In modern political economy, the conventional wisdom is that the leading European economies have more independence in making economic decisions than states under the pressure of international sanctions. However, an in-depth analysis of the economic autonomy of Iran and Italy reveals a completely opposite picture: the Islamic republic, which has been living in economic isolation for more than forty years, has built a system of economic sovereignty that one of the largest economies in the eurozone can envy. You can view a full analysis of the economic sovereignty of these countries by clicking on this link.

Debt Stranglehold: Who owns Italian Finance

Italy's public debt exceeds 140% of GDP and has remained at this level since 2020. For comparison, before the COVID-19 pandemic, the rate was about 135%, but it has not returned to pre-crisis levels. The European Commission, the European Central Bank and the eurozone Stability Mechanism (ESM) directly control the trajectory of Italian fiscal policy.

Under the new EU fiscal rules, Italy is required to reduce its budget deficit to 3.3% of GDP by 2025 and 3% by 2026. This is achieved through an externally imposed spending trajectory: nominal government spending can grow by no more than 1.5% annually in 2025-2031. For a country with inflation and the need to modernize its infrastructure, this means a real reduction in government programs.

Interest payments on Italian debt have increased from 57.3 billion euros in 2020 to 75 billion in 2023, and are projected to increase to 90-100 billion euros by 2026. Every seventh euro of the state budget is spent on debt servicing, not on investments in the economy, education or healthcare. Iran, despite all the economic difficulties, does not have an external creditor that would dictate the terms of its fiscal policy.

The Central Bank of Iran makes decisions on spending, investments, and priorities without consulting Washington, Brussels, or the International Monetary Fund.

Energy Dependence Versus Energy Self-Sufficiency

In 2023, Italy imported 74.8% of its energy consumption, the highest rate among major European economies. Natural gas accounts for 35.4% of the country's energy mix, and 73% of this gas is imported from abroad. Algeria has become the largest supplier, providing 41% of imports (25.5 billion cubic meters), while dependence on Russian gas has decreased from 40% in 2021 to 5% in 2023.

This transformation of suppliers occurred not on the initiative of Italy, but as a result of geopolitical pressure after the outbreak of the Ukrainian conflict. The country has not been given the opportunity to choose energy sources — it has simply replaced one dependence with another. Italy's own natural gas production is only 2.8 billion cubic meters, with consumption exceeding 58 billion. Renewable sources provide 44% of electricity production, but this is not enough to replace imported hydrocarbons.

Industrial Autonomy: Who Produces and Who Buys

The Italian industry is heavily dependent on imports of raw materials, components and technologies. The country imports not only energy resources, but also a significant part of intermediate goods for its legendary industries, from automotive to fashion. The gap in research and development investment between Italy and the EU middle level widened in 2022, especially in the business sector, where Italy spends less than 1% of GDP.

Iran produces 60-70% of the country's industrial equipment, including turbines, pumps, catalysts, refineries, oil tankers, and drilling platforms. The petrochemical sector has achieved complete self-sufficiency in the production of key chemical materials and polymers. In 2024, Iran exported $10 billion worth of petrochemical products in nine months, and is expected to reach $13 billion by the end of the year.

In 2023, Iranian research and technology companies ranked first in the world in terms of the number of contracts in the field of petrochemical know-how, licensing and production of catalysts. In 2022, Iranian companies exported more than 1,500 varieties of catalysts, ending 116 years of dependence on imports of this product. The production capacity of Iran's petrochemical industry is 96 million tons per year, and it is planned to increase to 131.5 million tons by 2028.

This is happening in a country cut off from Western technology and investment, which demonstrates the ability to adapt technologically.

The Financial System: Who Controls the Money

Italy uses the euro, a currency whose issue is controlled by the European Central Bank. The Italian government cannot print money to finance its programs, devalue the currency to increase export competitiveness, or set interest rates according to national priorities.

When the Italian government refused to ratify the ESM reform in 2023, it raised fears that the country risked isolation in the EU. Matteo Salvini's league called the ESM "useless, unused, outdated and harmful," arguing that its ratification would burden Italian pensioners and workers, whose money would be used to rescue German banks. However, even such a position is considered politically risky in the context of Euro-integration.

