“First the Money Pipeline, Now the Air Routes”: U.S. Accelerates ‘Operation Economic Outcast’ Against Iran, Targets Third-Country Firms Trading With Tehran

U.S. Pressures Iran’s External Trade Network With Expanded Aviation, Financial and Logistics Sanctions
China’s Sanctions-Evasion Trade Faces Oil and LNG Shipping Disruptions Under Hormuz Blockade
China and Qatar, Bound by Shared Energy Interests, Mediate Resumption of U.S.-Iran Talks

The United States has broadened its economic blockade against Iran across the aviation, financial and logistics sectors, imposing sweeping sanctions on 36 targets, including airlines and overseas procurement companies that supported Iran’s aviation industry. Following last week’s designation of a small Turkish bank that facilitated the indirect settlement of proceeds from Iranian crude sales, Washington warned that third-country companies continuing to transact with Iran could also be expelled from the global financial system. China, however, remains the most consequential variable in determining the sanctions’ effectiveness, as Iran’s largest crude buyer continues to conduct indirect trade through local-currency settlements, independent refiners and a shadow fleet. Yet China itself would inevitably face disruptions in securing Middle Eastern crude if the Strait of Hormuz remains blocked, prompting Beijing to join Qatar in a diplomatic effort to mediate the resumption of negotiations between the United States and Iran.

Sweeping Sanctions Target 36 Entities Supporting Iran’s Aviation Sector

On the 8th (local time; all subsequent dates are local), the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) added Air Shiraz, Fly Persia Airways, Fly Kish Airlines, ATA Airlines, Ava Airlines, Chabahar Airlines and several travel and logistics companies to its Specially Designated Nationals List. The Treasury said in a statement that the designations targeted “36 individuals and entities supporting Iran’s aviation sector, which the Iranian regime uses to transport weapons, personnel and illicit cargo,” as well as “front companies, foreign intermediaries and transshipment routes Iran uses to acquire U.S.-made aircraft and sensitive technologies.”

Overseas companies that assisted Mahan Air, Iran’s largest airline, were also placed under sanctions. Mahan Air has been subject to U.S. sanctions since 2019. According to the U.S. Treasury, Turkish and Malaysian companies brokered Mahan Air’s acquisition of Boeing 777 aircraft through third countries, including the United Arab Emirates (UAE) and Türkiye. Washington also took parallel measures to prevent sanctions-evasion transactions through the financial sector. The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued an alert to financial institutions worldwide on the same day, instructing them to identify and report transaction networks supporting Iran’s aviation industry. “Anyone doing business with the Iranian airlines designated today risks being cut off from the global financial system,” U.S. Treasury Secretary Scott Bessent warned in a statement.

Once the sanctions are fully enforced, air routes connecting Iran through Dubai, Doha and Istanbul are also expected to suffer considerable disruption. Given the extensive use of technology and components supplied by Boeing and other U.S. companies across the global commercial aviation market, third-country airlines will find it increasingly difficult to operate routes to Iran without U.S. authorization. Moreover, the Treasury has stated that only requests concerning aviation safety will be reviewed on a case-by-case basis. With Mahan Air operating more than 30 aging aircraft, including used planes as much as 35 years old, the simultaneous contraction of parts procurement, maintenance, insurance and payment networks is bound to compound risks to civil aviation safety and passenger travel.

Indirect Payment Channel for Iranian Oil Proceeds Also Blocked

The latest aviation-sector sanctions followed Washington’s designation last week of a small Turkish bank with $34 million in capital for allegedly facilitating the indirect settlement of proceeds from Iranian crude sales. Golden Global Investment Bank, the sanctioned institution, is a relatively new financial company established in 2019. The U.S. Treasury said the bank had been used as a conduit to transfer payments for Iranian crude from China to Türkiye before converting the funds into cash and gold. Authorities also uncovered indications that the bank had processed transactions worth tens of millions of dollars on behalf of the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF), prompting the designation of two subsidiaries as well.

The decision to target even a small bank is widely seen as a warning to financial institutions throughout third countries to sever their dealings with Iran. The Trump administration is rapidly expanding the reach of its “Operation Economic Outcast”, launched on the 24th of last month. Under the campaign, foreign financial institutions that continue to conduct significant transactions with sanctioned parties may face restrictions on opening or maintaining correspondent accounts in the United States. The Treasury is also tracking overseas hubs, intermediaries and financial networks involved in Iranian oil smuggling and money laundering, with plans to impose secondary sanctions on third-country companies that continue such transactions. The strategy is understood as an effort to sever, one link at a time, the cycle through which oil-sale proceeds flow into Iran through banks and are subsequently used to procure aircraft and military supplies.

