Iran has not ‘openly’ shipped crude by sea since mid-September. The US Navy has blockaded Iranian ports since 13 April. Washington cannot fully control the Strait of Hormuz, and cannot reopen it on its own terms, hence the Treasury is now going after Iran’s money instead.
Iran’s answer is to trade outside the dollar, with China and Russia. The flaw is that the sanctions target the firms Iran deals with, not its currency. The campaign works only if it reaches the channels China has built for Iran. That is our thesis: the next decision in Washington is about China, not Iran.
As a rule, judge Washington by what it does, not by what it says. On 28 February, the opening day of the war, President Trump told the Iranian people: “When we are finished, take over your government.” On 31 March he said: “We’ve had regime change… already.” Secretary of State Rubio said the objectives “had nothing to do with the leadership”. On 16 June Trump said he “never cared about regime change”. On 20 October Prime Minister Netanyahu called toppling the regime Israel’s “primary objective”, after telling Trump by phone that “we have a job to finish”.
The words changed four times in eight months; the policy did not. The blockade has stood, and the financial campaign has run since 24 August, with new names added to the US sanctions list, known as designations, almost every week. The Treasury’s stated aim is to cut the money that funds Iran’s military. A policy built to exhaust a state’s economy works towards regime change, regardless of what is said.
The Blockade
The blockade targets Iran’s oil, not the Gulf’s, and it has tightened in stages. In the first weeks of the war, before any blockade, Iran kept exporting, using tankers with their tracking switched off and what Lloyd’s List called a de facto safe corridor near its own coast. Treasury Secretary Bessent said Washington ‘let’ those tankers leave to keep the world supplied. Mere statements, not proof: with no blockade in place, nothing stopped the tankers either way. The blockade began on 13 April, and exports still picked up again under the June ceasefire memorandum. When the US reinstated it on 14 July, they stopped. It now covers every ship entering or leaving Iranian ports, regardless of flag, and US Central Command says it has turned back 130 vessels. By September Iran had gone seven weeks without “shipping significant crude exports” through Hormuz.
The rest of the Gulf is attempting to move again. Middle East crude exports, counting the Red Sea route and ship-to-ship transfers, were back above pre-war levels in late September, as a result of US-escorted shipping and Iranian authorisation. But the number of ships crossing was still ~70% below pre-war levels in mid-October, and Iran attacks ships that cross without its authorisation. Neither side controls the strait. The blockade decides whether Iranian oil leaves; Iran decides if crossing is possible at all.
The Financial Campaign
The Treasury launched Operation Economic Outcast, “Economic D-Day”, on 24 August, extending secondary sanctions to five more sectors: aviation, digital assets, gold, shipping and technology. Secondary sanctions punish non-US firms that deal with Iran by cutting them off from the US. Iran is not the target; the banks, traders and shippers it deals with are, and each must choose: Iran or the dollar.
The record shows the method: Banque Misr’s branches in the United Arab Emirates (UAE) on 28 August, Golden Global Bank in Türkiye on 4 September, Russia’s VTB Bank on 14 September, the Russian payments network A7 on 1 October, and Iraq’s International Development Bank on 15 October.
Iran’s trading partners fall into two groups. Most need the dollar more than they need Iran. The UAE supplied 30% of Iran’s imports in 2024, but its currency is pegged to the dollar. Iraq bought over $10bn from Iran in 2025, including $4bn to $5bn of gas a year, but its oil money sits at the Federal Reserve Bank of New York. Türkiye gets ~13% of its gas imports from Iran, but its banks run on dollars and euros. Pakistan depends on an International Monetary Fund programme. For each, the risk of losing Washington outweighs the rewards of Tehran.
China and Russia differ. China took ~1.38m barrels a day in 2025, over 80% of Iran’s oil. Russia is already cut off from the dollar, therefore it has little to lose. If its relations with Washington improve and its banks regain dollar access, that may change: Russia could then have more to lose by dealing with Iran. Yet, neither lets Iran near its main institutions. China’s state oil companies stopped buying Iranian crude years ago, and its largest banks stay away. Iran’s trade runs through separate channels, designed for Iranian trading, which do not touch the US.
However, even these channels need the dollar to get out. A7 issued a ruble-backed token so that Russian and Iranian trade could avoid the dollar. But to pay suppliers abroad, users swapped it into USDT, a dollar stablecoin traded on crypto exchanges, including Iranian ones such as Nobitex. Tether, which issues USDT, freezes wallets at US request, and from late September 2025 swapped USDT was being frozen at global exchanges. Resulting in the token’s daily volume falling ~96% by June 2026.
A7’s new service, launched on 13 October, takes USDT and, by A7’s own account, pays suppliers by ordinary bank transfer through SWIFT. The payments leave through front companies that hold ordinary bank accounts abroad. The US Treasury’s financial crimes unit (FinCEN) says A7 has used hundreds of them, with accounts at ~435 financial institutions in at least 83 countries, starting in Kyrgyzstan and reaching Hong Kong, the UAE, Türkiye and Indonesia. They moved over $17bn between January 2025 and June 2026. They are hard to stop because they pose as ordinary importers, with false invoices and fake local websites. The Treasury’s 1 October action proposes to bar US banks from any transfer involving them, but the rule is not final yet: FinCEN must first take public comment.
Why does the A7 need the dollar? Liquidity. Most currencies trade most easily through the dollar: rubles to dollars to lira is a deep market, rubles straight to lira a thin one. The yuan is the alternative, and it is used beyond China, in Russia and in offshore centres such as Hong Kong. But turning it into other currencies runs through banks that fear US sanctions, so for Iran it is money spent most easily in China. Germany built the same system after 1934. Its clearing agreements left trading partners holding Reichsmarks they could only spend on German goods.
