US tightens Iran sanctions on shadow economy, but experts doubt strategic impact

On August 24, Treasury Secretary Scott Bessent announced a new round of American economic pressure on Iran, this time aimed not at the country's formal institutions but at the shadow networks that have kept money and goods flowing across borders despite years of restrictions. The United States would target five specific channels: digital assets, technology, gold, aviation, and shipping. Bessent's warning was direct: any foreign company or intermediary caught moving Iranian money would be cut off from the dollar-based financial system. The countdown, he said, had begun.

This represents a shift in strategy. Rather than simply adding more names to the sanctions list, Washington is now trying to make it expensive and risky for the international middlemen—the exchange houses, trading partners, and financial intermediaries—who have become essential to keeping Iran's economy functioning. The Treasury announced measures against roughly 60 individuals, entities, and vessels. But notably, it stopped short of targeting major Chinese banks, a signal that even as the United States tightens the screws, there are limits to how far it will push against Iran's largest remaining trading partner.

The timing matters. Iran's economy is already under severe strain. Oil shipments to China, the country's main customer, collapsed from 823,000 barrels per day in July to 534,000 in August—down from a peak of 1.58 million earlier in the year. Food prices have risen 128 percent year over year. The currency has deteriorated so badly that Iranians now conduct major transactions in dollars. A building materials seller in Tehran told Deutsche Welle that inflation has become so extreme that simply storing goods in a warehouse can be more profitable than selling them. If he holds inventory for a month, its price may rise more than he would earn by selling it immediately. For a stone-cutting business owner, fulfilling contracts signed weeks earlier has become painful—replacement materials now cost far more, but raising prices beyond a certain point means customers cannot afford to buy.

The human toll is visible in layoffs and shuttered operations. An employee at an Iranian trading company said more than 70 percent of the workforce had been let go in the past six months. The company imported raw materials for personal care products and had relied on exchange houses in the United Arab Emirates to move money. Now, the employee said, no exchange house will work with them. For Iranian businesspeople abroad, the situation has become even more precarious. An Iranian entrepreneur who relocated to Dubai to escape import restrictions said that having an Iranian passport now makes almost every transaction harder. Banks are uncertain whether to keep Iranian accounts open. Residency rules could tighten. In such an environment, he said, running a business becomes nearly impossible.

But analysts question whether additional sanctions will actually change Tehran's behavior. Alireza Salavati, a London-based political economy commentator, argues that Iran is already sanctioned across most major economic sectors. New restrictions are likely to be enforcement actions against existing shadow networks rather than entirely new forms of pressure. The psychological effect—intensifying inflation expectations—may be the primary impact. Salavati also warns that economic pressure could weaken the professional and middle-income groups that traditionally provide space for more moderate politics, potentially deepening polarization instead of encouraging policy shifts.

There is a deeper paradox at work. The more Washington restricts formal financial channels, the stronger the incentive becomes to develop informal ones. Iran has already built complex networks of intermediaries, cryptocurrency transfers, front companies, cash transactions, and unofficial currency markets. Closing one route may make transactions more expensive without necessarily stopping them. Salavati described the broader consequence as likely to be corrosive rather than transformative—the result could be an even larger and less controlled underground economy. The new sanctions may make it harder for Tehran to finance trade and obtain foreign currency. But the immediate burden is falling on companies, workers, and households already dealing with wartime disruption and extreme inflation. Whether American pressure will change the behavior of Iran's leadership remains an open question.