Will potential US secondary sanctions affect Iranian and global aviation?

US Treasury Secretary Scott Bessent has warned that secondary sanctions may be imposed on global air services companies dealing with Iranian airlines, according to a report on Monday. The threat, made during talks with Chinese Vice Premier He Lifeng, states that the US could deny fuel, landing services, ticket sales, and other related support to Iranian airlines, effectively isolating them from the global financial system.

Mr Bessent's remarks follow the Treasury's ongoing Operation Economic Outcast, which aims to cut off Iranian sources of funding worldwide. The sanctions threat comes as Iran operates several airlines, including Iran Air, Mahan Air, and Qeshm Air, which conduct international flights. However, Saj Ahmad, chief analyst at StrategicAero Research, suggests that the impact of such secondary sanctions may be limited due to the small global footprint of Iranian airlines.

Ahmad questions the practicality of enforcing the US demands, as neighboring countries like Pakistan and China, which have strong ties to Iran, are unlikely to comply. He also notes that multiple companies typically provide ground services, making it difficult for any single entity to comply with the US demands.

The increased sanctions come amid the US's ongoing efforts to restrict Iranian funding and isolate the regime, as outlined in Operation Economic Outcast. The Treasury Department has also broadened its secondary sanctions, threatening to cut off US dollar access to institutions that continue to do business with Iran. For Iran, any affected aviation services would further isolate the country's airline operations and leave it heavily reliant on other airlines for air travel.