The routes around the sanctions, and the US responses, show how far the campaign reaches. The largest route was relabelling. In June 2025 China recorded 1.73m barrels a day of crude from Malaysia, whom produce only ~350,000. Iranian tankers met other tankers off Malaysia, switched off their tracking, moored alongside and pumped the oil across, so the cargo reached China under a new origin. The buyers were China’s small independent refiners, which have no dollar business to lose. When the blockade stopped Iran’s exports, China’s “Malaysian” imports fell through. The Treasury’s response is to sanction the buyers, as with Hengli’s refinery in April and the Qingdao Haiye terminal in May.
Front companies and exchange houses in Dubai and Hong Kong settle trades off the books. Crypto moves value through Nobitex, the Iranian exchange, and USDT. Oil money is turned into gold and cash in Türkiye and the UAE, because gold and cash move value without ‘the’ bank record that Washington can see and/or freeze. Hence, gold became a sanctioned sector on 24 August. Each of these routes depends on someone who fears Washington.
China’s main channel does not share this fear. Chinese buyers paid for Iranian oil into Chuxin, an unregistered financial conduit, which paid Chinese contractors to build airports, refineries and transport links in Iran. Sinosure, China’s state export insurer, covered the projects. Western officials estimate that ~$8.4bn of Iranian oil payments moved this way in 2024, under a fifth of the ~$46.8bn Iran earned from crude exports that year, by OPEC figures reported by Iran’s oil ministry. Every link is Chinese, meaning there is no foreign link to sanction. Limits exist: Iran gets projects, not cash; Sinosure and the contractors also work worldwide, often in dollars; and the oil still has to arrive, which the blockade attempts to prevent, albeit the Iranians are creative.
Banks with no dollar business remain, though by nature they are few. The US sanctioned China’s Bank of Kunlun in 2012, together with Iraq’s Elaf Islamic Bank, for Iran payments. Kunlun carried on, because it was built for that trade. These banks, designed for sanctioned trade, can be named, but not cut off.
Overland routes by rail, road and the Caspian are beyond any blockade, but moving 1.4m barrels a day to China by rail would take ~55 trains a day. Iran can survive on overland trade, but it cannot fund itself that way.
Three Numbers
Three numbers will show whether this campaign is working. The first is the price. Buyers pay less for Iranian oil than for Brent, the benchmark, to cover their risk; the gap is the discount. Before the war it was ~$10 a barrel. In April, with Gulf oil scarce, it closed, and Iranian crude sold at parity with Brent. A wider discount means the sanctions are working. A narrower one can mean they are failing, or simply that oil is too scarce for sanctions to ‘matter’. A way to distinguish; compare Iran’s price with other Gulf crudes, such as Oman’s: if they all rise together, scarcity is the cause; if only Iran’s discount moves, it is the sanctions. The campaign works only while the world has enough, or even better, an abundance of other oil, hence why control of the strait matters to both sides, and why we may see continued military action to force a hand.
A narrower discount helps Iran, but the price is only a portion. What counts is what Iran keeps after extra freight, ship-to-ship transfers, middlemen’s fees and the losses of turning yuan and projects into money it can use, which sanctions attempt to squeeze through secondary consequence.
The second is the rial. On the open market it went from ~2.03m to the dollar on 24 August to ~2.69m on 3 October, even as state banks sold up to $2bn to support it, and it has lost nearly 35% of its value since July. Iranians buy dollars with rials, and those dollars come mainly from oil sales brought home. If exports resume and the rial keeps falling, the oil is being paid for but the money is not reaching Iran: it is held in yuan in China, turned into projects, or stuck with middlemen.
The third is the Treasury’s designations. When a company is sanctioned, the network behind it often registers a new one to keep business moving. If new designations keep naming fresh companies tied to the same owners, managers, addresses or ships, the network is being replaced as fast as it is cut. If the Treasury moves on to larger institutions, the small network is shrinking. A pause in designations proves less: it can mean a shrinking network, or simply less enforcement.
Washington’s Decision
Washington has two choices. It can sanction a major Chinese bank, or Chuxin and Sinosure. That would close Iran’s last channel, and it has never been done: the Chinese banks the Treasury has hit, Kunlun in 2012 and Bank of Dandong over North Korea in 2017, were small in comparison. Beijing could answer with its anti-sanctions laws; with blocking orders like that of 2 May, a Chinese order that US sanctions on five Chinese companies over Iranian oil must not be obeyed in China; or with rare earths, whose suspended export controls lapse on 10 November. The trade arrangement between China and the US, which runs to 10 January 2027, would also hang by a thread.
Or the Treasury can stop short of China, at refiners, middlemen and banks elsewhere. Iran is squeezed but keeps a channel open, and a war of financial attrition continues. If Washington chooses this, it will be because it values the trade arrangement with China, fears the costs of breaking it, and wants calm around the midterms today, 3 November, more than it wants to close Iran’s last channel. That would show where Washington draws the line for now, albeit not a permanent limit.
Britain faced the same question in 1939. Its Ministry of Economic Warfare ran a naval blockade of Germany alongside blacklists, its form of sanctions, of firms in neutral countries that traded with the enemy. W. N. Medlicott’s official history shows planners struggled to tell which of the two was doing the work. Washington’s blockade has already stopped the oil, mostly. The financial campaign has yet to prove what it adds.
We favour the odds that by 10 January 2027 the Treasury will not have sanctioned a major Chinese state bank or Sinosure, and that its pressure will stay on refiners, middlemen and banks outside China. The first signal comes on 10 November, with China’s decision on rare earths.
The next decision in Washington is about China, not Iran.