It is not easy to choke a nation and not choke the world.

QUICK READ

• Shift from rules to power
  Sanctions on Iran reflect a structural move from multilateral legitimacy to unilateral enforcement, where one state can impose global compliance without collective approval.

• Finance as a coercive weapon
  Control over the dollar system and financial networks enables indirect but powerful economic pressure, forcing even non US entities to comply through fear of exclusion.

• Sustained economic attrition
  Iran’s economy has faced prolonged contraction, high inflation, currency collapse, and weakened industrial capacity, indicating systemic pressure rather than temporary disruption.

• Adaptation, not submission
  Sanctions have pushed Iran toward informal trade, alternative partnerships, and asymmetric strategies, altering behaviour but not achieving decisive policy change.

• Global spillover and systemic risk
  Economic warfare generates feedback effects, energy shocks, inflation, and gradual fragmentation of the global financial system, exposing limits of coercive power.

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APRIL 2026

Policing the World, Choking a Nation: The Long Journey of Economic Warfare Against Iran

The twentieth century promised a transition from coercion to consent in international affairs. Empires receded, multilateral institutions expanded, and legitimacy was meant to replace force as the organising principle of global order.

That promise did not collapse, it was reconfigured.

Power migrated from visible instruments of war to the embedded circuits of finance and trade.

In that migration, the United States acquired an ability that no empire historically possessed, the capacity to regulate access to the global economic bloodstream.

The prolonged economic campaign against Iran is not an isolated geopolitical dispute. It is a demonstration of how structural power now operates. What is at stake is not merely Iran’s economic survival, but the credibility and durability of the global economic system itself.

“United States acquired an ability that no empire historically possessed

The trajectory of sanctions against Iran reflects a broader historical shift from multilateral legitimacy to unilateral enforcement.

In the immediate post-world war decades, sanctions derived authority from collective approval, particularly through the United Nations Security Council.

This ensured at least a nominal alignment between power and procedure. The Iranian case initially followed a different path.

From Multilateral Legitimacy to Unilateral Enforcement

After the 1979 revolution, the United States froze Iranian assets and progressively escalated restrictions. The designation of Iran as a state sponsor of terrorism in 1984 institutionalised this hostility.

The structural break came with the 1996 Iran Libya Sanctions Act, which introduced secondary sanctions. These measures extended beyond Iran to penalise third parties engaging with it.

This marked a decisive shift. Sanctions were no longer instruments of collective pressure; they became tools of extraterritorial enforcement.

A temporary convergence reappeared between 2006 and 2015, when sanctions aligned with UN frameworks during negotiations that culminated in the Joint Comprehensive Plan of Action (JCPoA). That convergence proved fragile.

The unilateral withdrawal of the United States from the agreement in 2018, followed by the reimposition of sanctions, reasserted a singular centre of authority. The evolution is clear. Legitimacy receded, enforcement consolidated.

Financial Architecture as an Instrument of Control

The effectiveness of this system rests on the architecture of global finance.

The dominance of the US dollar is not incidental, it is foundational.

Approximately 60 percent of global foreign exchange reserves are held in dollars, and a majority of international trade is invoiced in the same currency.

Financial messaging systems function as the connective tissue of this order.

When Iranian banks were disconnected from SWIFT in 2012, the consequences were immediate and severe. Oil exports, which stood at roughly 2.5 million barrels per day, fell to nearly 1 million.

“The dominance of the US dollar is not incidental, it is foundational

By 2019, under renewed sanctions, exports declined further, dropping below 500,000 barrels per day.

These figures are not descriptive, they are causal. They demonstrate that control over financial infrastructure translates directly into control over economic outcomes.

Secondary sanctions amplify this mechanism. Firms and financial institutions across Europe, India, and East Asia are not legally subordinate to US jurisdiction, yet they comply.

The reason is structural compulsion. Exclusion from dollar clearing systems or loss of access to US markets carries costs that outweigh the benefits of engagement with Iran.

In a deeply interconnected economy, participation becomes conditional.

