New U.S. sanctions target Iran’s tech, gold, and shipping sectors, pressing global intermediaries.
The U.S. Department of the Treasury invoked the memory of approximately 160,000 Allied soldiers storming a 50-mile stretch of Normandy’s coast when it published its latest round of secondary sanctions against Iran on Aug. 24. However, rather than capturing Gold, Juno, Omaha, Sword, and Utah beaches, the sanctions seek to hobble Iran’s digital assets, technology, gold, aviation, and shipping sectors.
“In the Second World War, D-Day marked the historic beginning of a campaign with our allies to target and drive the enemy from its positions, including those in third countries,” U.S. Treasury Secretary Scott Bessent posted on the social media platform X, formerly Twitter. “Today, in that same spirit, we are launching an economic onslaught against Iran’s financial connections around the globe. Our objective is to sever every economic lifeline that sustains this tyrannical regime until Tehran stands alone.”
The Treasury, Department of State, and the rebranded Department of War personnel have worked with their counterparts to convey expectations for immediate action on the sanctions.
“Every country will be given a defined timeline to shut down the Iran-related activity we have identified,” the Treasury said in a prepared statement. “If they fail to act, the Treasury will act. Any entity that facilitates money laundering or sanctions evasion on behalf of Iran risks being cut off from the U.S. financial system.”
The new sanctions may deter international companies from doing business in Iran, but their immediate effect may be over-compliance due to the Treasury’s new designations, Kari Heerman, Brookings senior fellow and Director of Trade and Economic Statecraft, told Global Finance.
The harder question is how much additional pressure the latest sanctions have on Iran’s economy.
“Years of sanctions have pushed Iran’s remaining trade toward firms and financial channels more willing or able to tolerate U.S. sanctions,” she added. “That makes evasion more expensive for Iran, but it also makes each successive round of enforcement more difficult for the United States.”
Sanction Penalties
Besides blocking transactions involving property and property interests owned directly or indirectly by designated individuals located in the U.S. or in the possession or control of a U.S. person, they prohibit financial institutions from making any contribution, provision, or receipt of funds, goods, or services by, to, or for the benefit of any designated individual no matter their location.
At the time of the announcement, the Treasury had already sanctioned more than 60 entities, individuals, and vessels located in China, Europe, Hong Kong, Singapore, Switzerland, the United Arab Emirates, and other regions that have worked with Iran’s Ministry of Defense and Armed Forces Logistics and its Ministry of Intelligence and Security.
As the newly minted sanctions target entities further up Iran’s supply chains, they stop short of reaching major Chinese financial institutions that have been Iran’s lifelines.
“Targeting a major Chinese bank could have a much larger deterrent effect than sanctioning smaller intermediaries, but it could also provoke Chinese retaliation and affect other U.S. objectives, including the economic issues Washington, D.C., hopes to address at next month’s Trump-Xi summit,” said Heerman. “Bessent’s comment that he does not want to ‘blow up the global financial system’ acknowledges the most powerful sanctions tools can also be the most costly to use.”
Hours after the announcement, the Iranian rial plummeted on the open market, trading at roughly 2 million rials to a single U.S. dollar.
How key international trade partners respond to this new round of U.S. sanctions will ultimately reveal if Washington has gone a bridge too far.
Rob Daly covers fintech and the economy. Contact him at rdaly@gfmag.com.