More talks. Few details or positive signs have come from them but the fact that they are still ongoing shows both sides’ willingness to see what concessions are on the table. The US Administration is confused about what those might be. More bad news on the economy underscores the need for economic concessions but not at any price.
Trump Issues Ultimatum on Iran Nuclear Program
After several rounds of indirect US-Iran talks over the past month, US President Donald Trump warned that Iran will not be allowed to develop a nuclear weapon, saying a resolution will come “one way or the other” either peacefully or violently. While stressing a preference for diplomacy, Trump stated:
“They’re not going to have a nuclear weapon.”
“You make a deal, you’re going to be very happy,” he said.
Trump noted Iran’s interest in trade with the US and suggested economic incentives could help secure a deal.
The Trump Administration has taken various often contradictory positions on Iran’s civil nuclear ambitions. White House envoy Steve Witkoff told the Iranians both privately and publicly that the US was comfortable with Iran having a domestic enrichment program, something later denied by Trump. Indeed Trump has questioned Iran’s civil nuclear ambitions altogether, given its abundant oil and gas reserves, asking why such a country would need nuclear energy.
Trump confirmed that Iran had received a formal US proposal for a nuclear deal and warned Tehran not to delay, hinting at serious consequences.
Meanwhile a new nuclear deal proposal has reportedly been sent by Washington to Tehran for review by Foreign Minister Abbas Araghchi, outlining a monitored civilian nuclear program. Tehran however denies receipt of such a proposal.
Unsurprisingly Araghchi stated on X that the US messaging was “confusing and contradictory” and reaffirmed Iran’s non-negotiable right to uranium enrichment under the NPT.
Reaction to Negotiations and Trump’s Middle East Tour
Heavy diplomatic activity in the region including a US presidential tour to Gulf Arab states produced a flurry of rhetoric. Arab League members, in a summit communiqué from Baghdad, expressed support for Iran-US negotiations, calling for peaceful nuclear energy use and limits on uranium enrichment. Iranian President Pezeshkian affirmed Tehran’s willingness to negotiate with the US but emphasized Iran won’t yield to threats or intimidation.
In response to Trump’s direct diplomacy while in the region, Supreme Leader Khamenei condemned the US President’s recent regional comments as “shameful” and accused the US of fueling wars, particularly in Gaza. He described Israel as a “malignant cancer” and said America’s regional influence is collapsing. President Pezeshkian questioned Trump’s credibility, pointing to a contradiction between his talk of peace and continued investment in “destructive weapons.” Parliament Speaker Ghalibaf claimed Trump’s Mideast tour aimed to sow division among Islamic countries and boost arms sales.
E3 Talks over Snapback
Iran and the E3 (UK, France, Germany) met in Istanbul to discuss the status of the 2015 nuclear deal and sanctions relief according to Iran’s Deputy Foreign Minister Kazem Gharibabadi. The talks were hosted by Gharibabadi and Majid Takht-Ravanchi and included senior European political directors including Germany’s Dominik Mutter. Gharibabadi stated on X that both sides are committed to diplomacy and will continue the dialogue.
A German diplomatic source stressed the meeting was not formal negotiations but a diplomatic exchange on Iran’s nuclear activities and sanctions. The meeting ended without major announcements or concrete progress. However it reflects ongoing engagement despite strained relations and threats of escalating measures with the “snapback” deadline fast approaching. Under the UN resolution endorsing the 2015 deal, the E3 have authority to trigger the snapback mechanism reimposing UN sanctions if Iran is found to be in violation. Diplomatic sources have hinted the E3 may invoke this mechanism as early as August with 18 October as the absolute deadline as stated in the JCPOA.
The meeting triggered a split among Iranian political commentators. Longtime diplomacy advocates including former MP and foreign policy committee head Heshmatollah Falahatpisheh criticised the talks. Falahatpisheh argued Europe lacks influence while Trump remains president:
“There is no point… Iran’s only real option is direct talks with the US.”
He also criticised Iran’s timing, saying it missed a key opportunity by not negotiating with Trump during his first term.
Iranian Intelligence Charges in UK
Three Iranian nationals have been charged in the UK under the National Security Act for allegedly acting on behalf of Iran’s intelligence service. Mostafa Sepahvand (39) Farhad Javadi Manesh (44) and Shapoor Qalehali Khani Noori (56) were arrested in London on 3 May. They are accused of assisting a foreign intelligence service (Iran) and conducting surveillance targeting Iran International journalists between August 2024 and February 2025.
