The United States is gearing up to impose what it describes as 'unprecedented economic pressure' on Iran. However, the options available to President Donald Trump's administration carry potential consequences for the American economy, energy markets, and relations with China.
U.S. Treasury Secretary, Steven Mnuchin, stated that the United States is moving towards tightening the economic stranglehold on Tehran. Iran is already subjected to thousands of sanctions, alongside a maritime blockade on its ports.
Although Washington has not yet disclosed the nature of the measures it plans to take, the Treasury Department still possesses several tools that can be used to increase pressure on Iran.
Here are the top 5 possible options on President Donald Trump's table, according to Bloomberg:
Relations with China
China purchases more than 90% of Iranian oil exports, making sanctions on entities facilitating these purchases a direct method to reduce Tehran's oil revenue.
Washington has already imposed sanctions on some small Chinese refineries and associated companies since the beginning of the American campaign against Iran in late February. However, it has so far avoided targeting major Chinese banks financing this trade.
Targeting Chinese companies or financial institutions poses the risk of escalating tensions with Beijing, especially ahead of the anticipated meeting between President Donald Trump and his Chinese counterpart Xi Jinping.
There are also potential economic implications, as reducing Iranian oil exports could deprive the global market of low-priced crude, potentially leading to a further increase in already high oil prices.
In May, China ordered local companies not to comply with U.S. sanctions imposed on five refineries. The largest Chinese banks found themselves trapped between Beijing's directives and the risk of losing access to the U.S. financial system.
Exchange Companies
Several foreign exchange companies in various countries assist Iran in funneling funds back into the country. After concluding oil sales, Tehran needs exchange companies and intermediaries to convert payments, often received in Chinese yuan, into currencies it can effectively use.
The U.S. Treasury Department has already shown that it considers this route a weakness for Iran, sanctioning certain Iranian exchange companies as part of Steven Mnuchin's campaign dubbed 'economic fury', accusing them of assisting in the laundering of billions of dollars in foreign currencies.
Targeting these companies could limit Iran's access to a significant portion of its funds; however, Tehran has spent years building alternative channels for moving money away from the formal financial system.
Thus, cutting ties with specific exchange companies could push transactions towards new intermediaries, other currencies, or digital assets instead of stopping them completely.
Secondary Sanctions
The United States could threaten to impose secondary sanctions on any entity conducting even limited transactions with Iran, following a similar approach Trump took towards North Korea in 2017.
This step could force foreign companies and banks to choose between continuing to deal with Iran and retaining access to the U.S. financial system, thus expanding Washington's influence beyond entities directly related to Iranian oil trade.
This policy also exerts additional pressure on Russia and China but could also affect companies and financial institutions in countries neighboring Iran, including Turkey, an ally of the United States with significant trade ties with Tehran.
Trump has already proposed a similar approach, threatening to impose a 25% tariff on countries trading with Iran, although he hasn't implemented this threat yet.
Iranian Assets Abroad
The U.S. could go beyond freezing Iranian government assets and seek to seize assets already under its jurisdiction, based on a measure taken by President George W. Bush's administration after the Iraq invasion in 2003.
However, the amount of Iranian government assets under U.S. control may be limited. Furthermore, seizing them would be legally and diplomatically more complex compared to merely freezing them.
A significant portion of Iran's wealth overseas is concentrated in third countries, meaning Washington would need cooperation from foreign governments to seize them.
The Secret Fleet
While the U.S. maritime blockade has reduced vessel traffic in and out of Iranian ports, Washington might consider expanding its operations to include more comprehensive efforts.
These actions might target not only individual ships but also companies, terminals, and other infrastructures enabling shipping operations linked with what is known as the 'secret fleet'.
The United States has already imposed sanctions on several ships and entities linked to this fleet.