Iran's Economy Is On The Brink Of Collapse & Zelensky & Netanyahu In Washington

**Mike Baker** (0:11)
It's Wednesday, the 29th of July. Welcome to The President's Daily Brief. I'm Mike Baker, your eyes and ears on the world stage. And yes, look at that, I'm back on the road. All right, let's get briefed. First up, after weeks of kinetic action, nightly strikes on hundreds of targets, the Trump administration increasingly believes its most powerful weapon against Iran may actually be economic pressure. Really, you think? There are growing signs that the regime's economy is nearing a breaking point. I'll have the details. Later in the show, President Trump hosted two high stakes meetings at the White House, sitting down separately with Israeli Prime Minister Netanyahu and Ukrainian President Zelensky, as the conflicts in the Middle East and Ukraine continue to evolve. Plus, new reporting reveals the White House is preparing to dramatically increase spending to push back against China's expanding influence around the world. And in today's Back of the Brief, a powerful 7.1 earthquake and a series of aftershocks hit southern Japan, causing widespread damage and triggering a massive search and rescue operation.
But first, today's BDB Spotlight.
For weeks now, the focus of America's confrontation with Iran has been the kinetic action night after night of US airstrikes, carrier strike groups, cruise missiles, B-2 bombers striking targets deep inside Iran. But according to new reporting, the Trump administration increasingly believes the most powerful weapon in its arsenal may not belong to the Pentagon. Instead, they think it may belong to the Treasury Department. Now, regular PDB listeners know that before this latest war began, we spent a fair amount of time talking about Iran's economy. Inflation was already out of control. Economic growth had largely stalled. Ordinary Iranians were struggling under years of sanctions, while the regime continued pouring billions of dollars into its military and proxy groups across the Middle East. According to a report from Axios, senior US officials now believe the combination of sanctions, a US-led naval blockade of Iranian ports and mounting financial pressure may ultimately inflict more lasting damage on the Iranian regime than another round of bombing. One administration official said intelligence indicates that Tehran is increasingly struggling to pay its soldiers and militias because of the growing financial squeeze. Officials also say they're seeing signs of gasoline shortages, fears of bank runs and growing desperation inside the regime for access to frozen assets and sanction relief. And that assessment appears to line up with what's coming out of Iran. One of the country's best known economists, Masoud Nili, who's long been associated with the Iranian establishment, warned this week that Iran's economy has entered what he called the station before hyperinflation. In other words, the country has moved beyond chronic inflation and is now approaching the kind of runaway price increases that can devastate an economy.
Other economic indicators paint an equally bleak picture. Iran's economy barely grew last year and outside of the oil sector it actually contracted. The governor of Iran's central bank has acknowledged that investment has collapsed, real incomes have been cut nearly in half over the past decade, and the country's banking system is under severe strain. Another senior government official recently warned that roughly 60 percent of Iranians can no longer absorb additional economic hardships. But perhaps the clearest sign of just how strained things have become is the gasoline situation. Despite sitting atop some of the largest oil and gas reserves in the world, Iran is now openly discussing higher fuel prices and tighter gasoline rationing. That's not because the country has run out of oil, it's because years of sanctions, underinvestment, economic mismanagement, corruption, and now wartime disruptions have left the government struggling to balance supply, demand, and the enormous cost of fuel subsidies. Back in 2019, a sharp increase in gasoline prices sparked nationwide protests that quickly evolved into one of the biggest anti-government movements in recent Iranian history. The government eventually crushed those demonstrations, well there's not a surprise, but the memory still looms large in Tehran. Officials know that another fuel price hike could once again push public frustration into the streets.
And that's one reason why US officials believe that the economic pressure campaign may ultimately prove so powerful. Sustained financial pressure threatens the regime's ability to govern, to fund its security apparatus and maintain public support at home. The reality, though, is that economic warfare is often slower than military action, and history, of course, is full of regimes that endured tremendous hardship before changing course. So, a key question is, does the White House have the patience to maintain the blockade and serious economic pressure? Or is the pressure to end the war, to lower gas prices for American consumers, and to get the conflict behind them before the looming US midterm elections, is that pressure going to prove greater?