Sepahvand faces an additional charge of conducting reconnaissance with intent to commit serious violence while the other two allegedly aided such acts. Phones seized contained satellite images and videos of London streets and buildings linked to the surveillance.
Iran International, a UK-based Persian news network, has been targeted previously including the 2024 stabbing of its presenter Pouria Zeraati. The Crown Prosecution Service confirmed the men sought to locate journalists tied to Iran International. All three men are in custody and appeared at Westminster Magistrates’ Court on 17 May. Home Secretary Yvette Cooper confirmed Iran’s involvement and said the government will publish a review on strengthening laws against state threats.
MI5 has previously warned of at least 20 Iran-linked plots since 2022 including assassination and abduction attempts in the UK. A fourth man aged 31 was arrested but released without charge on 15 May. The accused reportedly arrived in the UK via irregular routes and claimed asylum between 2016 and 2022. Iran denies involvement and has called for due process for its nationals abroad.
Grim IMF Forecast Published
The IMF reported its latest assessment of the Iranian economy, concluding that Iran faces near-zero growth, surging inflation and deepening instability. Without meaningful reforms the Fund warns fiscal and monetary pressures will worsen, prolonging economic and social instability.
GDP Prediction
Iran’s real GDP is expected to grow by just 0.3% in 2025, a sharp drop from the 3% forecast issued in October 2023. The downgrade reflects the tightening of US sanctions under President Trump, particularly targeting Iran’s oil exports and access to global finance.
Oil Exports
Chief among the drivers is the IMF-projected drop of 300,000 barrels per day (bpd) in Iran’s oil production and exports. Private analysts predict even steeper declines of up to 500,000 bpd. Oil exports to China, Iran’s top buyer, fell to 1.38 million bpd between January and April, 7% below the 2024 average. Iran’s budget assumes 1.85 million bpd at 67 dollars per barrel but the IMF projects actual exports could fall to 1.1 million bpd.
International Trade and Capital Flight
A shrinking trade surplus is predicted with total exports projected to fall 16% to 100 billion dollars while imports drop 10% to 98 billion narrowing Iran’s trade surplus to 2 billion (down from 10 billion in 2024). Capital flight is expected to remain high having accelerated since Trump’s 2018 “maximum pressure” policy.
Rial Weakness
The rial continues to lose value having dropped nearly 50% in 2024. This has caused a steep fall in nominal GDP from 401 billion dollars to 341 billion. Though real GDP appears stable in local terms the dollar-adjusted economy is shrinking fast. Once larger than the UAE Turkey and Saudi Arabia, Iran’s economy now trails all three with Saudi and Turkish GDPs over three times Iran’s size.
Inflation
Inflation is now expected to exceed 43% in 2025, up from 37% in the previous forecast. This puts Iran fourth globally in inflation after Venezuela, Sudan and Zimbabwe.
Industry Prioritised Over Public in Power Crisis
The government has decided to protect industrial power supply during worsening blackouts by redirecting electricity cuts to households and public services. Spokeswoman Fatemeh Mohajerani defended the move, saying economic production would collapse if energy is cut from factories especially in winter (gas) and summer (electricity). Iran faces an electricity shortfall of around 20,000 megawatts during peak hours, worsened by extreme heat and historically low dam water levels from prolonged drought.
The manufacturing sector already weakened by sanctions, inflation and currency instability is considered too vital to shut down. But growing public resentment over blackouts may pose serious political risks. Energy-intensive industries like steel and cement are especially vulnerable. Steel industry losses last year were estimated at 4 billion dollars.
Widespread blackouts are having severe impacts on daily life including people trapped in elevators, failed traffic lights, water supply issues, disruptions to mobile phone signals and food spoilage. The government has shifted working hours for state offices and schools to 6:00 AM, sparking further public frustration.
Illegal crypto mining is again cited as a major energy drain, consuming an estimated 1,000 megawatts. Energy Minister Abbas Aliabadi has urged the public to report illegal miners. Over 220,000 illicit mining devices were seized in the past year.
Both sides want a deal but their core interests are likely too divergent to get them there, especially under the pressure of Trump’s compressed negotiation timeline. That doesn’t mean a deal won’t be signed. If one is, in the next few days or weeks, expect it to be brittle and short-lived.
Published 19th May 2025