If the US and Iran aren’t able to soon come to a deal to end the war or extend the ceasefire that expires next week, the Trump administration is setting the stage to shift its war campaign toward a more economic-focused effort aimed at choking Tehran into submission rather than relying on bombs alone.
Treasury Secretary Scott Bessent told reporters at a White House briefing Wednesday that the US plans to ramp up economic pain on Iran, and said the new moves will be the “financial equivalent” of a bombing campaign.
The threat of secondary economic sanctions on countries doing business with people, firms and ships under Iranian control – including allies like the United Arab Emirates (UAE) and competitors like China – represents an escalation of sanctions that the US is already employing.
Bessent said the administration has “told companies, we have told countries that if you are buying Iranian oil, that if Iranian money is sitting in your banks, we are now willing to apply secondary sanctions, which is a very stern measure. And the Iranians should know that this is going to be the financial equivalent of what we saw in the kinetic activities.”
A warning to China, Hong Kong, the UAE and Oman
The warning comes the day after the treasury department sent a letter to financial institutions in China, Hong Kong, the UAE and Oman threatening to levy secondary sanctions for doing business with Iran, and accusing those countries of allowing Iranian illicit activities to flow through their financial institutions.
It’s part of an economic playbook that President Donald Trump still can use to pressure Iran to accept US proposals to limit its nuclear ambitions, a person familiar with the administration’s thinking told The Associated Press. The person spoke on the condition of anonymity because they were not authorised to discuss private discussions on the record.
Privately, the argument being made to Trump is that the Iranians think they can weather the storm – but if they cannot pay their loyalists, that could pressure Iran to the table.
And some in the administration believe there are still more economic targets that can be hit that would put the economic hurt on Iran, including bonyads, the charitable trusts that account for a significant percentage of the Iranian economy.
Bessent told reporters that two Chinese banks have received warnings about handling Iranian money. Trump is preparing to visit Beijing next month for talks with Chinese President Xi Jinping.
Bessent also said that Iran’s Gulf neighbours are now willing to look at freezing Iranian money in their banks because of Iran’s aggression during the war.
More sanctions could risk blowback
Still, senator Elizabeth Warren, the top Democrat on the banking committee, argued that any new economic sanctions would be effectively offset by the financial windfall that Iran was seeing in the aftermath of the war.
“Instead of circumstances where we can keep sanctions on Iran and constrict their economy, the blockade in the Strait of Hormuz – combined with the sharply rising price of oil – has helped Iran’s economy,” Warren said, adding: “What secretary Bessent is trying to do is mop up the mess that Donald Trump has created by initiating this war.”
Daniel Pickard, a sanctions attorney, said imposing secondary sanctions could result in “diplomatic and economic blowback” from allies that could hurt efforts to build coalitions against Tehran.
“A lot of our trading partners have been outspoken in regard to their opposition to the conflict in Iran,” Pickard said. “Most economic sanctions professionals would agree that when you get more people on the team, the chances of your economic sanctions being effective [are] greater.”
On Wednesday, the US imposed sanctions on an oil smuggling network connected to the deceased senior Iranian security official Ali Shamkhani, who was a close adviser to the former supreme leader of Iran. Sanctions include dozens of individuals, companies and vessels involved in secretly transporting and selling Iranian and Russian oil through front companies, many of which are in the UAE.
“Treasury will continue to cut off Iran’s illicit smuggling and terror proxy networks,” Bessent said in a statement. “Financial institutions should be on notice that Treasury will leverage all tools and authorities, including secondary sanctions, against those that continue to support Tehran’s terrorist activities.
Momentum has shifted
Trump administration officials have also signalled growing confidence that the ceasefire and a blockade of shipments from Iranian ports in the Strait of Hormuz have shifted momentum in Trump’s favour.
Iran has endured tens of billions of dollars in damage during the bombardment to the country’s infrastructure – including setbacks to its oil industry, the heart of its fragile and long-isolated economy – that could take years to repair.
Vice-President JD Vance on Tuesday said Trump “doesn’t want to make, like, a small deal. He wants to make the grand bargain”.
“That’s the trade that he’s offering,” Vance said. “If you guys commit to not having a nuclear weapon, we are going to make Iran thrive.”
The president’s deputy chief of staff, Stephen Miller, offered a more caustic assessment of the moment, suggesting that Trump had “played the checkmate move” on Iran by implementing the blockage in the strait.
“If Iran chooses the path of a deal that’s great for the world, that’s great for everybody. If Iran chooses the path of economic strangulation by blockade, then the world will pass Iran by,” Miller said in a Fox News appearance Tuesday evening. “New energy routes will be established. New supply chains will be established. Other nations throughout the region – throughout the world, and especially America – will power the world and Iran will become a footnote.”
Scepticism that more sanctions will work
Some Republicans believe that any tactic to exert more pressure on Tehran is worth trying.
“I would support anything,” said senator Thom Tillis. “If the administration came up with the ideas, I would support all of the above. More pressure, the better.”
Others were sceptical, noting that Tehran was already facing a litany of economic penalties that had little impact on its behaviour.
“I’m not sure if it’s sanctions that’ll do it. I think we’re putting some pretty heavy sanctions on right now,” said senator Mike Rounds, a member of the banking and armed services committees. “I personally am just not optimistic that we actually can fix this thing without a regime change.”
Trita Parsi, executive vice president of the Quincy Institute, a think-tank that has been critical of Trump’s decision to launch the war, says that Trump had been “politically cornered and strategically constrained” before he announced the ceasefire. But now, Parsi argues, Trump may have altered the difficult dynamic and created a situation where “Iran now appears to need an agreement more than the US does”.
“The window now open offers Tehran a chance to convert battlefield leverage into lasting strategic gain,” Parsi writes in a new analysis. “To let it close would mean forfeiting not just incremental progress, but the possibility of reshaping its economic and geopolitical position. By contrast, the US, having already secured a tenuous exit ramp through the ceasefire, has less at stake in the short term.”
Reporting by Fatima Hussein, Aamer Madhani, Will Weissert and Seung Min Kim.
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Top image: Treasury secretary Scott Bessent speaks with reporters at the White House on April 15. Picture: AP Photo/Alex Brandon.
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