US Promises 'Unprecedented' Economic Isolation Of Iran. What Could That Mean?

WASHINGTON -- US President Donald Trump’s administration is promising a new phase of economic pressure on Iran, with Treasury Secretary Scott Bessent suggesting Washington will announce measures next week unlike anything previously used to isolate a country economically.

What those measures will be is unclear. But experts who spoke to RFE/RL said truly unprecedented action could mean moving beyond another round of sanctions against Iranian companies and targeting the international financial and commercial networks that have helped Tehran keep selling oil despite decades of US pressure.

That could include Chinese banks, yuan-denominated payments for Iranian oil, alternative payment systems, and the shipping, insurance, refining, and financial intermediaries behind the trade.

"Watch this space for more announcements coming next week because we are going to apply measures like have never been seen in the history of economic isolation on a country," Bessent said in an August 13 interview with Newsmax. He said the measures would form part of a "one-two punch" alongside the continued blockade of Iran's ports.

Trump amplified the remarks the following day by sharing a Newsmax report on them on Truth Social.

The White House has provided few details. Asked on August 14 about the expected action, spokeswoman Karoline Leavitt said “there are more tools at our disposal that we can use to continue punishing Iran and crippling their economy, which is in a very weak spot as it is right now."

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The administration says Iran is suffering from rising inflation, reduced energy revenues, poverty, and limited access to foreign currency. A Pentagon assessment cited by The Hill found that the first iteration of the US blockade, from April 13 to June 18, cost Iran about $4.8 billion in oil revenue.

The question now is where Washington can apply pressure that it has not already tried -- and whether the steps it takes can change Tehran’s calculus.

Targeting The Financial Lifelines

Elaine Dezenski, head of the Center on Economic and Financial Power at the Washington-based Foundation for Defense of Democracies, told RFE/RL that one potentially powerful option would be to target financial jurisdictions and institutions that facilitate payments for sanctioned Iranian oil.

She pointed to places such as Hong Kong and to banks that may be connected to transactions involving sanctioned oil while also relying on dollar or euro business and correspondent relationships with Western financial institutions.

Such a move would focus on what Dezenski called the financial "facilitation nodes" that allow the trade to function.

Another option, she said, could involve a section of the Patriot Act under which Washington could potentially identify certain Iranian oil transactions settled in Chinese yuan as involving a primary money-laundering concern.

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Iranian oil trade is increasingly tied to payment mechanisms outside the traditional Western financial system. Transactions can be settled in yuan and cleared through alternative systems, including China's Cross-Border Interbank Payment System, or CIPS, and Russia's System for Transfer of Financial Messages, known as SPFS.

For Dezenski, Iranian oil sales and the growth of alternative financial infrastructure are becoming part of the same problem. She said the trade helps reinforce yuan-denominated settlement and payment clearing outside the Western system, potentially contributing to a broader effort to reduce the dollar's role in global energy transactions.

"I think the two are at this stage really working in concert," she said.

Brett Erickson, a sanctions expert at US-based Obsidian Risk Advisors, said one measure would stand apart from the sanctions Washington has imposed so far.

"Sanctioning Chinese banks would represent a fundamentally different level of escalation," Erickson told RFE/RL. The Treasury Department, he said, has long known that it had such leverage but has avoided using it because of the potential collateral consequences for the United States and the global financial system.

"If Bessent intends to deliver economic isolation on a scale we genuinely haven't seen before, that is where I would look first," Erickson said.

China And The Limits Of Alignment

China has been the primary buyer of sanctioned Iranian oil, making it central to Tehran's ability to generate revenue. But Dezenski, co-author of the book Axis Of Aggressors, cautioned against viewing the economic relationship between China, Iran, Russia, and North Korea as an unbreakable alliance.

The cooperation is "real and consequential," she said, but it is also opportunistic. China has an interest in buying Iranian oil, but it has much larger economic relationships with the United States and other Western markets to consider.

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Iranian oil accounts for a relatively small portion of China's imports and can be replaced, she said. That could limit how much risk Beijing is willing to take to protect Tehran.