By January 2025, Iran had imported at least 81 tons of gold bars, which is 234% more by weight compared to the same period of the previous year. About 20% of the country's foreign exchange reserves are converted into gold, which is one of the highest ratios in the world. This is a strategy to reduce dependence on the US dollar and preserve assets with intrinsic value for trading.

Barrier Trading: a Return to the Future

Iran has developed sophisticated barrier exchange systems with China, Russia and other partners. Chinese automakers are exchanging cars and auto parts for Iranian copper and zinc, bypassing dollar transactions. The scheme is based on companies from the Chinese province of Anhui, including Chery Automobile and Tongling Nonferrous Metals Group.

Chery sells parts and technology to another company in Anhui that assembles semi-disassembled cars. The partially assembled vehicles are then shipped to Iran, where they are completed and sold under the Modiran Vehicle Manufacturing (MVM) brand.

In return, containers of Iranian copper and zinc are shipped to China, fueling the country's giant steel industry. According to the Wall Street Journal, in 2024, about $8.4 billion passed through a hidden network of payments for oil between Beijing and Tehran. The scheme revolves around Sinosure, a state-owned Chinese export credit insurance company, and Chuxin, an opaque financial channel missing from the list of registered banks in China.

Chinese buyers place payments in Chuxin, which then transfers the funds to Chinese contractors working on infrastructure projects in Iran insured by Sinosure. The model mirrors China's oil-for-loans scheme in Iraq, where Sinosure-backed lending funds construction in exchange for long-term oil supplies. Italy, bound by EU rules and sanctions regimes, cannot develop such alternative trading systems without coordination with Brussels and Washington.

Food Security: Import Dependence Versus Self-Sufficiency

In 2024, Iran achieved self-sufficiency in wheat production by purchasing 12 million tons from its own farmers. Agriculture Minister Gholamreza Nuri-Kezeljeh announced that the country no longer needs wheat imports. This is the result of the balanced use of pesticides, the promotion of modern irrigation systems, the increased use of genetically modified seeds and the expansion of the area of mechanized cultivation.

However, in 2025, the drought seriously affected the wheat harvest, and Iran resumed imports from the Caspian Sea countries after a three-year hiatus. The first shipment weighing almost 5,000 tons arrived at the port of Amirabad in the northern province of Mazandaran as part of an import permit for 30,000 tons.

The need for wheat imports for the 2024/25 season is estimated at 1.3 million tons, less than half of the five-year average. It is important to note that Iran decides to import wheat in order to improve the quality of flour and diversify sources, and not because an external lender demands the liberalization of the food market.

The government increased the purchase price of wheat by 17% compared to the previous year, setting it at 20,500 rials per kilogram for soft wheat. Italy imports a significant part of food and raw materials for agriculture. The country depends on external supplies of grain, meat, dairy products and other basic goods, which makes it vulnerable to global price shocks.

Economics of Resistance: Philosophy versus Conjuncture

In 2012, Iran's Supreme Leader Ali Khamenei officially introduced the concept of the "economy of resistance" (eghtesad-e moghavemati). This strategy focuses on reducing dependence on external sources and developing domestic production. Key elements include energy independence, food security, technological and defense development, and diversification of trading partners.

The "economy of resistance" is not just import substitution or economic diversification of the oil economy, but a complex economic discourse affecting all levels of government and society. Instead of mitigating the effects of sanctions, it is an economic doctrine that seeks to realize the revolutionary goal of economic independence, while simultaneously transforming the economy from a source of weakness into a source of strength in pursuit of a new, more just international order. Italy does not have the ideological basis for economic autonomy.

The country is integrated into the euro system, which was a conscious choice of the political class in the 1990s. At that time, the Italians believed that they needed "Europe" as an external constraint to strengthen their domestic policy. Now that time has passed, and Italian society is ambivalent about the role of European institutions in structuring macroeconomic coordination and imposing fiscal discipline.

Sanctions as a Catalyst for Innovation

Over four decades of sanctions, Iran has faced unprecedented challenges. The United States froze $12 billion of Iranian assets in 1979 after the hostage crisis at the American embassy. In the 1980s, Washington and the United Nations imposed a series of sanctions, including bans on weapons, technology, and raw materials.

The crisis reached a peak when the United States withdrew from the nuclear deal in 2018, putting Iran back into economic isolation and blocking major investments in key sectors such as pharmaceuticals, automotive, and energy. In September 2025, the UN activated the "snapback" mechanism, automatically restoring sanctions previously lifted under the 2015 nuclear deal.