This is coercion embedded within interdependence.

Economic Attrition and Strategic Adaptation

The macroeconomic impact on Iran has been both measurable and sustained. Between 2018 and 2019, the economy contracted by nearly 6 percent. Inflation has repeatedly exceeded 50 percent, eroding purchasing power and destabilising household consumption.

The Iranian rial has depreciated by close to 90 percent against the dollar over a decade, reflecting both external pressure and internal imbalance.

Oil revenues, once the fiscal backbone of the state, have been severely constrained. By the early 2020s, exports continued through opaque channels, often at discounted rates and mediated by intermediaries.

These outcomes are not temporary disruptions. They represent structural compression.

Industrial production has weakened due to restricted access to intermediate goods and technology. Youth unemployment has remained persistently high, reflecting both demographic pressure and limited private sector expansion.

Poverty has expanded, not as a sudden shock, but as a cumulative process. The intent of sanctions is often framed as behavioural change. The evidence in this case indicates systemic attrition.

The humanitarian dimension underscores the indirect nature of this attrition.

Sanctions regimes formally exempt essential goods such as food and medicine. In practice, financial restrictions obstruct even permitted transactions. Banks avoid exposure to risk, insurers withdraw coverage, and logistics chains fragment.

Following the 2018 sanctions, European pharmaceutical exports to Iran declined sharply. Shortages of critical medicines were reported, including treatments for cancer and rare conditions such as epidermolysis bullosa.

“The humanitarian dimension underscores the indirect nature of this attrition

These are not incidental failures. They are predictable consequences of over compliance within a risk averse financial ecosystem.

Infrastructure degradation has followed a similar pattern. The aviation sector has struggled to maintain ageing fleets due to restricted access to spare parts. Energy infrastructure has faced delays in modernisation, reducing efficiency and increasing vulnerability.

Economic warfare rarely produces dramatic humanitarian collapse. It operates through incremental deprivation, where absence replaces visibility.

Sanctions, however, do not produce passivity. They induce adaptation.

Iran has responded by reconfiguring its economic and strategic posture. Barter arrangements with major partners such as China and Russia have partially offset restrictions on formal trade.

“Sanctions, however, do not produce passivity. They induce adaptation

Informal financial networks have substituted for regulated banking channels. Domestic production has been prioritised under a doctrine of economic self-reliance, although with mixed efficiency outcomes.

Strategically, Iran has avoided direct confrontation with superior military power. Instead, it has invested in asymmetric capabilities.

Regional networks, including non-state actors, have extended its influence beyond conventional means. With a defence budget significantly smaller than that of the United States, Iran has leveraged cost asymmetry. This is not an aberration; it is a rational response to structural pressure.

Sanctions have not eliminated capacity; they have transformed its expression.

Systemic Spillover and the Limits of Coercive Power

The events surrounding the Strait of Hormuz in 2026 illustrate the limits of containment. This narrow passage facilitates nearly one fifth of global oil trade.

Disruptions, whether actual or anticipated, triggered a sharp increase in oil prices, estimated between 35 and 40 percent. Insurance costs for shipping escalated, and energy markets experienced immediate volatility. For energy importing regions in Europe and Asia, the consequences were direct. Fuel prices rose, inflationary pressures intensified, and supply chains absorbed additional strain.

This episode demonstrates a critical point.

Economic warfare cannot be geographically contained within an interconnected system. Pressure applied at one node propagates across the network. Energy markets transmit shocks rapidly. Higher input costs affect manufacturing, transportation, and agriculture.

Emerging economies face currency depreciation due to increased import bills, while advanced economies confront inflation.

“Economic warfare cannot be geographically contained within an interconnected system

Institutions such as the International Monetary Fund and the World Bank have repeatedly warned of stagflation risks under such conditions.

The contradiction is inherent. The same interdependence that enables coercion ensures that its consequences are distributed.

A useful lens to interpret this dynamic is the framework of complex interdependence within political economy. This framework posits that states are embedded in networks of economic and institutional relationships that constrain unilateral action while enabling influence.

