Oil, gas and Iran economic analyst
Iran’s economy has slipped into its first contraction in more than four years and now faces mounting debt and record capital flight, official data show, days before UN sanctions are due to return.
According to the Statistical Center of Iran, GDP shrank by 0.1% in the spring, ending 17 straight quarters of expansion. Industrial and mining output, which grew 5.9% last spring, fell to -0.3% this year, while agriculture plunged from +2.3% to -2.7%.
Severe water and electricity shortages disrupted production across both sectors, hitting farms and factories alike.
With the so-called snapback of international sanctions due on September 2, Iran faces a narrowing path to growth—and a worrying prospect of rising unemployment and public discontent.
Mounting debt
A separate Central Bank report shows government debt to the bank surged 63% year-on-year as of June, reflecting the administration’s failure to meet revenue targets.
Officials say only 60% of projected revenues were generated in the first five months of the year, worse than in previous years and well short of the levels needed to stabilize public finances.
Since 2018, when President Donald Trump withdrew the United States from a 2015 nuclear deal and reimposed sanctions, about a third of Iran’s annual budget has gone unrealized.
The IMF now estimates public debt at 37% of GDP and climbing. This trend is likely to accelerate if sanctions further limit oil revenues.
Record capital flight
The Central Bank also reported a net capital account of -$21.7 billion for the last fiscal year—the highest on record and 2.5 times greater than in 2020.
Capital flight has been accelerating since 2020, as businesses and households move assets abroad to escape currency depreciation and political uncertainty.
The scale of outflows highlights both a collapse in investor confidence and the inability of the banking system to hold foreign exchange inside the country.
Oil gains vanished
Iran earned $66 billion from oil, petroleum products and natural gas exports last year, a 17% increase. Including non-oil goods, total exports reached $115 billion, $27 billion more than imports.
On paper, that left the goods trade in surplus.
But the services sector recorded a record $12 billion deficit, dragging the overall trade balance for goods and services down to just $13 billion.
Combined with the $21.7 billion in capital flight, much of the hard currency generated by oil exports is effectively leaving the country.
The result is sustained pressure on Iran’s already fragile foreign reserves and further instability in the rial, which hit a record low of 1.08 million to the dollar on Thursday.
The bottom line is that Tehran’s extremely hard-gained oil cash is being wiped out by falling output, runaway debt and unprecedented capital flight—leaving the country perilously exposed just as fresh sanctions loom.
Customs data show 2.7 million tons of Indonesian crude -- around 630,000 barrels per day -- arrived in August, far exceeding Indonesia’s average output of 580,000 bpd in 2024, most of which was consumed domestically. The flows followed a sharp jump in July.
China, the biggest buyer of Iranian oil, officially reported no imports from Tehran since mid-2022. In the meantime, it buys more oil from Malaysia than the country produces. In the past two months, shipments from Malaysia -- often used for ship-to-ship transfers and rebranded cargoes -- have dropped more than 30%.
Analysts say operators are now shifting tactics.
“This is just part of a continuing evolution of the operators’ tactics, hiding what they’re doing,” said Charlie Brown, a senior adviser at United Against Nuclear Iran. “They’re still doing ship-to-ship transfers in the same area off Malaysia; the basic trade pattern remains the same.”
Vessel-tracking data show tankers including the Aquaris, Yuhan, Pola and Pix signaled calls at Indonesia’s Kabil port near Singapore -- a hub not connected to crude exports but close to established transfer zones off Malaysia. These tankers later discharged cargoes in Chinese ports such as Qingdao, Rizhao and Dalian.
Bloomberg cited the Aquaris as receiving Iranian crude from the sanctioned Sorion tanker before unloading in Qingdao in June. The Yuhan and Pola followed similar patterns, according to data from Vortexa and Kpler.
Queries to Indonesia’s energy ministry, Pertamina, Kabil port, and China’s foreign ministry went unanswered, Bloomberg reported.
China’s reliance on Iranian oil has provided Tehran with a crucial economic lifeline as US sanctions continue to target the trade.
The looming return of UN sanctions on Iran is unlikely to curb its oil exports but could boost China’s refiners, who already take nearly 80% of Tehran’s 1.6 million barrels per day at steep discounts, Reuters reported on Wednesday.
Exports of handmade rugs, which stood at more than $400 million in 2017, fell to just $41.7 million in the year to March 2025, according to customs data -- a drop of over 95% from their peak in the early 1990s, AFPreported.
The collapse followed Washington’s 2018 reimposition of sanctions, cutting off the US market that once bought more than 70% of Iranian carpets.
“During the unkind and cruel US sanctions, we lost our biggest buyer,” said Zahra Kamani, head of Iran’s National Carpet Center.
Germany, the UAE, Japan and China are now Iran’s top destinations, but volumes remain a fraction of past levels.
Rivals including India, China, Nepal, Turkey and Pakistan have captured global market share, with some rugs even imported back into Iran, traders said.
At least two million Iranians, many of them rural women, depend on carpet-weaving but earn only a few dollars a day. “We are losing even part of our domestic market due to imports,” Tehran trader Hamed Nabizadeh told AFP.
With tourism also in decline, fewer foreign visitors buy rugs, and even those who do are deterred by price tags of $30,000 or more for silk carpets.
Officials insist revival is possible. Trade Minister Mohammad Atabak said in June that new trade and currency policies could help resuscitate exports.
Analysts argue adapting designs to modern décor trends, using social media for sales and branding carpets more effectively may be key.
But with Iran’s currency plunging, many families at home are turning to cheaper factory-made rugs, and a centuries-old craft risks fading into a relic of the past.