Iran sanctions: How to make an outcast out of a pariah

Iran has long been an outcast in the eyes of the global community, dealing with sanctions for decades. The United States has imposed sanctions on various aspects of Iran's economy, including its banking system, shipping companies, oil industry, and military. The recent announcement of "Operation Economic Outcast" by US officials does not seem to be as impactful as previously suggested.

Justin Wolfers, an economics professor at the University of Michigan, noted that the announcement mainly serves as a prelude to future actions. Iran has been cut off from the global financial system, facing high inflation and a scarcity of basic necessities. Experts agree that the sanctions have diminishing returns, as the country has already been an economic pariah for half a century.

US officials believe that increasing pressure through Operation Economic Outcast, which includes targeting more than 60 entities, threatening sanctions on countries dealing with Iran, and forcing the closure of Iran's Bank Melli branches, may lead to the regime's downfall or at least initiate a much-needed diplomatic breakthrough.

However, US officials are hesitant to go further and impose secondary sanctions on Chinese banks, as they do not want to cross a red line. Treasury Secretary Scott Bessent stated that "no one is above the reach of US sanctions," but stopped short of taking any action. This cautious approach suggests that political will is a significant concern for US officials.

Ed Mills, a Washington policy analyst at Raymond James, believes that while Operation Economic Outcast may incrementally heighten the pressure on Iran, it will likely involve targeting entities in other countries if they are found to be aiding Iran.