Iran demonstrates reverse engineered US drone missile on helicopter

Iran’s real GDP is set to grow by just 0.3% in 2025, the IMF's Regional Economic Outlook for the Middle East and Central Asia published this month projected.

That’s a sharp fall in its October 2023 estimate for this year of 3%.

The revision appears to reflect the tightening of US sanctions under President Donald Trump, who has promised to slash Tehran’s oil revenues and restrict its access to international finance.

In April alone, the Trump administration imposed eight new packages of sanctions targeting tankers and trading networks that facilitate the sale of Iranian oil. Between January and April 2025, imports from China—Iran’s primary oil buyer—fell to 1.38 million barrels per day (bpd), about 7 percent below the 2024 average.

The IMF estimates both production and exports to fall by 300,000 bpd in 2025. Independent energy analytics firms such as Kpler, Vortexa, and TankerTrackers have predicted a steeper drop, as much as 500,000 bpd.

Surplus narrows, capital flees

Iran’s total exports, including non-oil goods and services, is projected to decline by 16% this year to $100 billion, according to the IMF. Imports are expected to fall 10% to $98 billion, leaving a slim trade surplus of just $2 billion, compared to $10 billion last year.

Despite running trade surpluses in recent years, capital flight remains alarmingly high.

Iran’s Central Bank estimates that $14 billion exited the country in the last nine months of 2024. That comes atop $20 billion the year before. Since 2018, when Trump introduced his so-called maximum pressure campaign against Tehran.

Currency falls, economy shrinks

Perhaps the most shocking of IMF figures is those of Iran’s nominal GDP—which reflects the size of an economy in global terms. Iran’s nominal GDP will fall from $401 billion in 2024 to $341 billion this year, according to the report.

The primary reason behind this dramatic fall is the collapse of Iran’s currency, Rial, which lost nearly half its value in 2024.

While real GDP appears relatively stable domestically as it adjusts for inflation and ignores currency devaluation, the dollar-denominated figures reveal a steep contraction.

In 2000, Iran’s economy was larger than those of the United Arab Emirates, Turkey and Saudi Arabia. Today, all three have surpassed Iran, with GDPs more than three times that of Iran in the case of the latter two.

Prices soar, pockets empty

Adjusting for ever-rising prices in Iran, the IMF has upped its inflation estimate for 2025: from 37% in its last report to just above 43% in the latest.

Iran now ranks fourth in the world in inflation, beaten by Venezuela, Sudan, and Zimbabwe only.

Several factors are fueling the surge: the rial’s collapse, restricted access to foreign reserves, excessive domestic borrowing, and rising import costs under sanctions.

What next?

Most troubling for Iran’s government could be the IMF's estimate that the country would need oil prices to reach $163 per barrel just to balance its 2025 budget. That is more than double the current global average.

In its latest budget, the administration of president Masoud Pezeshkian has assumed daily oil exports of 1.85 million bpd at $67 per barrel. But the IMF expects actual exports to average just 1.1 million bpd, indicating a substantial shortfall.

This is a familiar story. Successive administrations in Iran have run deficits amounting to roughly one-third of total public spending, plugging the gap with heavy borrowing and money printing—both of which have fueled inflation and monetary instability.

The IMF projects Iran’s gross government debt to rise to just under 40% of GDP in 2025, and a couple of points above it in 2026 — troubling figures for an economy already under severe external pressure.

On Wednesday, the Expediency Council gave final approval to the bill that enables Iran to join the Palermo Convention, formally known as the United Nations Convention against Transnational Organized Crime. However, the legislation includes several conditions that could raise concerns for the FATF.

Officials say the Expediency Council is expected to review the second remaining bill, required for joining the Combating the Financing of Terrorism (CFT) Convention, next week.

Ratifying these two conventions is considered a final and necessary step in aligning Iran with FATF standards and can facilitate its removal from the global anti-money laundering body’s black list.

The breakthrough followed a green light given in December by Supreme Leader Ali Khamenei which allowed the Expediency Council to re-examine both bills after years amid political infighting.

Official and media optimism

“The conditional approval of the Palermo bill by the Expediency Council is an important step towards constructive engagement with the world,” government spokeswoman Fatemeh Mohajerani said in a post on X on Wednesday.