Table 1. Expansion of U.S. Aviation and Financial Sanctions Against Iran

Disrupting Payments, Shipping and Insurance to Raise Iran’s Trade Costs

Even if third-country governments continue trading with Iran, local banks, insurers and logistics companies responsible for executing the transactions are unlikely to readily accept the risks associated with U.S. sanctions. Expulsion from the U.S. financial network would not only block dollar payments and trade financing but could also disrupt international transactions entirely unrelated to Iran. Companies dealing with sanctioned parties could likewise face asset freezes in the United States or restrictions on access to financial markets. Consequently, regardless of their governments’ diplomatic positions, private businesses across multiple countries are expected to terminate Iran-related contracts or suspend new transactions.

The United States is thus exploiting the risk aversion of third-country financial institutions and transportation companies to constrict Iran’s external trade network. Its strategy is to dismantle, in sequence, every link required to complete a transaction, from bank accounts and oil-sale proceeds to aircraft operations, cargo transportation and insurance underwriting. As the sanctions network tightens, Iranian companies will find it increasingly difficult to secure overseas partners willing to handle payments and shipping, while completed transactions will carry substantially higher fees and insurance premiums. Washington’s calculation is that pressuring the economic channels connecting Iran to the outside world will raise the country’s trade costs and ultimately choke off the Iranian regime’s sources of funding.

China Remains the Largest Variable in the Iran Sanctions Regime

The U.S. sanctions regime, however, still faces its largest variable in China. The U.S. Treasury has concluded that China’s independent refiners purchase most of Iran’s crude exports, sustaining the country’s principal source of revenue. According to oil-market intelligence provider Vortexa, Chinese imports of Iranian crude reached a record 1.8 million barrels per day in March. As Chinese state-owned refiners avoided direct purchases, “teapot” refiners based in Shandong Province and elsewhere took over the transactions. Much of the cargo entered Chinese ports after ship-to-ship transfers at sea, relabeled as originating from Malaysia or Indonesia.

In April, the United States added Hengli Petrochemical’s Dalian refinery, which has a processing capacity of 400,000 barrels per day, to its sanctions list. Washington has nevertheless remained cautious about escalating pressure against China’s entire trading network. Targeting major Chinese banks and state-owned enterprises could reignite U.S.-China trade tensions while sending shock waves through international oil prices and global financial markets. The hard-line measures that the Trump administration previously threatened against Iran’s major trading partners, including China and India, have in practice been recalibrated toward warnings and negotiations. China, meanwhile, continues to reject unilateral U.S. sanctions and maintain trade through local-currency settlements, independent refiners and a shadow fleet. As long as oil sales to China continue providing Iran with access to funding, Beijing will remain a critical economic lifeline enabling Tehran to withstand Washington’s blockade.

China and Qatar Mediate Between U.S. and Iran to Safeguard Energy Supply Chains

Yet Iranian crude exports to China would also become difficult to sustain if the Strait of Hormuz remains blocked. According to the U.S. Energy Information Administration (EIA), China’s crude imports averaged 8.1 million barrels per day in the second quarter of this year, down 32% from the previous quarter. In May and June, imports fell below 8 million barrels per day for the first time since 2016. Qatar is another country directly exposed to the Hormuz blockade. Most vessels carrying its liquefied natural gas (LNG) pass through the strait, while China ranks as Qatar’s largest trading and energy partner. Sheikh Mohammed bin Abdulrahman Al Thani, Qatar’s prime minister and foreign minister, has also pledged to prioritize energy supplies to China amid the shipping disruptions.

Bound by shared energy interests, China and Qatar are coordinating efforts to revive diplomatic channels between the United States and Iran. Qatar’s Foreign Ministry announced on the 8th that it was consulting regional and international partners, including China, on measures to resume negotiations. On the same day, Al Thani met Chinese Foreign Minister Wang Yi in Beijing to discuss easing tensions in the Gulf, safeguarding navigation through the Strait of Hormuz and stabilizing energy supply chains. China also signaled its intention to strengthen coordination with Qatar and restore regional peace as swiftly as possible. With U.S. attacks on Iranian oil tankers followed by Iranian missile strikes against U.S. naval vessels, however, Qatar reportedly maintains the cautious position that mediation is unlikely to produce results without sufficient political will from the parties involved.