Executive Intelligence Snapshot

Operation Economic Outcast represents an evolution in the US strategy of coercion towards Iran: through secondary sanctions, pressure on oil and financial flows, and the targeting of intermediary networks, Washington aims to constrain Tehran’s economic capacity and, indirectly, limit Sino-Iranian integration.

The growing exposure of Chinese interests, however, introduces a second theatre of strategic competition, in which Beijing is called upon to balance the protection of its energy supplies and alternative financial infrastructure against the risk of US sanctions, increasing the likelihood of a gradual economic and regulatory escalation between the two powers.

Information Context

On 19 August 2026, Donald Trump announced on Truth what he described as the most extensive economic pressure operation ever undertaken against a country, Operation Economic Outcast, directed against Iran. The US Treasury Department will no longer target solely the Islamic Republic, but also any entity supporting its economy, through a system of secondary sanctions. The financial coercion strategy stems from the inability to achieve a decisive military victory, six months after the beginning of the offensive.

The objective is to disrupt Iranian financial and oil flows, with direct repercussions for Chinese strategic interests as well. Beijing has responded through Foreign Ministry spokesperson Lin Jian, describing US secondary sanctions as illegal and unilateral, as they are not authorised by the UN Security Council. Jian reiterated that Sino-Iranian energy and trade cooperation complies with international law and that China will take all necessary measures to safeguard its national interests and its companies.

Chinese involvement is not accidental: Beijing absorbs approximately 80–90% of Iranian oil exports. For this reason, the Trump administration has placed on the blacklist several private Chinese and Hong Kong-based companies active in shipping and refining, while for the time being avoiding China’s major state-owned banks, in order to limit the risk of destabilising the global financial system.

Pressure on Beijing is also part of a broader intensification of the US-China economic confrontation. During the same weeks as Operation Economic Outcast, the White House advanced a new tariff package targeting China. Following the conclusion of investigations under Section 301 of the US Trade Act, concerning Chinese overcapacity and the export of goods at below-market prices, Washington formally put forward the possibility of an additional 7.5% tariff on Chinese goods.

The measure would be added to targeted tariffs already ranging between 10% and 12.5%, introduced to counter alleged violations in supply chains involving forced labour, as well as to the punitive sanctions of 50% envisaged for goods originating from countries providing Iran with assistance or commercial and military components.

Potential Chinese countermeasures, ranging from restrictions on critical mineral exports to commercial retaliation, are particularly significant because they come only weeks before the official meeting between Donald Trump and Xi Jinping, reportedly under consideration at the White House for 24 September 2026.

Analysis

Operation Economic Outcast is not merely a sanctions package targeting Iran, but a global secondary financial coercion operation. For Beijing, it represents a direct challenge to its security and development architecture.

The first vulnerability concerns supply security. China is the world’s largest crude oil importer and absorbs approximately 80–90% of Iranian oil exports, primarily destined for independent Chinese refineries, the so-called teapots in Shandong. These refineries purchase crude at heavily discounted prices using yuan or barter arrangements, thereby reducing their exposure to the US dollar.

On the financial front, Iran and China have developed a parallel circuit to circumvent Tehran’s exclusion from SWIFT and from dollar- and euro-denominated payments. Iran uses CIPS (Cross-Border Interbank Payment System) to settle transactions in yuan, but Iran’s major state-owned banks predominantly access the system indirectly, through intermediaries, shell companies in Hong Kong, smaller Chinese financial institutions and dedicated banks such as Kunlun Bank. These are precisely the channels now being targeted by the “economic D-Day”.

Iran’s entry into BRICS and the Shanghai Cooperation Organisation (SCO) has also accelerated negotiations to directly connect Iran’s SEPAM banking network to China’s alternative CIPS system and Russia’s SPFS.

Integration nevertheless remains partial for two reasons. The first is Beijing’s caution: direct access by Iran’s most heavily sanctioned banks is restricted in order to shield Chinese intermediaries with significant international exposure from the risk of US secondary sanctions. Any institution providing Tehran with a financial lifeline risks exclusion from the dollar payment system, the US interbank market and SWIFT.

So far, Washington has primarily targeted intermediary companies, but the threat of sanctioning major Chinese state-owned banks involved in payments has increased pressure on Beijing. Approximately 80% of the interbank messaging used globally by CIPS still relies on the ISO/SWIFT standard; consequently, when handling sensitive flows to Tehran, China resorts to dedicated data transmission routes.

The financial dimension therefore intersects with the geopolitical one. The Trump strategy seeks to weaken the alternative international order that Beijing is building with its Middle Eastern partners and BRICS, while simultaneously using pressure on Iran as a negotiating lever vis-à-vis China ahead of the forthcoming bilateral summit.

A central element of this multipolar order is de-dollarisation. The Sino-Iranian circuit does not rely solely on CIPS (and therefore the yuan), but also on gold and digital assets. By targeting the cryptocurrency, gold and alternative clearing channels used by Iran to trade with China, Washington demonstrates that it can also intercept China’s informal commercial networks.

In 2021, China and Iran signed a twenty-five-year strategic cooperation agreement theoretically valued at $400 billion. A complete erosion of Iran’s economic capacity would render Tehran financially inactive, reducing the value of Chinese infrastructure investments and strategic presence linked to the Belt and Road Initiative (BRI) in the western Middle East.

From this perspective, several analysts argued following the attack on Iran in February 2026 that, while Israel’s objective was the destabilisation of the revolutionary leadership, the United States’ objective could have been Beijing, by then deeply embedded in the Persian Gulf.

The use of Iranian sanctions as a tool of pressure against China is not, however, new. In 2021, in order to counter US long-arm jurisdiction, Beijing developed a legal response based on two pillars.

The first is the Blocking Rules issued by the Ministry of Commerce, which allow the Chinese government to order companies operating in China not to comply with foreign restrictions deemed unjustified, such as those preventing trade with Iran.

The second is the Anti-Foreign Sanctions Law (AFSL), adopted by the Standing Committee of the National People’s Congress. Article 12 prohibits individuals and organisations operating in China from implementing foreign “discriminatory restrictive measures”. If a company applies US sanctions and causes harm to a Chinese partner, the latter may therefore bring proceedings before Chinese courts to seek compensation.

The law remained for a long time primarily a deterrent and political instrument, but acquired an enforcement framework in March 2025, when the State Council issued the Provisions for Implementation of the AFSL, providing courts and authorities with protocols for intervening against entities that comply with foreign sanctions measures.

With the escalation of sanctions on Iran, the blockade of the shadow fleet and pressure on Chinese teapot refineries, China’s Ministry of Commerce has begun issuing binding blocking orders, prohibiting Chinese banks, insurers and logistics operators from complying with US secondary sanctions against Iranian crude oil operators.

The “economic D-Day” and the extension of the maritime-financial blockade therefore represent the point of convergence between US logistical and military constraints in the Middle East and the competition for global hegemony with China.

Conclusion

Achieving victory against Iran solely through direct air and naval power entails an unsustainable weapons burn rate over the long term, particularly given the risk of a parallel conflict in the Indo-Pacific. Employing economic pressure allows Washington to freeze Iran’s warfighting capacity without having to expend sustained, high-cost military resources.

This is compounded by the increasingly intense confrontation with the Chinese giant. The US Treasury seeks to demonstrate that bilateral payment channels not based on the dollar — such as CIPS clearing mechanisms or the use of the yuan — remain vulnerable to sanctions extraterritoriality and the interception capabilities of US financial intelligence.

In this scenario, Iran’s economic resilience depends almost entirely on the scope and determination of the Chinese response.