US threatens toughest sanctions yet against Iran: What we know

US Plans Expanded Sanctions on Iran as Diplomatic Efforts Stall

The United States has signaled intentions to impose additional economic restrictions on Iran following a breakdown in negotiations to end the ongoing regional conflict that began in February. Treasury Secretary Scott Bessent stated that the measures would target Iran’s government finances, while President Donald Trump warned of penalties for third countries conducting business with Iranian entities.

These statements build on existing US restrictions, including a naval blockade of Iranian ports aimed at limiting oil exports and designations against companies, brokers, and vessels involved in oil sales. Broader sanctions already cover Iran’s oil, shipping, and financial sectors. The new proposals would extend enforcement to foreign entities that facilitate such transactions.

On August 20, Trump posted on Truth Social that Iran had not pursued a diplomatic agreement and would face “economic warfare and isolation on an unprecedented scale.” He specified that any country permitting its financial institutions, businesses, airports, or government bodies to provide support to Iran would encounter “TREMENDOUS Economic Consequences.” The post listed activities such as oil smuggling, swap lines, cash transfers, exchange houses, ship registries, and front companies as targets for prohibition.

The following day, Bessent told CNBC that the approach combined the existing blockade with “the toughest sanctions in history,” describing the goal as collapsing the Iranian government. He indicated that foreign governments continuing trade with Iran, including oil purchases or ship transport, would face enforcement actions from the US Treasury. Bessent characterized the effort as the “greatest coordinated economic isolation in the history of the world” and urged allies to choose sides.

Iran’s Foreign Ministry spokesman Esmaeil Baghaei responded on social media that the extraterritorial application of sanctions undermined the sovereignty of UN member states. He argued that no country could be compelled to cease commercial relations with Iran and warned of a return to colonial-era practices. Foreign Minister Abbas Araghchi stated that similar past measures had not succeeded, referencing earlier sanctions from 2012.

On August 23, Mohsen Rezaei, secretary of Iran’s Supreme National Security Council, told state broadcaster IRIB that any country participating in the restrictions would be viewed as an adversary. He outlined a sequence beginning with diplomatic appeals, followed by strikes on the interests of non-compliant states if talks failed. Rezaei warned that participation could halt all oil exports from the Gulf region, including routes bypassing the Strait of Hormuz.

Iran has conducted strikes on US military sites and infrastructure in the region since February 28. Facilities in Qatar, Kuwait, Saudi Arabia, Bahrain, and the United Arab Emirates have sustained damage, primarily from debris of intercepted projectiles launched by Iran or affiliated groups. The United States maintains military installations and personnel in multiple Gulf states and Jordan.

Analyst Hamidreza Azizi noted that Iranian statements appeared aimed at deterring participation through preemptive signaling and the threat of disproportionate responses. Historical US sanctions on Iran have been linked by US officials to concerns over Iran’s nuclear enrichment activities, documented by International Atomic Energy Agency reports showing uranium levels above JCPOA thresholds, as well as Iran’s ballistic missile program and material support for armed groups including Hezbollah, Hamas, and the Houthis.

China’s Foreign Ministry stated on August 20 that sanctions and pressure do not resolve underlying issues and called for diplomatic channels. Gulf states, which neighbor Iran and host US forces, face competing pressures. The UAE imposed an indefinite trade embargo on Iran last week after accusing Iranian forces of launching ballistic missiles, an allegation denied by Tehran. Analysts have observed that several Gulf governments have expressed concern over potential instability from any sudden change in Iran’s government structure.

Russia and China remain Iran’s primary trading partners outside Western systems. China accounted for approximately 80 percent of Iran’s seaborne oil exports in 2025, according to Kpler data, with ship-to-ship transfers observed off Malaysia. Russia has developed commercial and military supply lines with Iran, including receipt of Shahed drones. Georgetown University professor Paul Musgrave noted that US leverage over these sectors is constrained because many Chinese refineries and Russian entities have limited exposure to the US financial system. Chatham House researcher Yu Jie indicated that any US action against major Chinese banks would occur against the backdrop of efforts to maintain a temporary US-China trade truce.

The conflict has involved Iranian strikes on regional energy infrastructure and US positions, alongside the US naval presence in the Gulf. Iranian officials have maintained that their nuclear program serves civilian purposes and that missile development is defensive. US policy has consistently tied sanctions relief to verifiable limits on enrichment and cessation of support for designated groups.

Further details on specific designations or implementation timelines have not been released by the Treasury Department.