The Iranian rial fell sharply on Wednesday as markets braced for the reimposition of UN sanctions under the snapback mechanism, with the US dollar trading above 1,074,000 rials on the open market, more than 2% higher than a day earlier.
Sterling climbed to 1,440,000 rials, while the price of the “Emami” gold coin rose 3.5% to 1,070,000,000 rials, reflecting heightened demand for hard assets amid economic uncertainty.
On Tuesday, Iran’s central bank governor Mohammadreza Farzin sought to reassure business leaders that the country’s foreign exchange and gold reserves remain secure.
Also on Wednesday, Oil Minister Mohsen Paknejad said that reimposition of UN sanctions will not add "new burdensome restrictions" on the country’s oil sales.
"In the last years, we have faced such severe restrictions from the unjust and unilateral US sanctions that, in practice, [UN sanctions] won't add much to this situation," Paknejad said after a cabinet meeting.
The oil and petrochemical sector contributed roughly a quarter of Iran’s GDP in 2024, making continued exports critical to Tehran’s economy as sanctions loom.
Reuters also reported on Wednesday that the revival of sanctions is unlikely to halt Tehran’s vital crude exports but could hand Chinese refiners a lucrative advantage, giving them greater access to discounted Iranian oil.
Britain, France and Germany triggered the 30-day “snapback” process on August 28, accusing Iran of breaching the 2015 nuclear deal. If no agreement is reached, restrictions including an arms embargo, asset freezes and bans on nuclear-related technology will return at the end of the month.
The move would also provide a legal basis for the EU and Britain to reimpose banking, shipping and energy curbs.
But as Reuters’ columnist Ron Bousso writes, past experience shows Western sanctions have had limited lasting impact on Iranian oil flows.
Exports collapsed to 444,000 barrels per day (bpd) in 2020 after Washington reimposed sanctions but have since rebounded to 1.6 million bpd this year, with nearly 80% going to China, according to data from analytics firm Kpler.
Despite years of US efforts to expand restrictions on tankers, traders and refiners, Iran has developed an opaque network of intermediaries, uninsured vessels and ship-to-ship transfers to keep crude flowing.
“These whack-a-mole efforts have had little and often short-lived impact,” Bousso wrote.
Analysts say the snapback may deter some Asian buyers but not Beijing, which has already defied Western sanctions by importing sanctioned Russian LNG cargoes. Chinese refiners could even gain leverage to secure Iranian oil at steeper discounts, further undermining the effectiveness of Western sanctions.
The oil and petrochemical sector contributed roughly a quarter of Iran’s GDP in 2024, making continued exports critical to Tehran’s economy as sanctions loom.
Foreign ministers of Iran, Britain, France and Germany – the so-called E3 – met on the sidelines of the UN General Assembly, joined by EU foreign policy chief Kaja Kallas, amid warnings that a 30-day “snapback” process to reimpose sanctions will expire on September 27.
In the meeting between Iranian and European top diplomats in New York, "some ideas and proposals for continuing diplomacy were raised, and it was decided that consultations with all involved parties would continue," according to Iran's Foreign Ministry.
"The course of discussions over the past month aimed at finding diplomatic solutions regarding Iran’s nuclear issue and preventing an escalation of tensions was reviewed in the meeting," according to the Foreign Ministry statement.
The E3 triggered the process on August 28, accusing Iran of failing to comply with a 2015 nuclear deal designed to prevent it from developing nuclear weapons. Tehran denies it seeks such arms, insisting its nuclear program is for peaceful purposes.
“Iran has been in contact with E3/EU officials and (the UN nuclear chief Rafael) Grossi since this morning at the UN Different ideas have been raised and discussed,” a senior Iranian official told Reuters on Tuesday.
Another Iranian official said “everyone seems to be trying” to find a resolution.
Iranian Foreign Minister Abbas Araghchi warned European states to choose “cooperation or confrontation.”
Speaking on state TV, he said: “They have tested Iran repeatedly and know we do not respond to the language of pressure and threat ... I hope we can find a diplomatic solution in the coming days, otherwise Tehran will take appropriate measures.”
According to diplomats, the E3 have offered to delay reinstating sanctions for up to six months if Iran restores access for UN inspectors, addresses concerns over its stockpile of enriched uranium and agrees to talks with the United States.
But two European envoys said Iran’s leaders have yet to meet these conditions. “The ball is in Iran’s camp,” one diplomat said. “It is up to it to quickly take the concrete steps in the coming days to avert snapback. If not, then sanctions will be reimposed.”
Another diplomat added, “The minimum would be for Iranians to present the special report and allow some token visit of inspectors to some sites, but even then that probably won’t fly – and chances are the US would veto.”
If no extension is agreed, all pre-2015 UN sanctions will automatically return on September 28, compounding economic pressures from US and European measures already in place.
President Masoud Pezeshkian said on Saturday that Iran would “overcome” any reimposition of sanctions. According to an insider cited by Reuters, growing discontent over the economy was rattling Iran’s leadership, with little sign of answers.
In June, following US and Israeli strikes on Iranian nuclear sites, Iran’s parliament passed a law suspending cooperation with the International Atomic Energy Agency. A deal with the IAEA was reached on September 9 to resume some inspections, though diplomats say its scope remains limited.
“I am in New York to use these remaining days for diplomatic consultations that might lead to a solution,” Araghchi said. “If it is not found, we will continue our path.”
Speaking at a meeting with the National Entrepreneurs Assembly, Farzin said the Central Bank of Iran (CBI) has “full security and access” to reserves held abroad and is preparing special measures to support exporters, ease access to hard currency and expand financing channels.
He announced plans for up to €200 million in sukuk Islamic bonds, new credit for export-oriented firms and a joint committee with entrepreneurs to resolve banking hurdles.
Farzin stressed that the CBI’s priority is to curb inflation and maintain financial stability, pledging that “all monetary and foreign exchange decisions will be taken with these objectives in mind.”
He also said the bank has introduced new instruments such as chain financing, gold-backed bonds and pre-sale of foreign currency to increase resilience in the market.
The remarks come as Iran braces for the automatic return of UN sanctions on September 28 after Britain, France and Germany triggered the mechanism last month.
The snapback would reinstate international restrictions suspended under the 2015 nuclear deal, compounding existing US and EU sanctions that have already slashed oil revenues and battered the rial.
Iran’s currency has tumbled past 1,038,000 rials per dollar on the open market, while inflation hovers near 50%.
Analysts warn that renewed sanctions could push inflation above 60–90% and deepen negative growth.
Despite official assurances, businesses say access to foreign exchange remains a critical obstacle, with many entrepreneurs urging structural reforms and clear rules for investors.
The central bank’s confidence message contrasts with mounting signs of distress, including protests over living costs, reports of suicides linked to financial hardship and warnings from experts that Iran’s energy and fiscal systems are at breaking point.
