SAN DIEGO, Calif. — By Jose E. Navarro, The Navarro Report | September 25, 2026
Chinese President Xi Jinping wrapped a three-day state visit to Washington on Friday with no reported breakthrough on Iran. President Trump said the two leaders discussed the war; Xi said only that he supports a return to the interim agreement that collapsed shortly after its announcement in June. For a Treasury campaign designed to isolate Tehran economically, Beijing’s silence is the most significant number on the page.
That campaign, Operation Economic Outcast, is barely a month old. Treasury Secretary Scott Bessent announced it on August 24, promising to sever Iran’s remaining financial lifelines: digital assets, technology, gold, aviation and shipping. The first round sanctioned 60 entities, vessels and individuals in places from the United Arab Emirates to Hong Kong, Singapore and Switzerland. Bessent has said new secondary sanctions will follow roughly every week, with banks first.
The instrument is the dollar. Secondary sanctions do not ask foreign banks to obey American law; they force a choice between Iranian business and access to U.S. correspondent banking. Treasury has proposed cutting the UAE branches of Egypt’s Banque Misr off from that access after concluding they processed about $1.8 billion for companies potentially tied to Iranian shadow banking. It designated Russia’s VTB Bank for helping Iran evade sanctions. The European Union has formally joined the effort.
I read this campaign the way I read any control environment: who carries the cost of compliance, and is anyone measuring it? Washington’s ledger reports designations. It does not report the other column. When a bank cannot predict which Iran-related payment Treasury will later call a lifeline, the pragmatic response is to refuse them all. Analysts studying Central Asia warn of exactly this over-compliance, with banks dropping perfectly legal transactions because guessing wrong is existential. Add higher freight and insurance rates, longer transit times and hours of legal review, and the bill lands on ordinary importers, exporters and insurers that never touched a sanctioned entity. I could find no public estimate of that cost.
The pressure on Iran is evident. President Masoud Pezeshkian has said Iranian trade has fallen nearly 35 percent under sanctions and the naval blockade, and annual inflation reached 66 percent in July. But economic pain is not political compliance. Six months into the war, Tehran has not retreated and still treats the Strait of Hormuz as leverage.
China is where the campaign meets its limit. Reuters estimated Chinese imports of Iranian crude at about 534,000 barrels a day in August, down from a 1.6 million peak earlier this year, yet independent refiners keep buying, often through non-dollar channels. Washington has so far spared major Chinese banks. Treasury has signaled that China is not exempt, but a state dinner for Xi and a newly extended trade truce make that threat look theoretical.
Meanwhile, the costs come home. Hormuz normally carries about a fifth of global petroleum consumption and roughly a third of internationally traded fertilizer. Brent rose above $90 a barrel at the end of August, and U.S. gasoline sits above $4 a gallon, about a dollar higher than a year ago, with midterm elections on November 3. Sanctions did not close the strait, but any honest accounting of economic warfare must include what the war around it costs American households.
The slowest-moving cost is the one Treasury may like least. The dollar’s share of global reserves rose to 57.1 percent in the first quarter, according to the IMF, partly because of the conflict. Yet OMFIF’s 2026 survey of public investors found, for the first time, more reserve managers planning to cut dollar holdings over the next decade than to raise them. Eighty-two percent of central banks now hold physical gold, and a net 30 percent plan to add more. Every sanction that proves the dollar’s reach also gives a reason to hold something else. Financial power depreciates with use.
Consider what a controller would demand before signing off on a program of this size. First, a running count of institutions designated and institutions merely deterred, because the second number is invisible in press releases. Second, a compliance-cost estimate for American banks, shippers and insurers, who must screen every counterparty against a list that changes weekly. Third, a defined exit: what Iranian behavior ends the campaign, and who certifies it? A sanctions regime without a stated off-ramp is not a strategy; it is an open-ended liability. The June memorandum that briefly paired ceasefire talks with sanctions relief shows an off-ramp can be written. It also shows how quickly one can close.
A program this large deserves what any large program receives: a cost-benefit statement. How many banks have de-risked entire regions? How many lawful transactions have been blocked? What has compliance cost American firms? Until Treasury answers, “economic D-Day” is a slogan without an audit trail, and Congress should say so before the next weekly announcement arrives.
Human-Directed AI Journalism
This article was produced under a human-directed AI journalism model: research, structure, editorial judgment, and final approval by Jose E. Navarro, MBA; drafted with AI assistance. The Navarro Report | navarro-report.com | jose@navarro-report.com
About the author: Jose E. Navarro is a financial controller and public finance analyst with 20+ years in public finance, nonprofit management, and government contract compliance.