The Economist magazine, in the editorial of its new issue, addressed the American sanctions on Iran, questioning their ability to change the regime there.
She noted that the way the US administration of Donald Trump announced it was “apocalyptic,” and spoke of a “victory day” or a military landing in the style of the Allies on D-Day during World War II on the beaches of Normandy.
Treasury Secretary Scott Bisent described the sanctions as the largest and most comprehensive ever imposed against an adversary. Having failed to topple the Iranian regime through military force, the administration has turned its attention to economic pressure.
Treasury Secretary Scott Bisent described the sanctions as the largest and most comprehensive ever imposed against an adversary. Having failed to topple the Iranian regime through military force, the administration has turned its attention to economic pressure.
The magazine notes that the “economic pariah” operation announced on August 24 will apparently not bring down the regime, as new sanctions will be imposed on some 60 individuals, entities and ships, as well as five sectors of the Iranian economy, ranging from digital assets to shipping.
However, the United States has so far only threatened to use its most powerful economic weapon: secondary sanctions against countries that trade with Iran or help its regime transfer funds. There is reason to believe that it may never use this weapon to its full extent.
Bisent suggested that such an action could lead to a global economic collapse. He was perhaps right, as the greatest risk lies with China, which, despite the sanctions, buys approximately 90% of Iranian crude oil exports at discounted prices.
Therefore, forcing Chinese financial institutions to choose between the dollar and Iranian oil would be a dangerous escalation in America’s confrontation with the world’s second-largest economy. Investors would also be concerned about the repercussions for trade and finance. The prospect of such repercussions restrained the US administration last year after China threatened to block supplies of rare earth elements, and this is one of the reasons Trump is now seeking warmer relations with China.
The magazine believes that Iran's leaders will not be devastated by this ill-conceived attack. Their country suffered under the "maximum pressure" campaign during Trump's first term, as well as bombing campaigns during his second.
The US sanctions and blockade of the Strait of Hormuz will exacerbate the suffering of ordinary Iranians. But the regime and its elite Islamic Revolutionary Guard Corps (IRGC) will be the last to be affected. In fact, the IRGC is funded by smuggling and manufacturing goods inside Iran that were supposed to be imported, which, according to the US, strengthens the regime it seeks to overthrow.
What will happen is an American retreat. Despite his talk of eliminating the Iranian threat, Trump may actually be trying to push it out of the headlines. Only 31% of Americans support continued military action. Oil prices are still high, but well below their peak, and renewed fighting would likely drive them up again. If the “economic pariah” campaign were to bring down the Iranian regime—a highly unlikely outcome—he could declare victory. If it achieves nothing and averts a global economic collapse, he can at least hope for relative calm in the run-up to the midterm elections in November.
Iran also has a say, and the danger lies in its regime's reluctance to rescue Trump from his destructive war. Its leaders might even renew their attacks, especially given their awareness of Trump's desire to end the fighting, which they see as an opportunity to assert their dominance. Iran could continue to pressure the United States through threats or attacks on shipping, either directly or through proxies, in the Strait of Hormuz and the Bab el-Mandeb Strait.
Iran hopes that oil prices will remain above $80, which would prompt American voters to punish Trump. Alternatively, talks with Oman might lead to an agreement on fees for ships transiting the Strait, forcing the US to tighten its embargo.
In either case, the approach of Bessent and his president comes at a price, and America may gain a brief respite from the flurry of attacks and pronouncements that have dominated recent months. But threatening Armageddon or the end of the world and then backing down will damage America's credibility, weakening its ability to achieve its goals in the future.
More importantly, either outcome will create another troubling problem. At best, Trump’s approach could lead to a disastrous stalemate in the Gulf. But Iran’s nuclear program and its stockpile of fissile material would remain intact. At worst, Iran might seize the opportunity to refocus its attention on nuclear weapons. Whatever Trump achieves—or fails to achieve—in his economic war, the path to a crucial negotiated nuclear settlement appears more difficult than ever.
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