U.S. Treasury launches 'economic ostracism operation' sanctioning third countries too... Chinese financial institutions left out
U.S. Treasury Secretary Scott Bessent held a press conference at the Treasury building in Washington, D.C., on the 24th (local time) and announced, "We are launching 'Operation Economic Outcast' to block every option available to the Iranian regime." The core of the new sanctions package is a pledge to impose sanctions on other countries that trade with Iran. Specifically, countries trading with Iran in five sectors—digital assets, technology, gold, aviation, and shipping—will be placed on the sanctions target list.
The Treasury also designated more than 60 entities, individuals, and vessels worldwide that help the Iranian regime acquire nuclear and missile technology, conduct cyber operations, and generate oil revenue as new sanctions targets. The targets include subsidiaries of Iran's Ministry of Defense and Armed Forces Logistics (MODAFL), which supports the procurement of proliferation-sensitive technology and equipment for ballistic missile development and nuclear research, as well as cyber entities directed by Iran's Ministry of Intelligence and Security (MOIS). Also sanctioned were brokers, companies, and so-called "shadow fleet" trading networks in the United Arab Emirates (UAE), Hong Kong, China, Singapore, Switzerland, and Europe that transport Iranian crude oil and funnel the proceeds to the Quds Force, the elite unit of Iran's Islamic Revolutionary Guard Corps (IRGC).
Bessent stressed, "The Treasury has identified every hub, intermediary, and network Iran has used to smuggle oil and evade sanctions," and, "We will tighten the noose further to cut off every potential source of revenue that funds the Islamic Revolutionary Guard Corps and the malign Iranian regime." He added that any institution facilitating money laundering on Iran's behalf would be excluded from the U.S. dollar system, and that this operation would take a "zero leakage" approach.
Bessent further said that Trump has been calling leaders around the world to ask them to halt engagement with the Iranian regime. "Every country has been given a deadline to stop the activities we have designated," Bessent asserted. "If they do not, the Treasury will take unilateral action." Asked about the deadline for third countries to cut ties with Iran, Bessent answered indirectly, "We do not have infinite patience." He warned, "The process will move very quickly, and they should know we are serious."
Bessent was also asked about the apparent absence of China—Iran's largest trading partner—from the sanctions list. The U.S. has so far only expanded sanctions on Chinese independent refiners and the shadow fleet transporting Iranian crude, without directly regulating the major Chinese financial institutions that fund them. On this day too, Bessent avoided mentioning China by name and offered only the general response that "no one can escape the reach of U.S. sanctions."
Despite the Trump administration's loud announcement, market reaction is calm... international oil prices fall for the first time in seven trading days
The measures came as the Trump administration sharply shifted its approach to Iran from military airstrikes toward economic sanctions. After the previous memorandum of understanding (MOU) that took effect on June 18 was immediately nullified, the U.S. military resumed using military means from early last month, but showed limits in forcing Iran to surrender. Recently, there has been a flood of reports that U.S. missile stockpiles are rapidly dwindling and that even the crew of the aircraft carrier Abraham Lincoln stationed off Iran have reached psychological limits.
Accordingly, Bessent said on the 14th via U.S. broadcaster Newsmax that the Trump administration would soon announce new sanctions on Iran. At the time, Bessent explained, "We will apply measures never seen in history that economically isolate a specific country," and, "We have shifted from the military operation 'Epic Fury' to 'economic fury.'" He made clear the strategy was Trump's idea, adding, "At the president's direction, we are raising the intensity by another level."
Trump also posted on his social networking service Truth Social on the 19th, threatening, "We will wage economic warfare against Iran on an unprecedented scale." On the 23rd, Bessent published an op-ed in the UK's Financial Times (FT) titled "An economic 'D-Day' is coming for Iran," previewing that it would be "the largest single financial assault ever mobilized against an adversary."
Contrary to the Trump administration's bluster, the market reaction was calm. In New York on the 24th, the Dow Jones Industrial Average (0.26%), the Standard & Poor's (S&P) 500 (-0.28%), and the Nasdaq Composite (-0.77%) closed mixed. U.S. Treasury yields also fell for the first time in a while, reacting more sensitively to a CNBC report that the Treasury could tap even its general account (TGA) for buybacks than to Middle East news. The 10-year U.S. Treasury yield fell 0.03 percentage point from the previous day to 4.704%, and the 30-year yield fell 0.04 percentage point to 5.234%.
On this day, even international oil prices, directly affected by the Middle East situation, declined. This reflected a view that the economic sanctions on Iran contained nothing to further escalate the conflict. On the ICE Futures exchange in London, Brent crude futures for October delivery closed down 2.35% at $92.17 per barrel, while West Texas Intermediate (WTI) futures for October delivery closed down 2.35% at $85.01 per barrel on the New York Mercantile Exchange. It was the first decline in international oil prices in seven trading days since the 13th.
Major foreign media also agreed that the U.S. Treasury's measures have limits. The New York Times (NYT) assessed, "Bessent said more sanctions would be announced, but it is unclear what actual impact they will have on halting Iran's nuclear program and toppling the regime." CNN noted, "The U.S. threatened lethal action against countries that refuse to sever economic ties with Iran, but did not actually impose large-scale sanctions."
Iran, holding out with grit despite economic ruin, says it "prepared long ago"... likely to counter by tightening strait control
It is, of course, true that Iran's economy is in a state of ruin after the war. On the 24th, the Iranian rial hit a record low, falling to 2.02 million rials per dollar as soon as the unofficial foreign exchange market opened. The official exchange rate posted by the Iranian central bank is around 1.5 million rials per dollar, but most citizens are subject to the unofficial market.