“The government welcomes the Assembly’s decision and hopes that national interests, economic benefits, and international considerations will guide the review of the CFT (bill) as well,” she added.

Iran's moderate and reformist media have also widely welcomed the move with optimistic headlines and commentaries.

“This can facilitate Iran’s return to the international financial system and its effective presence in global markets,” Donya-ye Eghtesad economic daily wrote.

“This important development has occurred while signs of progress in negotiations between Iran and the United States are also visible, and optimism about the future of Iran’s economy has increased."

Conditional ratification and FATF concerns

Despite the positive tone, the conditions attached to Iran’s ratification of the Palermo Convention—and the reservations included in the CFT bill—pose serious challenges to the country's full compliance with FATF standards.

The FATF has clearly said that Iran must ratify and implement the Palermo and CFT conventions “without undue reservations”, saying broad or vague reservations can undermine the conventions’ effectiveness and create loopholes for financing terrorism.

Speaking to IRNA after the Council’s decision, Deputy Economy Minister Hadi Khani downplayed the importance of the conditions.

“Many countries have set conditions for accepting these two conventions. Our country’s parliament, too, introduced conditions for certain articles of the conventions,” he said, adding that most of these were based on the principle that Iran would implement the conventions within the framework of its own Constitution.

Some FATF members including the United States, China, and India have ratified the Palermo Convention with the reservation that they do not consider themselves bound by Article 35(2), which involves mandatory dispute resolution by the International Court of Justice (ICJ).

Iran's Palermo legislation includes similar language, excluding ICJ jurisdiction while asserting that decisions on extradition and mutual legal assistance will be made on a case-by-case basis.

Iran has also declared that provisions incompatible with its national laws—many of which are rooted in Islamic Sharia—will not be binding. Pakistan and Saudi Arabia have accepted the Convention with similar reservations.

Moreover, Iran’s legislation explicitly states that accession to the required conventions does not imply recognition of Israel, a FATF member.

The CTF bill also includes language affirming the “legitimate and recognized right” of peoples under occupation to resist and pursue self-determination in apparent reference to the Israeli-occupied Palestinian territories.

FATF’s concerns are particularly related to the reservations included in the CFT bill. Iran's CTF bill does not accept the definitions of terrorism provided by other countries or international bodies if they conflict with its national laws and support for groups that it views as legitimate resistance movements.

Remaining on FATF black list

Iran was on FATF black lists from 2008 to 2016. In February 2020 it was black-listed again and has remained so to date.

While approval of the Palermo Convention and the CFT Convention bills is a critical step, removal from the FATF black list depends on effective implementation, not just legal ratification, and may take several years.

All countries—including allies such as China and Russia—will be obliged to apply enhanced due diligence to financial transactions involving Iran as long as it is on the black list.

In January, former Central Bank official Asghar Fakhriyeh-Kashani revealed that some Chinese banks had closed Iranian accounts to avoid FATF penalties and geopolitical analyst Abdolreza Faraji-Rad told Ham-Mihan daily at the time that Iran’s oil trade with China had to bypass the formal banking system, avoiding cash payments and relying on alternative mechanisms for the same reason.

On messaging apps like Telegram, channels advertise “Islamic marriage services.”

The language is coded—halal sigheh, “marriage under sharia supervision,” or “regulated Islamic companionship” — but the business model is simple: pick, pay and meet.

Under Iran's Shi'ite Muslim legal code, men are legally permitted to enter into temporary marriages for a fixed period—ranging from minutes to years—without court approval or official registration.

These marriages automatically dissolve when the agreed-upon time expires.

Iran International encountered a functioning industry of religiously sanctioned pimping, one that exploits the legal ambiguity of sigheh to facilitate sex work. Many users are conned. But some are not.

While screenshots were translated from Farsi, no photos—even blurred ones—have been included in this report, as we could not verify whether the women pictured were genuinely behind the profiles used in these exchanges.

Iran International contacted several channels and in half the cases, different women responded from different numbers. One sent audio replies. Another agreed to meet in person—for a cash exchange, if a deposit was paid.

