Iran’s economy, which was already floundering before the conflict with the U.S. and Israel, has been further damaged by the U.S. blockade of the Strait of Hormuz.
The IRGC holds on largely because of support from third countries willing to bypass U.S. and international sanctions. President Trump has threatened to finally dismantle Iran’s support networks by enforcing secondary sanctions.
The plan could work, but only if the White House has the will to follow through.
Trump announced on Truth Social Wednesday what he called the “crushing economic operation” against Iran, consisting of “Economic Warfare and Isolation on an unprecedented scale,” labeling it an “ECONOMIC D-DAY.”
He said any country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face “TREMENDOUS Economic Consequences,” specifically naming oil smuggling, swap lines, cash transfers, exchange houses, ship registries, and front companies as channels that “need to stop NOW.”
The threat came after a 60-day window to negotiate a peace deal with Tehran expired Monday without a breakthrough, nearly six months into the US-Israel war on Iran, which began February 28.
Treasury Secretary Scott Bessent had previewed the move on August 14, saying a new wave of actions against Iran was coming.
The US has been running Operation Economic Fury since April, imposing sweeping sanctions on Iran’s oil, shipping, and financial sectors plus a naval blockade on Iranian ports.
Al Jazeera’s Mike Hanna asked what economic pressure Trump could add that is not already in use; the new element is the secondary-sanctions threat aimed at third countries.
Iraq’s role in supporting the Tehran regime centers on oil smuggling disguised through blending.
The Treasury has sanctioned an Iraqi-Kittitian businessman, Waleed al-Samarra’i, for running a shipping network that covertly blends Iranian oil with Iraqi oil and markets the mixture as solely Iraqi-origin to avoid sanctions.
The scheme generates hundreds of millions of dollars for both the Iranian regime and al-Samarra’i himself. That action built on an earlier sanctions round against a similar blended-oil network.
Corruption reaches the Iraqi government itself. Treasury has designated Iraq’s own Deputy Minister of Oil for abusing his position to divert Iraqi oil for the benefit of the Iranian regime and its proxy militias.
They work through Iraqi politicians, front companies, and oil smugglers to siphon an estimated $1 billion annually from the Iraqi people for Tehran’s benefit.
Analysts describe Iraq as having become a central gateway where paper transactions mask real transfers of hard currency into Iran’s financial channels.
This prompted the Trump administration to block a $500 million shipment of U.S. banknotes tied to Iraqi oil revenues held at the Federal Reserve Bank of New York.
Separately, Iran piped 8.8 billion cubic meters of natural gas to Iraq in 2023, making Iraq its largest single pipeline gas customer. The U.S. has extended Iraq’s sanctions waiver for those gas imports even as it rescinded the waiver covering Iranian electricity.
China, Iran’s largest trading partner, is the country most likely to collide with a harder secondary-sanctions push. Sanctions could hit financial institutions serving independent “teapot” refineries, the last group still purchasing Iranian oil, though Beijing has warned Chinese entities not to cooperate with U.S. sanctions.
Additional shadow-network hubs include China and Hong Kong, which serve as primary centers for buying discounted crude and routing payments through front companies; Dubai and UAE logistics centers, which have hidden funds and managed Iran’s “shadow fleet” of tankers, though the UAE has since cut ties; Malaysia and Singapore, which have been used as transit points to relabel Iranian oil as “Malaysian Blend”; and Panama and Cameroon, which have allowed tankers to sail under flags that avoid scrutiny.
China’s support for Iran extends beyond oil purchases into military assistance. Chinese firms have exported large volumes of precursor chemicals, including ammonium perchlorate, to entities linked to the IRGC, which oversees Iran’s ballistic missile arsenal.
A single 1,000-ton shipment from Zhuhai to Bandar Abbas in early 2025 was assessed as sufficient propellant for 200 to 260 ballistic missiles.
Small Chinese firms have also been documented marketing drone engines, batteries, fiber-optic cables, and computer chips usable in Iran’s Shahed-136 attack drones, including engines barred from export to Iran.
China reportedly secretly supplied Iran with $5 billion worth of weapons systems, including CM-302 anti-ship missiles, HQ-9B anti-ballistic systems, and MANPADS, though the hardware was reportedly destroyed by Israeli and U.S. strikes on the first day of the war.
Treasury has separately sanctioned China– and Hong Kong-based individuals and companies for facilitating weapons procurement on behalf of the IRGC and Iran’s Ministry of Defense and Armed Forces Logistics.
Beijing has denied the allegations, saying it strictly enforces export controls on dual-use products.
Russia has provided direct military assistance to Iran, China’s support for Russia has helped prolong the war in Ukraine, and China is separately supplying Iran with weapons and dual-use equipment, even as Iran remains at war with the United States.
Russia has shipped drone components, ammunition, and TNT explosives to Iran via the Caspian Sea aboard more than two dozen vessels, helping Tehran replenish stockpiles depleted by U.S. and Israeli strikes.
China has exported precursor chemicals used in Iran’s ballistic missile fuel and reportedly supplied Iran directly with billions of dollars in weapons systems.
The three relationships run through overlapping financial infrastructure, including shared shadow fleets, front companies, and Hong Kong-based shell entities used to move sanctioned oil and payments for both Moscow and Tehran.
Effective secondary sanctions and embargoes targeting China and Russia for their military and financial support of Iran, combined with sanctions on China for its support of Russia, could help end the world’s two largest conflicts by degrading the shared evasion and supply networks both wars depend on.
Whether pressure of this kind would be sufficient on its own remains an open question. But because these support networks are interconnected, sanctions against one country or in one conflict will be most effective if they are enforced against all parties supporting both conflicts.
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