The Economic Weapon Against Iran: Washington Also Fractures Its Western Alliances

This month, global geopolitical tensions are translating into an intensification of economic-warfare measures, principally in the Middle East and along the transatlantic axis. The conflict between the United States and Iran, now in its eighth month, is seeing Washington harden its sanctions regime, driving a growing aerial and financial isolation of Tehran that weighs heavily on its economy. In parallel, a trade rift is widening between the United States and its traditional allies, with the imposition of new tariffs on Canada and threats of major retaliation against the European Union in response to its "associate member" proposal for Ottawa.

Against this confrontational backdrop, a signal of détente is emerging between the United States and China, which have announced a plan for the reciprocal reduction of tariffs covering $30 billion worth of goods. This upturn remains fragile, set against persistent tensions in the technology sector and threats of US sanctions on importers of Russian oil, including India and China. In Europe, industry is under pressure—steel in particular—while the influx of Chinese hybrid vehicles fuels the spectre of fresh trade-defence measures.

Hardening US Sanctions Isolate Iran

As the Iran–US conflict enters its eighth month, the United States is intensifying its strategy of maximum economic pressure. On 29 September, Washington sanctioned ten entities and individuals based in China, Pakistan, Turkey, Saudi Arabia and Iran, accused of supporting Tehran's military programme under Operation "Economic Outcast" (Al Jazeera English, 29/09). These measures form part of a maximum-pressure strategy targeting the Iranian military programme and its foreign suppliers (Al Jazeera English, 29/09).

These sanctions are having immediate and severe consequences for Iran's connectivity. As early as 24 September, the United Arab Emirates suspended flights by Iranian carriers, a measure swiftly followed by four major airports in Iraq (Baghdad, Najaf, Erbil and Sulaymaniyah) on 25 September (Bloomberg Markets, 24/09; Al Jazeera English, 25/09). Regional airspace is progressively closing, with an Iranian civilian flight even forced to turn back after Turkmenistan refused overflight (FAZ - Aktuell, 24/09). The isolation is financial too: the United Arab Emirates have imposed banking restrictions, notably against Bank Melli (FAZ - Aktuell, 24/09). This economic pressure is having a direct humanitarian impact, triggering a surge in medicine prices and critical shortages in Iran (France24 (anglais), 30/09).

Faced with this stranglehold, Iran is attempting to maintain a diplomatic posture. President Massud Peseschkian said he was prepared to relinquish enriched uranium (FAZ - Aktuell, 25/09). However, Tehran's latest truce proposal concerning the reopening of the Strait of Hormuz was curtly rejected by Washington. The US ambassador to the UN, Mike Waltz, stated that Iran was not negotiating "in good faith," while President Donald Trump believes he can secure "a better deal" by maintaining the naval blockade and economic pressure (The Guardian, 27/09; Al Jazeera English, 27/09). Qatari mediation continues in this tense context, while France has announced the deployment of troops to Saudi Arabia to secure port infrastructure (Daily Maverick, 30/09; FAZ - Aktuell, 24/09).

Trade Fractures Within the Western Bloc

The transatlantic front is marked by an escalation of trade tensions initiated by Washington. On 29 September, the United States enforced a ban on nearly $1 billion of Canadian goods, in retaliation for tariffs imposed by Ottawa (Al Jazeera English, 29/09). The impact was felt immediately in Canadian industry, with steelmaker Stelco announcing the suspension of part of its operations in Hamilton, Ontario (Bloomberg Markets, 28/09).

The situation worsened following a European diplomatic initiative. The proposal by European Commission President Ursula von der Leyen to make Canada the EU's first "associate member" provoked the ire of Donald Trump. On 17 September, he branded the idea "laughable" and "a hostile act," threatening the EU with "very serious tariffs" or a complete halt to trade should the project materialise (The Guardian, 17/09; Der Spiegel - Schlagzeilen, 17/09). Despite the threats, Canadian Prime Minister Mark Carney welcomed the European offer, reaffirming his country's willingness to deepen cooperation with Europe in order to emancipate itself from US influence (The Guardian, 17/09). The French Minister for European Affairs, Benjamin Haddad, stressed that Washington held no veto over the Union's decisions (The Guardian, 17/09).

Contradictory Signals in the Sino-American Relationship

Alongside tensions with its allies, the US administration has sent a signal of détente towards Beijing. On 28 September, the United States and China published a detailed plan to mutually reduce tariffs on roughly $30 billion of imports (Bloomberg Markets, 28/09). This de-escalation gesture, welcomed by Presidents Trump and Xi Jinping (France24 (anglais), 24/09), contrasts with persistent tensions on the technology front.

Indeed, on the same day, Chinese technology stocks hit their lowest level in a year, amid rumours of fresh US sanctions and investigations into purchases of Nvidia chips (Bloomberg Markets, 28/09). Distrust persists, fuelled by Chinese firms' efforts to circumvent sanctions. An investigation by the Independent Anti-Commission (NAKO) revealed that shell companies, including a manufacturer of "smart sex toys," served as fronts to channel Western microelectronics to the Russian defence industry, exposing a flaw in European control mechanisms (EU Observer, 25/09).

Threats to Global Economic Security

US sanctions policy is extending its ramifications beyond Iran. On 17 September, the US House of Representatives passed the Lindsey O. Graham Sanctioning Russia and Iran Act, which authorises the President to impose tariffs of up to 100% on countries importing Russian oil and gas, explicitly targeting India and China (Deccan Chronicle, 17/09). India reacted immediately, warning that such measures would disrupt global energy markets and harm bilateral relations, while reaffirming its determination to protect its energy security (France24 (anglais), 17/09). China, for its part, rejected what it describes as "long-arm jurisdiction," deeming it unacceptable and not authorised by the United Nations Security Council (Deccan Chronicle, 17/09).

In Europe, economic challenges are mounting. The steel sector is in crisis, with exports down 20% and production at a historic low, throttled by Chinese overcapacity, high energy costs and tariff barriers (FT Markets, 01/10). At the same time, the sharp rise in sales of Chinese-made hybrid and plug-in hybrid vehicles is alarming Brussels, which is brandishing the threat of quotas to protect its automotive industry (The Guardian, 24/09). China has warned that the EU's adoption of sweeping tariffs could jeopardise the ongoing trade negotiations (Bloomberg Markets, 30/09). Finally, the Union remains divided over its sanctions policy against Russia, with Latvia having blocked, on 22 September, a proposal to lift measures targeting certain oligarchs, creating a deadlock that threatens the renewal of other sanctions (Süddeutsche Zeitung, 22/09).

To Watch

• Sino-European trade negotiations: Progress in the talks will hinge on the EU's decision whether or not to impose trade-defence measures against Chinese vehicles.
• US sanctions on Russian oil: The enactment and implementation of the Lindsey O. Graham Sanctioning Russia and Iran Act could trigger a major trade and diplomatic crisis with India and China.
• Europe's steel crisis: Sector players will closely monitor any announcement of support or trade-defence measures by the European Commission in the face of Chinese competition and energy costs.
• EU–Canada "associate" status: The continuation of discussions between Brussels and Ottawa could provoke further reactions from Washington and potentially the imposition of the tariffs announced by Donald Trump.