A Dramatic Name for an Old Policy
The Trump administration has announced what Treasury Secretary Scott Bessent calls an "economic D-Day" against Iran. The language is dramatic, but the policy itself is much less revolutionary. Washington is once again attempting to accomplish through economic pressure what it has been unable to accomplish through military and diplomatic pressure: isolate Iran, deprive the government of oil revenue, and force Tehran to change its behavior. The Treasury Department has formally launched what it calls "Operation Economic Outcast," expanding sanctions against Iranian commercial networks and warning foreign governments, companies, banks, and traders that continued business with Iran could expose them to American secondary sanctions.
There is nothing fundamentally new about this strategy. Iran has lived under various forms of American economic sanctions for decades, and Donald Trump himself pursued "maximum pressure" during his first administration. Iran suffered economically under those policies. Its currency declined, inflation increased, international trade became more difficult, and ordinary people became poorer. Yet the Islamic Republic remained in power and continued many of the policies Washington wanted it to abandon. The new sanctions are therefore not really a new strategy. They are essentially the old strategy with a more dramatic name, greater intensity, and a renewed threat of secondary sanctions against those who continue doing business with Iran.
The Real Question Is China
The central weakness in Trump's strategy can be summarized in one word: China. Iran does not need every country in the world to purchase its petroleum. It needs enough customers to keep oil revenue flowing, and China has become overwhelmingly important to that trade. U.S. Energy Information Administration data show that Iranian crude and condensate exports to China increased dramatically after 2020 despite American sanctions, reaching an estimated 1.444 million barrels per day in 2024. Reuters reported on August 24 that China remains Iran's most important oil customer and that Iranian oil shipments to China, although recently reduced, continue despite American pressure.
Iranian petroleum can be discounted, transferred through intermediaries, transported by a shadow fleet, relabeled as originating elsewhere, and paid for through mechanisms designed to reduce exposure to the conventional dollar-based financial system. Reuters reports that Iranian crude has sometimes been presented as Malaysian or Indonesian oil and that Chinese independent refiners have played an especially important role in purchasing it. This is precisely why simply declaring tougher sanctions does not automatically eliminate Iran's petroleum exports.
The United States can intimidate smaller countries and companies that depend heavily on access to American banks and markets. For them, the threat of losing access to the American financial system can be devastating, and many will comply rather than risk confrontation with Washington. China, however, is an entirely different matter. Xi Jinping does not make Chinese foreign policy according to instructions from Washington. Beijing has repeatedly opposed unilateral American sanctions and possesses enormous economic resources of its own. If China decides that continuing to purchase Iranian petroleum serves Chinese strategic interests, Washington faces a much more difficult choice: tolerate continued Chinese purchases or begin imposing serious penalties on major Chinese companies and financial institutions.
Can Trump Really Force Xi Jinping to Cooperate?
This is the unanswered question behind the administration's announcement. It is relatively easy to threaten Iran or smaller countries around it. It is considerably more difficult to punish China seriously for buying Iranian petroleum. China is not Cuba, Iraq, Venezuela, or a small Gulf state. It is the second-largest economy in the world, a nuclear power, America's principal strategic competitor, and an indispensable part of international manufacturing and trade.
This distinction became particularly important on August 24. The administration warned countries doing business with Iran that they could face secondary sanctions, but Reuters reported that Washington stopped short, at least initially, of imposing some of the most consequential threatened penalties against the major Chinese institutions facilitating Iranian commerce. That restraint exposes the central dilemma in Trump's policy. Threatening secondary sanctions is one thing; imposing them against economically significant Chinese banks and companies, and then accepting Beijing's retaliation, is something considerably more serious.
If Trump genuinely wants to reduce Iranian oil exports toward zero, eventually he must confront the Chinese refiners, traders, shipping networks, financial institutions, and intermediaries that make those exports possible. But doing so would carry substantial costs for the United States as well. A serious financial confrontation with China could affect trade, financial markets, supply chains, American companies operating in China, and negotiations over numerous other strategic issues. Beijing also possesses economic weapons of its own. This is why announcing devastating sanctions against Iran is much easier than enforcing those sanctions against the country that matters most.
Russia Presents Another Obstacle
Russia presents a similar, although economically smaller, problem. Moscow already operates under extensive Western sanctions and has developed considerable experience functioning under them. Russia and Iran have incentives to conduct transactions outside conventional Western financial channels, use intermediary companies, employ alternative currencies, and move sanctioned commodities through complicated international networks. The United States therefore has considerably less economic leverage over Russia than it has over countries that remain deeply dependent on American financial institutions.
Neither Vladimir Putin nor Xi Jinping is likely to cooperate simply because Donald Trump demands it. They will cooperate when cooperation serves their own national interests. Both countries also have strategic reasons to prevent the complete economic isolation of Iran. Iran provides them with an important regional relationship and complicates American strategy throughout the Middle East. For Washington, therefore, sanctions against Iran increasingly risk becoming a confrontation with an economic network involving powers over which the United States has much less control.
China May Actually Benefit From a Prolonged Conflict
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