Secondary sanctions allow the United States to penalise countries, companies or individuals that do business with a sanctioned country, even when they have no direct relationship with the US. The threat is aimed at Iran’s trading partners as Washington expands its economic pressure campaign against Tehran.
US Treasury Secretary Scott Bessent said the campaign would target sources of Iranian revenue, including oil, while President Donald Trump warned on August 19 that entities providing Iran with an economic “lifeline” could face major consequences.
How the penalties work
The main US leverage is access to the American market and financial system. An Indian bank with no direct relationship with Iran could still face secondary sanctions if it processes payments for an Indian company trading with Tehran, particularly if the bank has US branches, dollar-clearing ties or American clients.
That risk can lead banks and other financial institutions to avoid transactions that touch Iran. The same concern has reduced the willingness of many global financial institutions to participate in trade with Iran or Russia because they do not want to jeopardise their US business.
Related coverage: Iran and Oman weigh a temporary shipping route through Hormuz.
What Washington has announced
The United States has targeted at least 60 entities across the Middle East, Asia and Europe in its latest sanctions. Bessent said countries and companies that facilitate transactions or help turn Iranian oil into revenue would be exposed to secondary penalties.
The administration has described its wider pressure campaign as “Operation Economic Fury” and its newer effort against Iran’s trading partners as “Operation Economic Outcast”. The measures come as the conflict that began on February 28 remains deadlocked, while disruption around the Strait of Hormuz has affected energy markets and global supply chains.
Previous uses and limits of US leverage
The United States used the Countering America’s Adversaries Through Sanctions Act, or CAATSA, to impose targeted secondary sanctions. In 2018, it sanctioned China’s Equipment Development Department over purchases of Russian Su-35 fighter jets and S-400 missile systems. In 2020, it sanctioned Turkiye’s Presidency of Defence Industries and associated officials over Ankara’s purchase of the Russian S-400 system in 2019.
More context: Iran’s trade is concentrated among a few key partners.
Iran exported about $56bn in goods to at least 112 countries and territories in 2024 and imported about $68.5bn from at least 87. Its leading export partners were China, Iraq, the United Arab Emirates, Turkiye and Afghanistan. Its main import partners were the UAE, China, Turkiye, the European Union and India.
US influence depends on how much a trading partner relies on the American financial system. Analysts say that leverage is limited in some Chinese and Russian sectors, including most Chinese oil refineries. China bought 80 percent of Iran’s shipped oil in 2025, according to Kpler, and could respond if Washington sanctions Chinese banks for processing Iranian funds.
Also read: Iran threatens retaliation as US prepares new economic sanctions.
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