In another case, a woman offered options for a short-term arrangement and said she was working “with the support of a governmental office,” insisting that payment be made to their account first.

To obtain a woman’s contact information alone, clients are typically asked to pay between 3 million to 5 million rials (roughly $3.50 to $6 at current exchange rates). Full service arrangements labeled as “monthly sigheh contracts” range from 70 to 400 million rials ($83 to $476), with rates varying based on location, age or even height.

In one case in Iran International's investigation, a woman arranged to meet at a metro station in west Tehran after initial negotiations, with two rounds of fees—labeled as 'identification' and 'dowry'—required as conditions to be paid after the meeting.

“Bring the balance in cash,” she instructed. “After we talk, if you’re satisfied, we go somewhere.” Her tone was direct and businesslike. The transaction mirrored sex work in every way—except it was presented as a religious contract.

'Virginity guaranteed'

The channels involved do not describe sigheh as a sexual service. Instead, they variously frame it as a “pious alternative to sinful behavior”—“a way to support chaste women,” one wrote.

Listings often include physical traits, education level and place of residence. Some promise “virginity guaranteed.” Longer-term packages come with varying price tags—often higher for women labeled as educated or Tehran-based.

“We only use women who are under the protection of the Islamic Republic. No funny business. Everything is legal under sharia,” wrote another channel.

Behind that language lies a structured operation. Clients are matched. Money is transferred through intermediary accounts—typically under male names.

Some users told Iran International that they had even received handwritten contracts and met women after paying.

Yet scams still exist. Some men are strung along with fake profiles and asked for repeated payments—dowries, insurance fees, “pregnancy contingencies”—only to have contact cut off once the money is sent.

One man in Karaj who spoke on condition of anonymity told Iran International: “I sent money three times. Each time there was a new excuse. The last time, they asked for an abortion deposit. Then she vanished.”

The online platforms are not licensed or regulated by the state but are not shut down either. Their visibility on domestic platforms points to at least a passive tolerance from authorities.

Even Fars News, which is close to Iran's Islamic Revolutionary Guard Corps, wrote on the phenomenon on Wednesday but mostly sought to discredit the platforms as a scam aiming to defraud credulous men.

But it also implicitly acknowledged the existence of real actors within the system.

“Our field investigation shows that many of these pages lack any official or legal license and are mostly created for purposes such as fraud, extortion, and even the dissemination of users' personal information,” the outlet wrote.

The use of “many” rather than “all” leaves room for exceptions—an implicit admission that not every channel is fake and that some do involve actual individuals, transactions, and encounters.

An apparent official tolerance of sigheh as a moral buffer against paid sex appears to have opened the door to commodifying women under theological cover. Prostitution is criminalized and punished, yet sigheh remains legal and broadly interpreted—creating a religiously sanctioned loophole.

“Pimping is illegal,” said a Tehran-based legal expert who requested anonymity for security reasons. “But sigheh offers a loophole. If the woman agrees, there’s a contract, and it’s framed as religious—who’s going to prosecute it?”

The line between religiously permitted marriage and outright sexual commerce is not just blurred—it has become a business model. For the Islamic Republic, it is one that hides in plain sight, cloaked in doctrine and fueled by tanking standards of living and deepening poverty.

Far from being limited to scams, the sigheh economy has become a channel for monetizing sexual access under the guise of religious propriety.

President Trump arrived in Saudi Arabia on May 13 on the first leg of a four-day, three-country trip to the Middle East that included stops in Qatar and the United Arab Emirates.

The choice of Saudi Arabia for the first state visit of Trump’s second term mirrored that of his first, except this time he did not go to Israel, signaling that the administration is doubling down on its Arabian peninsula partners as key supporters of US regional interests.

Iran was naturally not on the itinerary but ever-present in Trump’s public statements, with the president using a characteristic blend of carrot-and-stick which urged Iranian leaders to take a “new and better path” and warned of “massive maximum pressure” if Tehran “rejects this olive branch.”

Trump expressed his desire to reach a deal with Iran on many occasions, even hinting that a deal was almost agreed. For that to happen, however, Tehran "must stop sponsoring terror, halt its bloody proxy wars, and permanently and verifiably cease its pursuit of nuclear weapons,” he added.