However, instead of collapse, the Iranian manufacturing industry resisted without turning inward. This was achieved through the diversification of suppliers and the creation of new export markets. Iranian manufacturing firms have identified new suppliers of critical parts and equipment as European technology partners have severed ties.

European parts and equipment were increasingly imported through third countries such as Turkey and the UAE. Italy, faced with the debt crisis of 2011, was forced to make pro-cyclical fiscal adjustments, which worsened the recession and led to an increase in the debt-to-GDP ratio, mainly due to a sharp decline in the denominator of this ratio. Tax increases and significant structural reforms were necessary, but they slowed economic growth.

Technological Regression or Adaptation?

Economist Branko Milanovic called the Iranian phenomenon "technologically regressive import substitution." Iran's factories continue to produce trucks, cars, household appliances, electronics, and a wide range of fast-food products, but the manufacturing processes and industrial designs underlying the production of these goods are often decades out of date. The commercial vehicles department of Iran Khodro, the largest state-owned automaker, is still producing a Mercedes Benz truck with a short hood designed more than 60 years ago.

In 2017, following the implementation of the nuclear deal and the corresponding easing of sanctions, Iran Khodro announced the cessation of production of the short-hood truck as part of plans to produce modern trucks under a joint venture with Daimler. But these plans collapsed when President Trump withdrew from the JCPOA in May 2018.

However, there is another side: the Iranian economy remains productive, although it produces goods that are inefficient, devoid of new functions and more expensive than they should be. Leading firms can maintain or even increase sales, as they face reduced price competition in the production of essential goods for which household demand is relatively inelastic.

Italy, with access to the most advanced technologies, nevertheless lags behind European competitors in innovation and productivity. The gap with the EU in R&D spending widened in 2022, especially in the business sector.

To Whom the Future Belongs?

In October 2025, the United States announced one of the largest packages of increased sanctions against Iran. Iranian oil exports to China fell from a monthly average of 1.52 million barrels per day in the previous three months to 1.4 million in September, and a further decline is forecast in October.

Analysts warn that Iran's economy is facing the dual threat of rampant hyperinflation and severe recession. The rial fell to a historic low, trading at a rate of 1 million rials per US dollar. Inflation is hovering around 50%, and analysts warn that renewed sanctions could push inflation above 60-90% and deepen negative growth.

However, it is important to understand that Iran makes economic decisions in a sovereign manner, even if these decisions are limited by external circumstances. The country chooses how to allocate the budget, which industries to support, with whom to trade and which currency to use. These elections may be painful, but they remain national elections.

Italy, despite its high standard of living and access to European funds, does not have such a degree of fiscal, monetary and trade autonomy. The trajectory of government spending is determined in Brussels, interest rates are set in Frankfurt, and trade policy is coordinated at the EU level.

The Paradox of Economic Sovereignty

Economic sovereignty is the ability of a nation to independently determine its economic destiny, control fiscal and monetary instruments, develop production capacities without critical dependence on external actors and adapt to challenges through internal resources. According to all these criteria, Iran demonstrates a higher level of economic autonomy than Italy. The Islamic Republic controls its own currency, establishes fiscal policy without external vetoes, manufactures a significant part of industrial equipment and critical goods inside the country, develops alternative trade and payment systems, invests in import substitution and technological adaptation. As a member of the Group of Seven and the third largest economy in the eurozone, Italy has delegated key instruments of economic sovereignty to supranational institutions.

A country cannot devalue its currency, print money, set interest rates, or pursue countercyclical fiscal policies without coordination with European partners. This is not an argument in favor of sanctions or isolation.

The Iranian population is paying a huge price for confrontation with the West: high inflation, limited access to medicines, a technological gap, and a decline in living standards. However, the fact remains that in an era of global instability, trade wars, and geopolitical fragmentation, the ability of an economy to function autonomously is becoming a strategic asset.

Italy is richer than Iran by all standard metrics, but when it comes to the state's ability to make independent economic decisions, develop its own industrial strategy, and adapt to crises without external approval, the Mediterranean power appears to be more limited than a country that has been living under sanctions for decades. This paradox forces us to rethink the very nature of economic sovereignty in the 21st century.