Introduction

The Trump administration on Monday, August 24, warned countries to cut business ties with Iran or face secondary sanctions, unveiling what Treasury Secretary Scott Bessent called an "economic D-Day" against Iran's financial connections around the globe. However, the Treasury Department stopped short of actually imposing penalties on Chinese financial institutions, leaving questions about how far Washington is willing to go in targeting Iran's most important economic lifeline.

The Announcement

Bessent described the action as an "economic onslaught" against Iran's global financial network. The Treasury announced new sanctions on 60 individuals, entities, and vessels, but the list did not include any Chinese financial institutions suspected of facilitating Iran's oil trade. Bessent told a press conference, "Why would I want to blow up the global financial system? We believe that it is important to level set and give people a cure period, but they should know that that will move very quickly and that we are serious."

Asked whether the Treasury was prepared to move against a Chinese bank, Bessent said no country was out of reach, adding, "If they facilitate transactions and are part of the ecosystem that turns Iranian oil into money, into repression, they will be targeted." He also said the US was expanding the scope of commercial activities subject to secondary sanctions in five sectors: digital assets, gold, technology, aviation, and shipping. The action targeted businesses in China, the UAE, Singapore, and several other countries, including a cooking-oil refinery in France. Bessent previewed a "major announcement" on a financial institution by the end of the week; a Treasury spokesperson did not respond to a request for more information.

The China Factor

China has for several years been the biggest buyer of Iranian oil, and according to the US Treasury Department, it accounts for roughly 90 percent of Iran's oil sales. Data from the US-China Economic and Security Review Commission shows China and Iran recorded nearly $10 billion in two-way trade in 2025, excluding an estimated $31.2 billion in oil shipments. Reuters reported that China imported an average of 1.4 million barrels per day of Iranian crude in 2025, based on ship-tracking data from Kpler. Kpler data cited by Reuters showed shipments at 785,000 barrels per day in June, 823,000 in July, and around 534,000 so far in August, even under US naval pressure.

Iranian networks rely on front companies, shell entities, and constantly changing vessel registrations to evade sanctions. Oil cargoes are often relabelled as Malaysian and, more recently, Indonesian crude, and payments are frequently settled in Chinese currency through opaque intermediaries rather than dollar-based channels. The Treasury has recently sanctioned independent Chinese "teapot" refineries for buying Iranian oil and expanded sanctions on the "shadow fleet" of tankers transporting it. In April, Washington sanctioned Hengli Petrochemical, one of China's largest independent refiners, over alleged purchases of Iranian crude, with Reuters reporting that around 40 shipping firms and vessels were included. Reuters also reported that the Treasury has warned two major Chinese banks about potential exposure to secondary sanctions but has stopped short of formally designating them.

The Strategic Dilemma

The effectiveness of the sanctions campaign may be determined less by the number of Iranian entities added to lists and more by Washington's willingness to confront Chinese institutions. Brett Erickson, managing principal at Obsidian Risk Advisors, told Al Jazeera that Washington's willingness to target China would reveal whether it is serious about a long-term economic campaign against Iran. He added that unless the Trump administration is prepared to use every remaining economic lever simultaneously and accept serious damage to relations with China, sanctions alone are unlikely to compel major political concessions from Iran.

Jennifer Kavanagh, a senior fellow at Defense Priorities, told Al Jazeera that cutting Chinese economic ties with Iran is essential for any serious pressure campaign, but Washington is unlikely to go that far because China possesses substantial leverage. The stakes are heightened by the scheduled meeting between Trump and Chinese President Xi Jinping in Washington on September 24, intended to stabilize bilateral relations. New sanctions on Chinese banks could sour prospects for extending a deal to keep Chinese rare earths flowing and cap US tariffs, as reported by multiple sources.

Iran's Resilience and the Broader Context

Iran has spent decades developing what Jorge Leon, head of geopolitical analysis at Rystad Energy, told CNN amounts to a "survival economy." Under sanctions, living standards have deteriorated, inflation has surged, and the currency has repeatedly weakened, but the political system has endured. The war with Iran is nearing its six-month mark, with energy prices higher worldwide and shipping through the Strait of Hormuz blocked. The US naval blockade has inflicted severe economic damage on Iran and already curbed Chinese offers to purchase Iranian crude, according to Reuters. Defense Secretary Pete Hegseth said the US could maintain the blockade indefinitely. Treasury data shows the US has imposed Iran-related sanctions on more than 1,000 people, vessels, and aircraft since Trump began his second term in 2025. Recent measures have frozen an estimated $500 billion in Iran-linked cryptocurrency. Bessent singled out Iran's Bank Melli, which continues to operate branches in Europe, the Middle East, and Asia.

Reactions and Outlook

Daniel Fried of the Atlantic Council said the announcement "did not live up to the hype," but that economic pressure is better than restarting military conflict. Chinese officials have consistently opposed unilateral sanctions and called for a diplomatic resolution. Wang Wen, dean of the Chongyang Institute for Financial Studies at Renmin University, told Al Jazeera that China would inevitably take countermeasures if the US imposed sanctions affecting Chinese interests. Zichen Wang, deputy secretary-general of the Center for China and Globalization, told Al Jazeera that Chinese restraint should not be mistaken for passivity, noting Beijing's growing willingness to respond with practical countermeasures when its companies are affected.

Perspectives

  • US Administration: The Trump administration frames the sanctions as a necessary "economic onslaught" to sever Iran's financial connections, with Treasury Secretary Bessent emphasizing the seriousness of the campaign and warning that no country is out of reach, while seeking to avoid destabilizing the global financial system.
  • Analysts and Experts: Analysts such as Brett Erickson and Jennifer Kavanagh argue that the sanctions' success depends on confronting Chinese institutions, but note Washington's reluctance due to China's leverage. Daniel Fried suggests the announcement fell short of its billing but favors economic pressure over military conflict.
  • Chinese Officials and Scholars: Chinese officials oppose unilateral sanctions and call for diplomacy, while scholars like Wang Wen and Zichen Wang warn of countermeasures and emphasize that China's restraint should not be seen as passivity, indicating a firm stance against measures affecting Chinese interests.