How much could Trump's 'economic D-Day' hurt Iran?

Nearly six months following Donald Trump's pledge of a swift victory over Iran, the conflict seems to have reached a stalemate, with the likelihood of a military triumph or negotiated settlement dwindling. In response, Trump has announced an "economic D-Day," under which any nation engaging with Iran would face significant economic repercussions. However, Iran has previously encountered sanctions and has demonstrated a willingness to endure hardship and adjust to substantial economic and military pressure.

The precise details of the forthcoming US economic pressure initiative remain undisclosed, as Treasury Secretary Scott Bessent plans to disclose them during an upcoming news conference on August 24th. In a CNBC interview, Bessent affirmed that the US is prepared to impose sanctions on any entity - be it a friend or foe - believed to be aiding Iran.

Bessent emphasized that the US would "put its full might and force" against such countries, whether or not they transfer funds, purchase Iran's oil, or facilitate sea transfers involving the United States.

Vice-President JD Vance described the sanctions as the "new phase" of the conflict, asserting that economic pressure is currently the most potent tool available to the US. Vance stated that Iran has faced greater pressure than anticipated, and the administration intends to maintain this pressure to achieve its ultimate objective.

Iran has been under intense US sanctions since the inception of the Islamic Republic in 1979, and these sanctions were heightened following the US withdrawal from the Joint Comprehensive Plan of Action (JCPOA) in 2015.

Operation Economic Fury, a two-pronged US strategy encompassing treasury-coordinated sanctions targeting regime financial flows and a naval blockade against Iranian ports, has already been announced. Imran Bayoumi, a geostrategy expert with the Atlantic Council in Washington DC and a former defence department policy adviser, suggested that the latest announcement resulted from mounting frustration over the failure of other options to deliver the desired outcomes.

Bayoumi emphasized that this is merely an additional tool the US employs, as it has not yet presented a clear strategy, military or economic, in the conflict.

Michael Parker, an eight-year veteran of the Office of Foreign Assets Control (OFAC) and an expert on economic sanctions, believes that the new strategy aims to broaden the "economic blast radius" of sanctions by targeting third countries that still engage with Iran and rely on the US dollar. Parker pointed out that the US has primarily utilized the threat of secondary sanctions against foreign financial institutions to encourage compliance.

Nevertheless, this unexplored aspect remains largely untapped, focusing on entities that facilitate Iran's circumvention of sanctions.

Iran's capacity to evade sanctions remains a significant concern, as the country has demonstrated agility in utilizing alternative channels, such as shadow vessels for oil transportation or new commercial entities not listed under US sanctions. Sanctions experts contend that Iran's ability to adapt necessitates constant vigilance from enforcement authorities worldwide.

The success of these sanctions will heavily rely on the willingness of targeted countries, including US allies like Turkey and Iraq, as well as China, to comply with American foreign policy objectives.