Washington can punish almost anyone who needs the dollar. But can it really sever Iran from a globalized economy without confronting China, Russia and the limits of American financial power?
Treasury Secretary Scott Bessent has given America's economic war against Iran a name worthy of a military campaign: Operation Economic Outcast. He says Washington is beginning an "economic onslaught" designed to sever Iran's financial connections around the world until the Islamic Republic "stands alone." That is a formidable threat. It is also a remarkably ambitious one.
The United States does not need to control a Chinese bank physically to hurt it. If a foreign bank or company depends on access to the U.S. financial system, dollar clearing, American correspondent banks or American markets, Washington can make the cost of doing business with sanctioned Iranian entities prohibitive. Treasury can designate institutions, freeze assets under U.S. jurisdiction, and threaten foreign companies with secondary sanctions.
That is why American sanctions reach far beyond America's borders.
And Washington has already demonstrated that reach. Treasury has targeted Iranian shadow-banking networks operating through the Gulf, Hong Kong, Singapore and elsewhere. It has also sanctioned Chinese and Hong Kong entities involved in Iranian oil and weapons networks.
But there is a difference between financial reach and absolute economic control.
Iran does not exist economically inside the American system alone. Its oil has a buyer: China. Its trade can be settled in yuan. Its networks can operate through intermediaries, shell companies, exchange houses and a shadow fleet. Treasury itself has acknowledged that Iran's oil revenues are increasingly settled in Chinese currency.
And China is not a small bank in Dubai.
Washington can threaten a Chinese financial institution with exclusion from the American financial system. But if the institution is important enough, imposing that punishment could also damage U.S.-China relations, disrupt energy markets and accelerate the development of financial channels designed specifically to avoid American sanctions.
That is the paradox of Bessent's strategy.
The more successfully Washington pushes Iran out of the dollar system, the greater the incentive becomes for Iran and its partners to build systems that do not need the dollar.
This does not make sanctions ineffective. Quite the opposite.
Sanctions can reduce Iran's revenues, raise transaction costs, complicate procurement, make insurance and shipping more difficult, and force Tehran to sell its commodities at discounts. Recent reporting indicates that Iranian oil shipments to China have already fallen substantially under the combined pressure of the U.S. campaign and the blockade.
But that is economic attrition, Mr. Bessent, not economic annihilation.
And it happens because Washington's objective has changed. The administration is no longer merely trying to make Iran poorer. It wants to make Iran incapable of sustaining the war and incapable of keeping the Strait of Hormuz closed.
That is a much higher bar.
Iran can probably be made significantly poorer. Its access to foreign currency can be restricted. Its military procurement can be disrupted. Its oil revenues can be squeezed. Its financial networks can be made progressively more expensive and dangerous to operate.
What is much harder is making a country of Iran's size and strategic location simply "stand alone."
Iran has borders, ports, energy resources, a large domestic economy and relationships with countries that have their own reasons for resisting American pressure. China wants Iranian oil. Russia has strategic reasons to oppose American dominance in the region. Gulf states have commercial relationships with Iran even when they are simultaneously trying to protect themselves from it. Turkey, Iraq, Pakistan and others have their own interests.
These are not necessarily an Iranian alliance.
They are something more complicated — a globalized network of interests that Washington cannot switch off with a single Treasury announcement.
That is why the sanctions campaign may ultimately be less about bringing Iran to its knees than about buying time.
Every month in which Iran earns less money is a month in which its military has fewer resources. Every disrupted procurement network makes reconstruction harder. Every tanker, bank or intermediary forced out of the system creates another obstacle.
But time works both ways.
It gives Washington time to rearm, replenish inventories and apply pressure. It also gives Iran and its partners time to adapt, reroute trade and build alternatives.
The decisive question, therefore, is not whether American sanctions can hurt Iran.
They unquestionably can.
The question is whether Washington can impose enough pain, quickly enough, without imposing comparable strategic costs on itself.
Bessent says that "no one is above the reach of U.S. sanctions." That may be true in the narrow financial sense.
But there is a larger question hanging over Operation Economic Outcast:
Can American financial power still reach far enough to break every Iranian connection in a globalized world — without discovering that some of those connections lead directly to China, Russia and the foundations of the international system Washington itself helped build?
That is the real economic D-Day.
And unlike the military version, there may be no single morning when anyone knows whether it has succeeded.
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