AYESHA RASCOE, HOST:
The Defense Department has identified the six American service members killed in the crash of the refueling plane in Iraq last week. And in a Truth Social post on Friday night, President Trump announced U.S. strikes on Kharg Island in southern Iran. He said he would hold off on striking the oil facilities there and called for Iran to reopen the Strait of Hormuz, a key route for the global oil supply. Yesterday, he urged allies from around the world to send warships to secure the strait. Iran's foreign ministry says the Strait is open to all but the U.S. and its allies. Djavad Salehi-Isfahani is a professor of economics at Virginia Tech, and he joins us now. Welcome to the program.
DJAVAD SALEHI-ISFAHANI: Thank you for having me.
RASCOE: So is destroying the oil infrastructure on that island, the pipelines, the terminal, all of it, is that effective in tanking Iran's economy enough to change the course of this war?
SALEHI-ISFAHANI: I doubt it in the short run. It is true that the Kharg Island is a very key terminal. Ninety percent of Iran's oil is exported from there. But any effect from shutting it down will come with a lag because Iran has to sell the oil. It takes a couple of months for the oil to reach its destination and then for Iran to use the funding. And as things stand right now, the oil is going to China and Iran has an account with China. It has exported for the past year and hasn't been able to buy everything back in a kind of a barter from China. So I don't think there will be an impact - an immediate impact on the Iran - Iran's economy, but certainly in the long run, all - any destruction, especially the destruction of oil facilities, is going to affect the future of Iran.
RASCOE: Well, with that said, there were huge, deadly protests driven by Iran's economic problems just before the war. So, you know, tell us about the economic conditions for the average Iranians since President Trump pulled out of the nuclear deal in his first term and ratcheted up sanctions.
SALEHI-ISFAHANI: Yes, the protests you mentioned - they were very much animated by the very dire economic conditions, which have been there for the past, say, 15 years, when sanctions have been very tight and Iran economy - Iran's economy has not grown. It has been stagnant. The economic story in Iran is not one of decline and collapse, but more of stagnation. But the kind of stagnation that comes with lack of hope about getting out of the mess. You know, I think of people being able to take a drop in their living standards like people going on camping. But since they expect to get out and go back to their normal lives, they may take that with joy even. But in the case of Iran, the way the sanctions developed, President Trump's withdrawal from a deal, a nuclear deal that was signed in 2015 and seemed very promising. His exit from that deal killed a lot of hopes.
RASCOE: Well, can you give us some specifics, like in terms of inflation and currency devaluation?
SALEHI-ISFAHANI: Yes, exactly. Well, you know, when you have an external shock like you lose your oil exports, the first thing that happens is that the currency devalues. Iran's economy is very much dependent on imports. So the price of most things jumps when the currency drops in value. So inflation is a given every time you have an impact like that, anything that reduces Iran's exports. And inflation does not necessarily imply immediate loss of living standards because among things that rise is the price of labor or wages. But for many middle-class people whose wages go up annually, when you have inflation of 50% and above, that means for the remainder of the year, they're going to be living with incomes, real incomes, about half of what they had. So, yes, there has been a lot of dissatisfaction because of inflation, which was caused by the currency devaluation.
RASCOE: The U.S. and especially, you know, during the Trump administrations, they've tried to use these sanctions to exert pressure. Now that Trump is not as focused on regime change as the main goal of this war, what's he trying to achieve by using economic levers like, you know, destroying oil infrastructure? Is it to disrupt even more the status quo in Iran?
SALEHI-ISFAHANI: Well, I think he's trying to just increase the severity of the punishment, hoping that Iranians will fold. But my understanding is that it makes a lot of sense for the Iranians to have foreseen this particular escalation, and they're not going to fold if they enter this ratcheting-up game. Iranians are trying to resolve this mowing the grass story, which is U.S. and Israel can come in anytime they want and bomb stuff. So they are actually trying to resolve that issue, and they think if this conflict stays long enough, that they might find a solution like that.
RASCOE: That's Djavad Salehi-Isfahani of Virginia Tech. Thank you so much for speaking with us today.
SALEHI-ISFAHANI: You're welcome. Transcript provided by NPR, Copyright NPR.
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