US Acknowledges Role in Iran’s Currency Crisis and Unrest: Explained.

Updated by Faith Barbara N Ruhinda at 1207 EAT On Friday 13 February 2026

Scott Bessent, the head of the United States Department of the Treasury, has claimed that Washington deliberately engineered a dollar shortage in Iran, sending the rial into freefall and helping to spark protests across the country.

In December and January, Iran experienced some of its largest anti-government demonstrations since the 1979 Islamic Revolution, as a deepening economic crisis fuelled public anger and unrest.

Protests over soaring prices in Iran began on December 28, 2025, when shopkeepers in Tehran led by Supreme Leader Ali Khamenei, responded with a violent crackdown. Estimates suggest that more than 6,800 protesters—including at least 150 children—were killed during the suppression of the movement.

Questions now remain over how Washington reportedly engineered a “dollar shortage” in Iran that contributed to the rial’s collapse—and what the economic and human consequences have been for ordinary Iranians.

A “dollar shortage” occurs when a country lacks sufficient US dollars to pay for essential imports and international obligations.

The US dollar is the dominant currency in global trade, particularly for commodities such as oil, machinery, and debt repayments, making a stable supply crucial for a country’s economy.

A dollar shortage can emerge when a country’s exports decline and sanctions restrict access to the US financial system. This scarcity weakens the local currency, drives up the cost of imports, and fuels inflation.

In Iran, the shortage was reportedly engineered by simultaneously blocking the two main channels for foreign exchange (FX) inflows: oil exports and international banking access, according to economist Mohammad Reza Farzanegan of Germany’s Marburg University. The US achieved this through sanctions on Iranian oil, exposing anyone who bought or sold it to punitive measures.

Given Iran’s heavy reliance on oil revenue, such sanctions can create a severe FX constraint, putting intense pressure on the rial and the broader economy.

“By imposing secondary sanctions that target any global entity trading in dollars with Iran, the US effectively traps Iran’s existing reserves abroad and blocks new dollars from entering the domestic market,” Mohammad Reza Farzanegan told Al Jazeera.

Responding to questions at a Congressional hearing last week, US Treasury Secretary Scott Bessent described Washington’s strategy to drive the Iranian currency into a steep decline.

“What we [have done] at Treasury is create a dollar shortage in the country,” Bessent said, adding that the approach reached a “grand culmination in December, when one of the largest banks in Iran failed … the Iranian currency went into freefall, inflation exploded, and we saw the Iranian people take to the streets.
“We have seen the Iranian leadership wiring money out of the country like crazy,” he added. “So the rats are leaving the ship, and that is a good sign that they know the end may be near.”

Earlier, speaking with Fox News at the World Economic Forum in Davos last month, Bessent outlined the role of US sanctions in triggering the nationwide protests.

“President Trump ordered Treasury … to put maximum pressure on Iran, and it’s worked,” he said. “In December, their economy collapsed. They cannot secure imports, and that is why the people took to the streets.”

Bessent had previously addressed the strategy at the Economic Club of New York in March of last year, explaining how the White House leveraged former President Donald Trump’s “maximum pressure” campaign to destabilize Iran’s economy.

At that event, he described US measures as an “elevated sanctions campaign against [Iran’s] export infrastructure, targeting all stages of Iran’s oil supply chain,” combined with “vigorous government engagement and private sector outreach” to “close off Iran’s access to the international financial system.”

In 2018, during his first term, former President Donald Trump withdrew the United States from the 2015 Joint Comprehensive Plan of Action (JCPOA), a landmark agreement between Iran and global powers that limited Tehran’s nuclear program in exchange for sanctions relief.

Since his re-election last January, Trump intensified his “maximum pressure” campaign aimed at crippling Iran’s economy and forcing Tehran to renegotiate its nuclear and regional policies. Last month, he threatened a 25 percent tariff on countries doing business with Iran.

By rigorously blocking Iran’s access to the global financial system and creating a dollar shortage, the US pushed Tehran into severe “import compression,” leaving it unable to pay for the intermediate goods and machinery needed for domestic production, said economist Mohammad Reza Farzanegan.

“The strategy is particularly devastating because it leverages commercial risk management against humanitarian needs,” Farzanegan told Al Jazeera. “In short, it makes the small Iranian market a commercial liability for any company, even if they are only dealing in medicine.”
A research paper co-authored by Farzanegan and Iranian-American economist Nader Habibi last year found that Iran’s middle class would have grown by an annual average of roughly 17 percentage points between 2012 and 2019, had US actions not intervened. By 2019, the share of the middle class had shrunk by an estimated 28 percentage points.

“People lost their purchasing power, and savings were wiped out,” Farzanegan said. “This is a long-term destruction of the country’s human capital.”
Experts note that US sanctions compounded Iran’s existing economic vulnerabilities, including long-term mismanagement, high corruption, and over-reliance on oil revenues. While sanctions delivered an external shock, the lack of domestic structural reforms left the government with “no fiscal space to cushion the blow,” Farzanegan added.

Unlike Russia, which benefits from a more diversified export base and larger foreign reserves, Iran has faced various forms of sanctions for decades, dating back to the rise of Supreme Leader Ali Khamenei in 1979.

“Iran has a sophisticated internal mechanism for sanctions circumvention that makes the ‘dollar shortage’ a game of cat-and-mouse rather than a one-time shock,” said economist Mohammad Reza Farzanegan.

With a US naval presence currently stationed in the Arabian Sea, Washington and Tehran are engaged in talks to ease tensions. The US has three key demands: halt uranium enrichment, dismantle ballistic missile capabilities, and stop arming non-state actors in the region. Analysts note, however, that these efforts ultimately aim at regime change.

Yet, according to expert Fein, economic sanctions alone “seldom, if ever, topple regimes. Regime change externally comes only with the use of military force.”

“Iran’s dollar shortage will not oust the mullahs or the Revolutionary Guard,” Fein told Al Jazeera. “The impoverishment of ordinary Iranians is more likely to reduce their capacity for political mobilization, because day-to-day survival becomes the overriding priority.”

Source: Aljazeera

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