Later, aboard Air Force One, Trump told reporters that Iran had to “make the right decision” about its nuclear program because “something’s going to happen one way or the other” and "we’ll either do it friendly or we’ll do it very unfriendly.”

Arab, Iranian audiences

There are various takeaways for leaders in Iran as well as in its neighboring Arab countries, from Trump’s commentary.

For the latter, Trump’s demand that Iran end its sponsorship of terror and involvement in proxy wars will be welcomed as a signal that any agreement with Tehran might not be narrowly confined to its nuclear program alone, as was the case with the Joint Comprehensive Plan of Action in 2015.

For leaders in Riyadh, Doha and Abu Dhabi - not to mention in Tel Aviv -it was Iran’s regional activities that were as much a priority as its nuclear program, and their exclusion from the negotiations for the 2015 nuclear deal caused alarm in the region.

However, any such optimism in regional corridors of power may be tempered by concern that the president’s unconventional approach to deal-making may create openings for an agreement that gives Trump the optics he desires at the expense of nuts-and-bolts details on specific Iranian commitments.

Deals, details and differences

Comments by Steve Witkoff, Trump’s chief negotiator and one of his closest confidants, in podcast and other appearances, have not given the impression of a details-focused approach to diplomacy, whether in terms of Russia and Ukraine or Iran.

Witkoff and other members of the Trump administration have also sent mixed messages about whether Iran would be able to enrich uranium in any agreement, reinforcing concerns by domestic and regional critics of US engagement with Iran that a new deal may be worse than no deal.

For the leadership in Tehran, beset by economic challenges, energy shortages and geopolitical setbacks that left its regional "Axis of Resistance" weakened, the optics of Trump’s regional procession offer glimpses of opportunity.

The fact that Trump met with Syria’s new president, Ahmed al-Sharaa, in Riyadh and declared that sanctions on Syria would be lifted was further illustration that Trump is transactional rather than ideological, and willing to take decisions that break the mold of conventional American policy thinking.

This was underscored in Trump’s remarks in Riyadh on May 13 when he slammed the failures of generations of western interventionists and neocons in the Middle East who “told you how to do it, but they had no idea how to do it themselves” and, he argued, did far more damage than good.

In making these comments and receiving al-Sharaa, Trump has shown himself willing to break free of traditional constraints on US policymaking in the region, at least on the surface, and this may yet extend to Iran.

Unclear outlook

There are nevertheless multiple uncertainties for Iranian officials as they begin to digest the outcomes of Trump’s visit to the Middle East and assess the implications, both short- and long-term, for Tehran.

The plethora of major deals signed in Saudi Arabia, Qatar, and the UAE have cemented these countries’ deep and longstanding ties with the US across the defense and security, economic, and energy spectrum.

Any concerns in the region of US disengagement from the Middle East may be dissipated by the sight of Trump bestowing such significance on the region, in stark contrast to the disdain with which the administration has treated its formal allies in Europe and North America.

And yet, if Trump is to reap the benefits of the hundreds of billions of dollars of planned investments into the US, he will likely return from his trip with a conviction that the pledges, and the returns, require stability and would be jeopardized by any conflict with Iran.

This not only plays into the de-risking and de-escalatory approach that Iran's energy-rich Arab neighbors have taken since 2020 but may also fortify Trump’s desire to burnish his credentials as a peacemaker in the explosive region.

Iran’s Foreign Minister Abbas Araghchi said on Thursday that none of the country’s nuclear facilities will be dismantled, dismissing President Trump's warnings that the alternative to a deal could be "horrible" for Iran.

“Why do they negotiate? Because they are not able to impose their will through military means,” Araghchi told reporters in Tehran on Thursday.

He suggested that Iran’s participation in talks with the United States is not a sign of weakness, but rather a reflection of its deterrent power.

“In fact, it is our defensive capabilities—the missiles of the Islamic Republic—that give strength and power to the negotiator to sit at the table, and it is these that cause the other side to give up and lose hope in a military attack,” he added.

He also repeated Tehran's position that no uranium enrichment facility would be dismantled as part of a deal.