The United States has initiated a series of significant economic sanctions against Iran, escalating tensions and raising concerns about the region’s stability. The White House, under President Donald Trump, has announced a comprehensive effort to cripple Iran’s economy, targeting countries that trade with it. This strategy, dubbed ‘Operation Economic Outcast,’ aims to significantly disrupt Iran’s oil and gas revenues and destabilize the global economy. The US Treasury Department has outlined a plan to limit access to Iranian markets, demanding that countries and entities involved in trade with Iran cease participating. The sanctions, numbering over 60 entities across the Middle East, Asia, and Europe, are intended to exert pressure on Tehran’s economic lifeline. The launch of ‘Operation Economic Fury’ in February 2024 has accelerated this pressure, and the recent announcement of targeting countries that facilitate transactions involving Iranian oil and gas represents a significant escalation.
US Treasury Secretary Scott Bessent stated on Monday that the US would target all sources of Iranian revenue, including oil, to prevent other nations and companies from engaging in business with the country. He asserted that the US is ‘severing every economic lifeline’ that sustains the regime, emphasizing that the new campaign exposes Tehran’s trade partners to secondary penalties. The rationale behind this aggressive strategy is rooted in a perceived threat to Iran’s long-term viability, coupled with a desire to demonstrate the US’s resolve to exert influence in the region. The US has long employed secondary sanctions, previously used against Russia and North Korea, as a tool to deter economic activity. These sanctions are designed to harm Iran’s ability to generate revenue and exert political leverage.
The US has long leveraged threats of secondary sanctions – sanctions imposed on countries that trade with a sanctioned nation – as a means of deterrence. For instance, secondary sanctions have been imposed on countries, companies, and individuals involved in the purchase of Iranian oil or heavy military equipment from Russia, particularly since the 2018 CAATSA sanctions. The US’s primary leverage is its access to its market and financial system, which allows it to exert significant economic influence. For example, even if an Indian bank has no direct relationship with Iran, it could face secondary sanctions if it processes payments for an Indian firm trading with Tehran, especially if that bank has US branches, dollar-clearing ties, or American clients. The risk of secondary sanctions is heightened because of the reliance of many global banks and financial institutions on the US financial system. The risk of a return to the F-35 program, triggered by Trump’s 2026 announcement, creates a significant complication. The risk of secondary sanctions is further amplified because of the reliance of China and Russia on the US financial system. Analysis indicates that Trump’s leverage over China and Russia is limited.
The CAATSA sanctions, authorized in 2017, targeted Iran, Russia, and North Korea. Under CAATSA, the US targeted countries with secondary sanctions, and in 2018, it targeted Turkiye’s Presidency of Defence Industries, a country’s military procurement agency, alongside some officials affiliated with it. The US’s calculus is that the S-400s are incompatible with NATO equipment and a potentially threatened allied security. The risk of secondary sanctions is also fueled by the potential for a return to the F-35 program, which would require the US to overcome a 2020 law that mandates presidential approval for any reversal of sanctions.
This strategy is designed to undermine Iran’s economic strength and potentially destabilize the region. The US has already threatened to limit the ability of banks and institutions to process Iranian funds, which could increase the risk of a return to the F-35 program. Analysts suggest that China could also retaliate if the US imposes sanctions on its banks for processing Iranian funds, increasing the risk of a back-and-forth. The sanctions are a complex and evolving strategy with significant implications for global trade and geopolitics.
Source: Al Jazeera
