Secondary sanctions are the tool Treasury Secretary Scott Bessent leaned on this week when he unveiled what he called an “economic D-Day” against Iran. According to NPR, Bessent expanded the categories of sanctionable activity to five new areas — digital assets, technology, gold, aviation, and shipping — and the Treasury Department sanctioned nearly 60 entities, individuals, and vessels in a single day, among them multiple Chinese nationals, according to NBC News. Bessent said the goal was to cut off every economic lifeline keeping the regime afloat until Iran stood isolated.
To understand why this particular tool matters, it helps to look at how the U.S. used it once before, against North Korea. For years, U.S. sanctions worked by blacklist: Treasury named specific people, companies, and banks, and everyone else just had to check whether a trading partner’s name was on the list. The problem was that new front companies could pop up faster than the list could grow. In September 2017, President Trump signed Executive Order 13810, which changed the rule entirely. Instead of blacklisting specific parties, it authorized penalties against any foreign bank that engaged in significant trade connected to North Korea — full stop, whether or not that bank’s name appeared anywhere. Weeks earlier, Treasury had already test-driven the idea by naming a single mid-sized Chinese lender, the Bank of Dandong, a “primary money laundering concern” and cutting off its access to U.S. correspondent banking, while leaving giants like the Bank of China untouched.
That’s the concept worth naming: a secondary sanction doesn’t just punish the target country directly — it threatens anyone else in the world who deals with that country, by cutting off their own access to the U.S. financial system if they do. The threat doesn’t even need to be enforced widely to work. Once one mid-sized bank gets cut off as a warning shot, other banks tend to sever ties with the target far beyond what the law strictly requires, simply because access to U.S. dollars is worth more than any single relationship with a sanctioned country. Regulators have a name for that overreaction, too: de-risking.
Iran isn’t North Korea, though, and that difference is what makes this week’s move riskier for Washington. We looked at the oil side of this same conflict in an earlier post on the Hormuz truce — this time, the pressure point is banking, not tankers. North Korea’s economy was already isolated, so squeezing its banking partners barely rippled through global markets. Iran’s oil, by contrast, flows overwhelmingly to China. If secondary sanctions expand far enough to reach Chinese refiners, shipping networks, or banks, Beijing has far more capacity — and far more reason — to push back than North Korea’s trading partners ever did.
My take: A sanction doesn’t erase a name from a list. It erases everyone else’s willingness to be seen with it.
Not advice. Just how I see it.