"There's a point at which the economic alignment really does begin to fracture," Dezenski said.

She pointed to previous US action against independent Chinese "teapot" refineries involved in purchasing Iranian oil. Beijing publicly resisted the sanctions, but Chinese banking regulators later instructed major state banks to pause lending to the affected refineries, she said.

That suggests US sanctions can have effects even when China publicly rejects them, she said.

The next step could be to examine the wider ecosystems around such refineries, including corporate structures, ownership vehicles, and other businesses involved in refining and distributing petroleum products.

"The sanctions on teapots do have impact," Dezenski said.

Still, disrupting a single refinery or shipment is different from dismantling the entire network. Iranian oil can move through a web of traders, vessels, shell companies, refiners, financial intermediaries, and insurers. Pressure on one part of that system can prompt evasive activity elsewhere.

Dezenski said the best approach would be multipronged, examining banks, shipping, maritime insurance, and payment infrastructure together rather than relying on one new sanctions tool.

There is also a longer-term concern. As more financial institutions connect to systems such as CIPS, Washington could face a growing challenge to its ability to use access to the dollar-based system as leverage. Dezenski said acting against such infrastructure while it is still developing could therefore make strategic sense.

Can Economic Pain Produce Results?

The more difficult question is whether even an unprecedented escalation would force Tehran to accept Washington's demands.

Barry Pavel, a former senior director for defense policy and strategy at the National Security Council, told RFE/RL that while he does not know what measures Bessent is preparing, sanctions campaigns often become progressively more severe rather than immediately reaching their maximum possible scope.

Pavel stressed that he was speculating when discussing possible measures such as broader restrictions on trade and finance. Iran, he said, has spent decades learning how to evade sanctions, and its closer ties with China and Russia could create additional avenues around future restrictions.

Iranians shop for fruit and vegtables in a market in northern Tehran (file photo)

More important, Pavel questioned whether causing widespread economic suffering would necessarily change the calculations of Iran's leaders.

The United States has imposed sanctions on Iran in various forms since the 1979 Islamic Revolution. A major escalation could cause far greater damage, Pavel said, but it is not clear that this would translate into the diplomatic concessions Washington wants.

"I'm not sure about that," he said.

Iran's leadership has long defined itself through resistance, Pavel argued. "They don't have to win. They don't have to defeat the United States. They just have to survive and outlast the United States until the United States, you know, in their view, goes home," he said.

That makes endurance a central part of the equation. The question is how much pain the population and the leadership can absorb before those in power decide the cost is too high.

Pavel said he would favor a more targeted approach focused on decision-makers and what they value most. Broad economic pressure, he warned, could impose severe costs on ordinary Iranians without necessarily putting comparable pressure on the political elite.

He questioned whether such suffering would persuade Iran's decision-makers to stop leveraging the Strait of Hormuz and abandon their nuclear ambitions in the way the Trump administration wants.

Race Against Time?

Erickson made a similar distinction between economic weakness and political vulnerability.

"Iran can endure an extraordinary amount of economic pain," he said. The population can become much poorer and the economy can deteriorate sharply while the government remains in power.

For Erickson, the decisive test is whether the government loses its ability to maintain control.

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That creates a contradiction in the US strategy, he said. Washington needs economic pressure to weaken the relationship between the Iranian public and the government, but pressure from an outside adversary can strengthen incentives to rally around the state.

"We have spent enormous resources trying to make Iran economically vulnerable while simultaneously doing almost everything possible to make its population politically resilient," Erickson said.

He also argued that Washington needs more than another pressure point: It needs time.

Every week that global markets can absorb disrupted energy flows, higher shipping costs, and broader instability gives economic pressure more time to affect Iran. But if the economic consequences for the outside world become intolerable first, Erickson said, the strategy could fail regardless of the scope of the measures.

“If the outside world reaches its breaking point before Tehran does, it does not matter how comprehensive the economic warfare is, the strategy fails.”