Tehran has vowed to retaliate against any country that cooperates with the US attempt to impose fresh sanctions against Iran in what the Treasury secretary, Scott Bessent, has billed as “the single greatest financial offensive ever marshalled against an adversary”. In advance of the US announcement, the United Arab Emirates, Iran’s single biggest trading partner in the Middle East, announced it was ending all trade with Iran, a move Tehran believes was coordinated between Washington and the UAE. The US has said it will impose sanctions on any country or entity trading with Iran – what is known as secondary sanctions.
The test of the US rhetoric is likely to rest on whether countries such as India, China and Russia believe continued trade with Iran would lead to credible US reprisals against their economies. China has for decades been the main importer of Iranian oil. In May, the US threatened sanctions against Chinese refiners and the banks funding them, but the Chinese commerce department directed Chinese firms to ignore US warnings over Iranian oil imports, saying the threats were illegitimate and deploying for the first time a government statute designed to render US sanctions ineffective in Chinese jurisdictions.
The US had imposed sanctions on Hengli Petrochemical (Dalian) Refinery Co in April but Washington largely backed off as Donald Trump realised he was risking a wider trade and tariff war with China that the US was likely to lose. This time the Chinese foreign ministry spokesperson, Lin Jian, again said China opposed unilateral sanctions that lacked basis in international law and China believed that military means, sanctions and pressure tactics were not the solution. However, unlike in May, Iran’s oil shipments to Asia have already all but ended due to the effectiveness of a US naval blockade of Iranian ports, driving the cost of those cargoes to the highest levels in years.
Last week, Iran’s central bank governor, Abdolnaser Hemmati, admitted his country’s crude exports had “virtually stopped” due to the US blockade. The White House believes the Iranian economy is as a result once again on the brink of collapse due to hyperinflation and lack of foreign exchange income caused by the US blockade of oil exports. The rial was trading at 1.992 million per dollar on the unregulated market on Monday, down 4.5% since the US president announced a “crushing economic operation” against Tehran last week.
But Iran has been under some kind of US economic maximum pressure campaign for more than 20 years and so far survived. Iran’s security chief, Mohsen Rezaei, said Tehran would respond with an “earthquake-like” retaliation if Washington proceeded with the proposed measures. He also warned Iran’s Gulf neighbours against joining the US sanctions campaign.
Shipping through the strait remained severely disrupted over the weekend, putting further pressure on global energy markets. Iran’s foreign minister, Abbas Araghchi, dismissed the expected sanctions as a sign of US desperation, arguing that the measures would fail to defeat Tehran. He said the US had shifted from military operations to what he described as “the same old plans”.
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