In theory, interdependence reduces the likelihood of conflict by raising the cost of disruption. In practice, it creates asymmetries that can be exploited.

“The use of sanctions as a primary instrument of policy introduces incentives for diversification

The United States occupies a central position within this network, particularly through control over currency and financial infrastructure. This centrality allows it to impose costs on others without equivalent exposure.

However, complex interdependence also implies feedback effects. Actions taken within the system generate responses that alter its structure.

The use of sanctions as a primary instrument of policy introduces incentives for diversification.

States seek to reduce vulnerability by developing alternative payment systems, increasing reserves in non-dollar assets, and expanding bilateral trade arrangements. The framework clarifies both the source of US leverage and the conditions under which that leverage may erode.

Interpretations of the Iranian case diverge along two lines.

One perspective views sanction as an effective non-military tool that constrains adversarial behaviour while avoiding direct conflict. Proponents argue that economic pressure limits resources available for destabilising activities and signals resolve without escalation.

The opposing perspective emphasises unintended consequences. Prolonged sanctions can entrench political structures by externalising blame, weaken moderate constituencies, and incentivise alternative alliances.

Second order effects are particularly significant.

The proliferation of parallel financial mechanisms reduces the transparency of global transactions. Informal networks expand, complicating regulation and oversight.

The credibility of international institutions is affected when rules appear subordinate to power. Over time, this can lead to fragmentation of the global economic system into competing blocs.

These outcomes are not immediate, but they are cumulative. They represent a gradual reconfiguration rather than a sudden rupture.

“The credibility of international institutions is affected when rules appear subordinate to power

At its core, the issue reflects a philosophical tension between legitimacy and coercion.

Legitimacy derives from shared norms, procedures, and consent.

Coercion derives from the capacity to impose costs.

A stable international order requires a balance between the two. When coercion dominates, compliance may increase in the short term, but trust erodes.

The Iranian case illustrates this imbalance. The persistence of sanctions over four decades, with limited success in altering core political behaviour, raises questions about the efficacy of coercion absent legitimacy.

This tension extends beyond a single country. It touches on a broader civilisational question.

Can an interconnected global system sustain itself if access is conditional on alignment with a single centre of power.

Or does such a system inevitably fragment as actors seek autonomy. The answer will shape the future of globalisation itself.

Big Picture

The prolonged economic campaign against Iran demonstrates the operational logic and structural limits of financial coercion.

First, the mechanism is effective in the short to medium term. Control over currency and financial infrastructure allows the imposition of significant economic costs.

Evidence from Iran shows sustained contraction, high inflation, currency depreciation, and constrained state revenues.

Second, the impact extends beyond the target. Energy market disruptions, particularly in critical chokepoints such as the Strait of Hormuz, transmit shocks globally.

Inflationary pressures and supply chain disruptions affect both advanced and emerging economies.

Third, humanitarian effects are indirect but substantial. Financial restrictions impede access to essential goods despite formal exemptions.

This generates incremental crises that are difficult to quantify but significant in aggregate.

Fourth, adaptation is inevitable. Targeted states develop alternative trade mechanisms, informal financial channels, and asymmetric strategies. These adaptations reduce the long-term effectiveness of sanctions.

Fifth, systemic implications are emerging. Increased reliance on unilateral sanctions accelerates efforts to diversify away from dollar centric systems.

Parallel financial architectures are under development, indicating gradual fragmentation.

Risk assessment indicates three key trajectories.

·        Continued reliance on economic warfare may yield diminishing returns as adaptation increases.

·        Escalation in critical regions such as the Gulf can produce global economic shocks.

·        Erosion of institutional legitimacy may weaken the stability of the broader system.

Policy consideration should focus on recalibrating the balance between coercion and legitimacy. Multilateral frameworks, even if slower, provide greater durability.

Overextension of financial power risks undermining the very system that enables it.

The central insight is clear.

Economic warfare is not an insulated instrument. 

It is a systemic force with global feedback loops.