
Sanctions and currency regulations—specifically, the now-repealed “foreign exchange commitment policy,” which required exporters to repatriate earnings within a specified period—have been primary obstacles, Aghamiri said. Even with the policy’s repeal, exports remain constrained. “The competition from India, Turkey, and Afghanistan has only made things worse,” he added.
Adding to the challenge, Afghan carpets smuggled into Iran have flooded the domestic market. Aghamiri explained that US investment in Afghanistan’s carpet industry before the 2021 withdrawal, fueled production, making lower-quality Afghan carpets a growing presence in Iran’s markets, often sold as Iranian products.
The steep fall in exports has significantly impacted jobs across the carpet sector, exacerbating unemployment in Iran’s rural areas. Aghamiri also highlighted the lack of social insurance for carpet weavers and registered artisans, depriving them of minimum wages and benefits. He added that these issues have led to the loss of two million jobs in Iran and reduced production and exports in the handwoven carpet industry.
Committee to revive carpet exports
In response to the industry’s difficulties, Iran’s foreign minister Abbas Araghchi said that the government intends to form a special committee to address these export challenges.
On Friday, during a visit to the 31st Tehran International Handwoven Carpet Exhibition, Araghchi called on officials to support the production, sale, and export of Iranian carpets. “The vitality of Iranian carpets depends on exports,” he said, emphasizing that the committee will work to remove obstacles hindering the industry.
While sanctions are a significant factor, Araghchi highlighted the need to ease Iran’s export regulations as well.
To boost Iranian carpets abroad, the foreign ministry has instructed embassies to promote exports. “The foreign ministry’s economic department has been tasked with expanding markets for Iranian products, especially carpets,” Araghchi said. He also called for a comprehensive policy to guide each government agency’s role in supporting the industry.
Data from the Trade Ministry show that the export of traditional Iranian hand-woven carpets in 2001, when nuclear sanctions against Iran had not yet been imposed, was more than half a billion dollars, over a quarter of which was imported by the United States, with Germany, Lebanon, and Britain as other major customers.
The exports picked up again in 2017, immediately after the implementation of Iran's 2015 nuclear deal with world powers, the Joint Comprehensive Plan of Action (JCPOA). But exports started to fall again after the US withdrawal from the deal in 2018 when Washington reimposed sanctions on the import of Iranian rugs.
With President-elect Donald Trump taking office in January 2025, it remains to be seen whether President Pezeshkian’s administration’s proposed committee can revitalize the industry under a new wave of potential sanctions.