DNA
Since February, the United States has been applying military and political pressure to Iran to force terms akin to a surrender. Six months later, and despite the White House bombast, there has been no agreement, and international shipping through the Strait of Hormuz remains vulnerable to Iranian attacks. With talks seemingly drifting, Washington now appears to have moved to Plan B: tightening the financial noose.
The aim is to make Iran’s continued resistance so economically costly that it is forced to reconsider. US Treasury Secretary Scott Bessent thinks this will reduce the need for US military operations. Writing in The Financial Times, he described the latest sanctions as “a sweeping economic offensive” against Iran’s financial links and trading partners around the world, with the intention of inflicting an ‘Economic D-Day’ on the country.
Last week, the United Arab Emirates announced that it had suspended all forms of trade, commercial exchange, and financial transactions with Iran until further notice following another missile attack on the Gulf state. Bessent said the UAE’s decision “was no coincidence,” as he announced new sanctions on 60 individuals, entities, and vessels. Interestingly, the list included none of the Chinese financial institutions suspected of facilitating Iran’s oil trade.
Key customer
For years, China has been the largest buyer of Iranian oil, accounting for more than 80% of Iran’s seaborne crude exports last year. Its imports fell drastically to about 534,000 barrels per day (bpd) in August 2026, from an average of 1.4 million bpd in 2025, after US restrictions on Iranian oil exports. Washington has intensified its efforts to curb Chinese purchases, but has so far refrained from sanctioning Chinese banks.
Since the US reimposed sanctions on Iran in 2019, China’s major state-owned refiners have avoided buying Iranian crude, while official Chinese customs data record no direct imports from Iran. Iranian oil has nonetheless continued to reach China for years through cargoes falsely declared as originating in countries such as Malaysia or Indonesia, with payments made in yuan through a complex network of intermediaries and traders that is difficult to trace.
The Treasury has previously warned two major Chinese banks that they could face secondary sanctions if Iranian funds were found to have passed through their systems, although neither was ultimately hit. In April, Washington sanctioned the Hengli petrochemical refinery in Dalian, along with around 40 shipping companies and vessels, accusing the refinery of buying billions of dollars’ worth of Iranian oil. The company denied the allegation.
Bessent said the US was broadening the range of commercial activities subject to secondary sanctions to include digital assets, gold, technology, aviation, and shipping. He also hinted at a “major announcement” concerning sanctions on a financial institution by the end of the week.
Some analysts think the measures were less forceful than expected. Daniel Fried, a former US State Department sanctions coordinator who is now with the Atlantic Council, said the announcement “did not match the scale of the fanfare,” but that economic pressure was still preferable to war. Ali Wyne, senior adviser on US-China relations at the International Crisis Group, told AP that the significance of the announcement “depends on how firmly President Trump is prepared to enforce it,” adding that “despite threatening severe economic consequences for countries that deal with Iran, he has so far largely looked the other way when it comes to China”.
Display of confidence
For its part, Iran vowed to retaliate and said it was confident its principal trading partners would resist Washington’s pressure. Iranian parliamentary Speaker Mohammad Bagher Ghalibaf said the US was in no position to further restrict Tehran’s relations with other countries. Writing on X, Ghalibaf, Iran’s chief negotiator, said the country’s trading partners had made clear, both publicly and privately, that they “do not take these statements into account at all”. Iran also threatened possible military retaliation and further reductions in Gulf oil exports.
After the sanctions were announced, Economy Minister Ali Madani-Zadeh said: “We are fully prepared… Naturally, the enemies intend to launch an economic terrorist attack against us, but we have tools of our own, and we know how to play the game. Our defence is no longer quite so defensive, and the enemies should expect an attack.” He added that neither China nor Russia had “accepted” the US measures and predicted that other countries would resist them as well.
Brig. Gen. Hossein Mohebbi, spokesman for the Islamic Revolutionary Guard Corps (IRGC), pledged to strike US interests and energy chokepoints if Iranian infrastructure was attacked, according to Press TV. Mohsen Rezaei, a former IRGC commander and secretary of Iran’s Supreme National Security Council, threatened to halt oil exports altogether. “If the economic war continues, not a single drop of oil will be exported, neither through the Strait of Hormuz nor from anywhere in the Arabian Gulf.”
Iran also threatened “seismic force” against any neighbouring country that joined US efforts to choke its economy. It has already targeted Gulf states and Jordan, with attacks focused on US bases, but energy facilities and other sites have also been struck. A further escalation against oil and gas production facilities could drive up energy prices, hitting Trump at the polls in November.
Calls for calm
China said further sanctions “will not help resolve the problem”. Speaking at a regular press briefing in Beijing, Foreign Ministry spokesman Lin Jian said such measures “will only aggravate tensions and escalate the situation, which serves no one’s interests”. He urged all parties to refrain from steps “that could intensify differences and conflicts and disrupt global economic development and financial stability”.
In May, Beijing banned any recognition, enforcement, or compliance with US sanctions targeting domestic companies involved in the Iranian oil trade. On 25 August, Lin Jian told reporters that China-Iran trade “has always been conducted within the framework of international law and should not be interfered with or disrupted,” adding: “China has stated many times that it firmly opposes illegal unilateral sanctions and will take all necessary measures to safeguard its rights and interests.”
Washington is wary of any Chinese retaliation if US sanctions hit Chinese banks. Beijing could respond with restrictions on the export of critical minerals, for example. Trade with Iran will no doubt be discussed at the upcoming meeting between President Trump and President Xi Jinping in Washington in September, but the White House may not want to risk an agreement reached last November that preserves the flow of Chinese rare earths and caps US tariffs.
A decades-long pattern
The US has been sanctioning Iran for decades. These were eased when Iran agreed to allow nuclear inspections during the US presidency of Barack Obama, but after Trump won the 2016 US presidential election, Washington withdrew from the nuclear agreement in 2018 and initiated a sanctions regime that inflicted the most severe and sustained damage on Iran’s economy, which contracted by 4.7% in 2018-19 and by 8.2% in 2019-20. Oil bore the brunt of the impact. During the first nine months of 2019-20, the oil and gas sector shrank by 37%, with overall output down 7.6% over the same period.
When Trump began his second term in 2025, the US had imposed Iran-related sanctions on more than 1,000 people, vessels, and aircraft. Recent measures have targeted shipping insurers, a weapons-procurement network and digital-asset exchanges, while freezing $500bn in Iran-linked cryptocurrency. Bessent singled out Iran’s Bank Melli, which operates branches in Europe, the Middle East, and Asia. “Every branch of Bank Melli should be closed, and its lights turned off,” he said.
Hours before Bessent’s announcement, the Iranian currency fell to a record low, with the rial dropping to two million to the US dollar as trading began. The official exchange rate set by Iran’s central bank stood at about 1.5 million rials to the dollar, although most Iranians pay the market rate. Central bank Governor Abdolnaser Hemmati said the simultaneous decline in oil revenues, tax receipts, and social-security contributions was affecting every part of the Iranian economy. Bessent took to social media to gloat, writing: “Three million, here we come!”
The rial had already been under considerable strain before the US-Israeli attack on Iran on 28 February, with double-digit inflation and economic contraction. In the nearly six months since the war began, the currency has repeatedly fallen to record lows. The cost of basic goods has risen sharply for ordinary Iranians. Since the start of the war, the price of rice is up 60%, and beef prices are up more than 150%.
The International Monetary Fund expects GDP (gross domestic product) to contract by more than 5%, but Iran has weathered decades of US sanctions, making it well prepared to confront this latest round. Whether it has the immediate impact the Trump administration intends may end up depending on China.
