Iran is searching for ways to keep its economy connected to the world as the United States increases pressure on countries that continue doing business with Tehran. Already weakened by inflation, years of sanctions and falling oil revenue during the war, Iran now faces another challenge after the United Arab Emirates suspended trade relations. Washington is warning other nations that they could face penalties if they refuse to cut financial ties with Iran.
Washington Turns Up the Economic Pressure
The Trump administration’s latest strategy aims to make it increasingly difficult for Iran to trade, receive payments and maintain access to the international financial system. Treasury Secretary Scott Bessent has warned that countries continuing economic relations with Tehran could face secondary U.S. sanctions.
“Those who stand with the United States will reap the rewards of our partnership,” Bessent said while announcing the plan, called “Operation Economic Outcast.” He added, “Those who tether themselves to the Iranian regime should expect to share in the isolation.”
The pressure could be especially damaging because Iran depends heavily on a relatively small number of countries for foreign trade. China, Turkey and the UAE supplied nearly three quarters of Iran’s merchandise imports, while China, Iraq, the UAE and Turkey accounted for more than two thirds of its non-oil exports. Iran traded about $125 billion worth of goods globally in 2024, according to Trade Data Monitor.
Losing the UAE Creates a Major Trade Problem
The UAE has played a particularly important role in Iran’s economy. It was Iran’s largest source of imported goods and served as a major gateway for financial transactions that allowed Iranian companies to send and receive international payments.
The UAE also acted as a re-export center. Foreign companies that did not want to sell directly to Iranian customers could move products through the Emirates instead. Its decision to suspend trade relations therefore removes more than just a source of goods. It also threatens one of the channels Iran has used to stay connected to the wider global economy.
“From Iran’s perspective, the UAE can be replaced, but the Iranians are openly saying it’s not going to happen overnight,” said Alex Vatanka, a senior fellow at the Middle East Institute in Washington.
Finding another country able and willing to perform the same role could become difficult if Washington follows through on its threat to punish countries that help Tehran avoid sanctions.
China Could Decide How Effective the Sanctions Become
Much of the U.S. strategy may depend on China. Beijing is Iran’s largest trading partner and buys the overwhelming majority of Iranian crude oil through trading networks designed to bypass sanctions. China also supplies Iran with important manufactured goods and components.
Unlike some of Iran’s smaller trading partners, China has greater economic power to resist American pressure. However, Beijing also has major economic interests throughout the Persian Gulf and a much broader trade relationship with the United States.
“I don’t see China playing ball by any means,” said David Lubin, a senior research fellow at Chatham House.
China has reduced Iranian energy imports under U.S. pressure before. But former U.S. ambassador Daniel Fried said getting Beijing to go further today could prove much more difficult.
“We will want the Chinese to go a lot farther than they have gone in the past,” Fried said. “But it’s a lot harder now.”
China also has experience supporting heavily sanctioned countries. It has long been North Korea’s most important economic and diplomatic partner, giving Beijing experience maintaining relationships despite international restrictions.
Iran’s Neighbors Face a Difficult Choice
Iran may also try to deepen trade with nearby countries such as Iraq, Turkey and Pakistan. However, those governments have their own economic and security relationships with Washington and may be reluctant to risk U.S. penalties.
Iranian Parliament Speaker Mohammad Bagher Qalibaf visited Iraq around the time the UAE suspended trade. He said one goal was “speeding up efforts to expand joint cooperation among all countries in the region, without foreign interference.”
But the strength of the U.S. dollar and America’s influence over the international financial system give Washington considerable leverage.
“We’re still at a point where if the U.S. wants to hurt you, it will matter,” Vatanka said.
Turkey has particular reason to be cautious. It recently settled a long-running dispute with Washington involving a state-owned bank accused of helping Iran evade sanctions through an oil-for-gold arrangement.
“I really don’t think Turkey would like to become the next country helping Iran to evade sanctions right now,” said Riccardo Gasco, an analyst at the IstanPol think tank in Istanbul.
Pakistan could provide another possible route for goods. Peter Harrell, a visiting scholar at Georgetown University, described how products could arrive at western Pakistani ports before being transported overland into Iran. Yet Pakistan is also trying to balance relations with Washington, Tehran, China and Saudi Arabia, making expanded trade with Iran politically complicated.
The Caspian Offers an Alternative but Not a Quick Solution
Iran is also looking north for new trade routes. With the Strait of Hormuz mostly blocked and shipping in the Black Sea threatened by Russia’s war with Ukraine, Tehran has sought to expand trade through the Caspian Sea.
Russia has rerouted some exports to Iran through Caspian ports such as Astrakhan. But there are limits to how much the two sanctioned economies can offer each other. Agricultural products account for about 80% of their reported trade.
“Both economies are exporting natural resources and have little to offer each other,” said Nikita Smagin, an independent analyst and former Russian state news agency correspondent in Tehran.
Other Caspian countries, including Azerbaijan, Turkmenistan and Kazakhstan, may also be reluctant to dramatically increase their involvement.
Russia and Iran have spent years developing ways to work around international restrictions. Mark Galeotti, executive director of Mayak Intelligence, described the countries as an “axis of the sanctioned,” suggesting they could increase trade in strategic products and goods restricted by sanctions. Still, there are limits to what ordinary trade between the two economies can accomplish.
“Pomegranates and tomatoes only go so far,” Galeotti said.
Iran Faces Fewer Economic Escape Routes
Iran has survived decades of sanctions by relying on regional trade, indirect financial networks and relationships with countries willing to challenge U.S. pressure. The latest American strategy is designed to make those options harder to maintain by forcing Iran’s remaining partners to choose between doing business with Tehran and protecting their access to the U.S. financial system.
The outcome may ultimately depend on how China and Iran’s neighbors respond. If more countries follow the UAE and reduce economic ties, Tehran could find itself increasingly isolated at a time when war, inflation and falling oil revenue are already putting its economy under severe strain. If major partners resist Washington’s demands, however, Iran may still have ways to keep goods, money and oil moving despite the growing pressure.
