The US has launched "Operation Economic Outcast," a new set of sanctions aimed at isolating Iran from the global economy by threatening to sanction foreign governments, banks, and companies that continue to do business with Tehran. This initiative, spearheaded by Treasury Secretary Scott Bessent, comes after months of conflict have failed to force Iran's capitulation and seeks to cut off Iran's remaining economic ties.
However, a key challenge to the success of these new sanctions is China, which is Iran's principal buyer of oil, purchasing an estimated $10s of billions worth last year. Beijing has already instructed its firms not to comply with US sanctions targeting Chinese buyers of Iranian oil and has warned it will take "all necessary measures" to protect its interests. Chinese Foreign Ministry spokesperson Lin Jian stated that "economic warfare and maximum pressure will not help resolve the issue; they will only further intensify tensions and conflicts, create spillover risks, disrupt the global economic and financial order."
These new US sanctions are creating a diplomatic tightrope walk for both Washington and Beijing, especially with a highly anticipated visit by Chinese leader Xi Jinping to the US next month. While the US hopes for "quiet diplomacy" to gain cooperation, Chinese analysts suggest limited room for Washington's demands, noting that China is unlikely to allow the US to dictate its trade relations with third countries. Sanctioning major Chinese state-owned entities or banks, which are heavily integrated into the US dollar system, could severely deteriorate the atmosphere for the upcoming summit, potentially shifting it from stabilization towards damage control.
Despite China's opposition to the sanctions regime, there are potential areas of alignment between Washington and Beijing, particularly in restoring trade flows in the Strait of Hormuz and achieving broader regional stability. Chinese oil purchases from Iran have already decreased significantly compared to last year due to the US blockade. The effectiveness of "Operation Economic Outcast" hinges on whether the US can persuade or coerce global participation, especially from China, or if China, alongside other members of the Shanghai Cooperation Organization (SCO), will continue to actively promote diplomatic solutions and resist US pressure, as seen with their recent summit in Kyrgyzstan where Iranian President Masoud Pezeshkian was present.