The U.S. military's naval blockade of the Strait of Hormuz has destabilized supplies of various goods, sending prices soaring. Since the war began, the price of rice in Iran has surged about 60% and beef by more than 150%. This month, the International Monetary Fund (IMF) forecast that Iran's gross domestic product (GDP) would shrink 5.4% this year and inflation would rise to 70%.
Nevertheless, these sanctions do not appear to significantly exceed what Iran had braced for. Major foreign media also see little chance that Iran, which has long withstood U.S. pressure, would raise the white flag over sanctions of this level. Analysts say Iran could stick to a strategy of further tightening its Strait of Hormuz blockade to push Trump into a political defensive position ahead of the November 3 midterm elections. Iran also has the means to militarily target the energy facilities of neighboring Gulf states such as the UAE and Saudi Arabia to deter the U.S. from using force. Iran has set the withdrawal of U.S. troops, the lifting of sanctions, the release of frozen assets, and the payment of reparations as preconditions for reopening the Strait of Hormuz.
Mohsen Rezaee, secretary of Iran's Supreme National Security Council (SNSC), also warned on state broadcast on the 22nd, "We declare to every country: do not join the economic war the U.S. is waging," and, "We will regard any country that participates in economic sanctions as an enemy." Seyed Ali Madanizadeh, Iran's minister of economic affairs and finance, claimed immediately after the U.S. announced sanctions on Iran on the 24th, "We drew up a two-year economic plan long ago to counter U.S. sanctions," and, "We are fully prepared even for new sanctions." While acknowledging that the war dealt heavy blows to Iran's steel and petrochemical industries, Madanizadeh expressed confidence that global financial flows are not enough to cut off Iran's economic arteries.
According to Iranian media on the 24th, the newly established Persian Gulf and Strait Authority (PGSA), created to manage the Strait of Hormuz, disclosed 45 sanctioned vessels on X (formerly Twitter) on the 23rd, threatening to fine them or seize their cargo. The targets include very large crude carriers (VLCCs); liquefied natural gas (LNG) and liquefied petroleum gas (LPG) carriers; and petroleum product tankers. Notably, five vessels owned by South Korea's Sinokor Merchant Marine were included. To make matters worse, Yahya Saree, spokesman for Yemen's pro-Iran Houthi rebels, claimed on the 24th that they had struck the Saudi tanker Amjan with a missile off Yanbu in the northern Red Sea. Since the Strait of Hormuz was blocked, Saudi Arabia has exported a substantial volume of crude via the Red Sea route through the Bab el-Mandeb Strait.
China urges U.S. to "resolve through dialogue" while holding high-level talks with Iran... U.S.-China summit strategy on the 24th of next month is a variable
The biggest follow-up measure by the Trump administration that markets are watching is, again, whether it will impose real sanctions on China. On this point, Chinese Foreign Ministry spokesman Lin Jian, asked about Bessent's secondary sanctions at a regular briefing on the 24th, drew a line, saying, "Sanctions and pressure do not help resolve the issue." Lin said, "Sanctions and pressure only escalate tensions and worsen the situation, and serve no one's interests," and, "We urge them to avoid measures that could intensify contradictions and conflicts or shock global economic development and financial stability." He added, "We urge a return as soon as possible to the correct track of dialogue, negotiation, and political resolution," and, "China will closely watch relevant developments and take necessary measures to defend its legitimate rights and interests." Naturally, China gave no declarative statement that it would sever ties with Iran. China was the largest buyer, purchasing more than 80% of Iran's seaborne crude oil exports last year.
The Chinese Foreign Ministry further disclosed belatedly on its website on the 23rd that Vice Foreign Minister Miao Deyu had met Iranian Deputy Foreign Minister Kazem Gharibabadi in Beijing on the 17th. The 17th was three days after Bessent had previewed maximum sanctions. According to the Chinese Foreign Ministry, Gharibabadi conveyed the latest developments in the Gulf region and Iran's position to China, saying, "Iran is resolutely defending its sovereignty and security, and is willing to resolve the issue through diplomatic negotiations." In response, Miao replied, "China is closely watching the Middle East situation and is actively working to promote reconciliation and dialogue," and, "We will make efforts while upholding the spirit of President Xi Jinping's 'four proposals' on safeguarding and promoting peace and stability in the Middle East." The four proposals Xi presented this April are upholding peaceful coexistence, upholding national sovereignty, upholding international rule of law, and upholding the comprehensive principle of development and security.
The U.S. inability to preemptively target China—the core of the Iran sanctions—is interpreted as reflecting the burden of expanding the front of conflict too widely with just over two months until the midterm elections. The U.S. is recently fighting a 50% tariff war not only with Iran but also with Canada. Moreover, unlike Iran and Canada, China holds multiple trade cards—such as rare earth exports and soybean imports—capable of dealing lethal blows to the U.S. economy. It can also wield enormous influence in the Middle East through the power of capital. Even during his visit to China on May 14–15 this year, at the height of the Iran war, Trump refrained from direct confrontation with Xi.
According to the U.S. political outlet Politico on the 17th, Xi is likely to arrive in the U.S. late at night on the 23rd of next month, meet Trump on the 24th, and return home immediately on the 25th. Trump is in a position where he must somehow extract something from his meeting with Xi that will help him in the elections. He also needs Xi's help for his plan to meet North Korean leader Kim Jong-un on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit to be held in Shenzhen, China, on November 18–19.
In conclusion, for the Trump administration to raise the level of sanctions enough to fully subdue Iran, it will inevitably need China's cooperation—though there is little chance China will readily comply. Depending on how Trump employs a mix of hard and soft tactics against China, the landscape of the Middle East situation, financial markets, the U.S. midterm elections, and Korean Peninsula security could all change.
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