US admits to creating ‘dollar shortage’ in Iran: How economic squeeze led to protests

Dollar as a weapon? US says financial squeeze shook Iran’s economy

• US policy created a dollar shortage to pressure Iran's economy
• Sanctions slash Iran's oil exports, block global banking
• Iran's currency collapsed, inflation soared, and protests erupted

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As Iran's Foreign Minister Abbas Araghchi arrived in Geneva for a second round of indirect nuclear negotiations with the United States, fresh attention has turned to Washington’s economic pressure campaign against Iran.

The spotlight intensified after Bessent publicly acknowledged that US policy deliberately triggered a “dollar shortage” to weaken Tehran’s economy, a strategy he described as economic statecraft rather than military confrontation.

What Bessent said

Bessent said the US Treasury intentionally squeezed Iran’s access to foreign currency to destabilise the economy.

“What we [have done] at Treasury is created a dollar shortage in the country,” Bessent said, adding the policy culminated when a major Iranian bank collapsed and “the Iranian currency went into freefall, inflation exploded, and hence, we have seen the Iranian people out on the street.”

“We have seen the Iranian leadership wiring money out of the country like crazy. So the rats are leaving the ship, and that is a good sign that they know the end may be near.”

Earlier, speaking at the World Economic Forum in Davos, he said:

“President Trump ordered Treasury ... to put maximum pressure on Iran, and it’s worked. Because in December, their economy collapsed. They are not able to get imports, and this is why the people took to the streets.”

How the ‘dollar shortage’ was created

Economists say Washington simultaneously targeted the two main channels through which Iran earns foreign currency:

1. Oil exports: Sanctions were tightened across the oil supply chain, Iran’s primary source of foreign exchange, sharply reducing inflows.

2. International banking access: Secondary sanctions discouraged global banks and companies from dealing with Iran, blocking access to overseas reserves and dollar transactions.

According to Mohammad Reza Farzanegan, who told Al Jazeera, “By using secondary sanctions to threaten any global entity trading in dollars with Iran, the US traps Iran’s existing reserves abroad and prevents new dollars from entering the domestic market.”

What is dollar shortage? 

A “dollar shortage” refers to a situation where a country cannot access enough US dollars, the main currency used in global trade, to pay for imports or stabilise its financial system. From what Scott Bessent described, the United States created this in Iran by restricting oil sales and cutting off banks from international dollar transactions.

With fewer dollars entering the country and overseas reserves effectively frozen, businesses struggled to import goods, the currency weakened sharply, inflation surged, and economic pressure spilled onto the streets.

Economic impact inside Iran

The Iranian currency plunged from roughly 700,000 rials per dollar to about 1.5 million within a year, driving severe inflation. Food prices reportedly rose by around 72%.

Protests began among shopkeepers in Tehran and spread nationwide, followed by a crackdown ordered by Supreme Leader Ali Khamenei. Reports cited by international media say more than 6,800 protesters, including children, were killed.

Farzanegan said the sanctions forced “import compression”, preventing Iran from purchasing machinery and essential goods and making even medical transactions risky for foreign companies.

Talks resume amid pressure

The economic pressure campaign unfolds as Washington seeks limits on Iran’s nuclear programme and regional activities, while Tehran has signalled willingness to negotiate sanctions relief.

With diplomacy restarting in Geneva, analysts say the admission underscores how economic coercion, rather than military force, has become a central tool in the confrontation between the United States and Iran.