A Global Pressure Tool Redefining Energy Trade and Diplomacy

Secondary sanctions on Iranian oil have become one of the most potent tools in the arsenal of U.S. foreign policy, reshaping global energy markets, redefining international diplomacy, and challenging the norms of economic sovereignty. While primary sanctions prohibit U.S. entities from engaging with Iran, secondary sanctions extend that pressure globally by targeting non-U.S. companies and countries that deal with Iranian oil.

The intent behind secondary sanctions is clear: to isolate Iran economically and deprive it of the revenue that could fund its nuclear program and regional influence operations. By threatening access to the U.S. financial system, Washington pressures foreign firms and governments to cut ties with Iranian oil, even if their own domestic laws permit such trade.

This extraterritorial reach has caused friction with U.S. allies in Europe and Asia. European nations, while often sharing U.S. concerns about Iran’s behavior, have criticized secondary sanctions as an infringement on their economic sovereignty. The creation of INSTEX, a special-purpose vehicle by European countries to facilitate trade with Iran outside the U.S. financial system, was a direct response to these pressures. However, the mechanism struggled to gain traction and was largely symbolic.

For countries like China and India—major importers of Iranian oil—secondary sanctions present a complex balancing act. While both nations value energy security and have longstanding trade relations with Tehran, they are also wary of jeopardizing their financial institutions’ access to U.S. markets. As a result, Iranian oil often flows through opaque channels, involving ship-to-ship transfers, re-flagging of tankers, and other means to evade detection.

The impact on Iran has been severe. Crude oil exports, which once accounted for the majority of state revenue, have plummeted. The Iranian economy has contracted, inflation has soared, and public discontent has increased. Yet, Iran has also adapted, building a “resistance economy,” expanding barter trade, and seeking alternative markets such as Venezuela, Syria, and parts of Africa.

Secondary sanctions have also sparked legal and political debates about the limits of U.S. authority in global commerce. Critics argue that these measures weaponize the dollar-dominated financial system and create a dangerous precedent that could be mimicked by other powers in the future. Supporters counter that such sanctions are necessary to enforce international norms and hold Iran accountable for its actions.

Energy markets, meanwhile, remain sensitive to any policy changes. The possibility of easing or intensifying sanctions affects oil prices, investment decisions, and supply chains globally. Traders and energy firms must constantly monitor geopolitical developments to adjust their strategies accordingly.

In conclusion, secondary sanctions on Iranian oil exemplify the intersection of energy, law, and geopolitics. They are a powerful, controversial, and evolving instrument of pressure that extends far beyond the borders of the United States. As global tensions continue to rise and multipolarity grows, the future effectiveness—and legitimacy—of such measures will remain under scrutiny.