Yves here. Please welcome Reza Assadi, who writes about geopolitics and in particular, Iran and the emerging multipolar order. Below he contends that the US sanctions regime against Iran (and Russia) has not weakened, but has actually stopped functioning
Secondary sanctions had worked because they had secured compliance from many key economies through the ability to restrict dollar-payment and US market access. That coalition has dissolved on two fronts at once. Structurally, China has now become the primary trading partner of over 120 countries. The success in developing bi-lateral payment mechanisms has lowered the cost of defiance, which was widespread outside the Collective West during the Russia sanctions.
Morally, not only are these US-led sanctions illegal by lacking UN authorization, but the Gaza genocide, the implicit US approval of Israel assassinating negotiators to undermine peace initiatives, persistent Israel violations of Lebanon ceasefires, the indefensible launch of the war on Iran, the US is more and more obviously becoming, in the words of Douglas Macgregor, a leper colony. America’s coercive power is fading because it is no longer powerful enough to bully alone and bystanders are increasingly refusing to participate.
By Reza Assadi, who writes on the geopolitics of the post-unipolar world, with particular focus on Iran and the multipolar transition. He also runs an AI company focused on bridging the trust gap, and some of his writing connects: how AI is reshaping the multipolar order, what it means for sovereignty, power, and what remains human. Jointly published with his site, rezaassadi.substack.com
Most children who have spent time in a schoolyard know how a bully works. He is not stronger than everyone around him. He is stronger than any single child who stands up alone, while the rest of the yard stands by in silent support, understanding that intervening has a cost most are not willing to pay. The bully’s strength is his ability to reduce every child to selfish survival. Coordination against him is prevented; coordination with him is enforced instead, one at a time. In essence, his power is borrowed from the bystanders, and a child who has stood up to a bully knows there comes a moment when the coalition is no longer tenable: the bully crosses a line that makes silence feel like complicity, one child moves, then another, and the bully discovers that his power was illusory.
This mechanism runs at every scale, from the schoolyard to the boardroom to statecraft. The sanctions regime that the United States built against Iran over forty-seven years, against Russia since 2014, against Venezuela since the early 2000s, against Cuba since 1960, was never solely dependent on American will. It was political, a coalition held together by a shared willingness to enforce and by the implicit agreement among bystanders that siding with the target would cost more than siding with Washington. The coalition that held for decades no longer holds. The text of the sanctions has not changed. The coalition simply walked away.
The Coalition Theory of Sanctions
Primary sanctions bind those who impose them. American primary sanctions prevent American banks, American firms, American citizens from transacting with the target. Their effect is bounded by the size of the American economy and the attractiveness of the American market. Secondary sanctions are the instrument that converted the American sanctions regime from a bilateral embargo into a global quarantine, coercing the rest of the schoolyard to join in. They threaten foreign banks and foreign firms with exclusion from the dollar system and loss of access to the American market if they transact with the target. They are, in effect, a tax on refusal to obey American foreign policy, payable by third parties.
The mechanism works only as long as the coalition holds. The threatened punishment has to be larger than the expected gain. When the dollar system is the only global payment rail at scale, when the American market is the largest single buyer for most exporting economies, when you have American military bases as a warden, when US aid is required to keep a fragile economy afloat, the coalition is by default on Washington’s side. Refuse and lose everything; comply and lose one trading partner. Every bank’s general counsel reaches the same conclusion, and the target is isolated not by American power alone but by the rational self-interest of every intermediary Washington has enlisted.
The 2012 to 2015 Iran sanctions worked because this coalition held. India, Japan, and Korea all cut purchases. The European Union imposed its own embargo in July 2012, and Iranian crude oil exports to Europe fell from roughly 20 billion dollars in 2011 to near zero by 2013. Iranian oil exports overall dropped from 2.5 million barrels per day to around 1 million. Total oil export revenue was cut by more than half between 2011 and 2013. The Iranian economy contracted 7.4 percent in 2012. Inflation reached 40 percent by 2013. The pain was real because the enforcement was collective, and the enforcement was collective because no participant saw a way to refuse that was not worse than complying.
The JCPOA was not signed because Iran had been broken. Iran would have absorbed the pain. It was signed because a convergence of interests made the deal worth more than the status quo: Obama’s legacy, European commercial reopening, Russian and Chinese interest in pulling Iran into the architecture they were building, Iranian sanctions relief on terms that preserved sovereignty.
The Russian Case
The cleanest currently running test is Russia. After February 2022, Washington and its allies imposed the most extensive sanctions regime in modern history against an economy of Russia’s size. The ruble plunged sharply, the central bank’s reserves were frozen, Russian banks were cut from SWIFT, and secondary sanctions were threatened against any third country that helped Russia evade. For a few months it looked like the regime might produce the coercive effect Washington had designed it for. However, by summer 2022 the ruble had stabilised, faster than even Russian policymakers had projected, and the effect did not materialise.
The Cross-Border Interbank Payment System that Beijing had built as an alternative to SWIFT processed 24 trillion dollars in 2024, a 43 percent increase on the prior year. A December 2023 American executive order threatened Chinese banks with secondary sanctions and produced a measurable slowdown in the first half of 2024. Some Chinese regional banks suspended Russian transactions; processing time rose to 18 days; Chinese exports to Russia fell 16 percent year-on-year in March 2024. Then the effect faded. Russia-China trade recovered. The parallel import networks reconstituted. By the end of 2024 the architecture was running on substitutes Washington cannot reach.
The yuan and ruble had displaced the dollar and euro across Russian trade. The yuan share of transactions on the Moscow Exchange rose from 3 percent at the start of 2022 to 54 percent by May 2024, and after American sanctions hit the Moscow Exchange itself in summer 2024, it reached 99.8 percent. Russia-China bilateral trade now settles almost entirely in yuan and rubles; Russia’s finance minister put the figure at 99.1 percent in late 2025.
Iran had been running this experiment for forty-seven years. When the first wave of Western sanctions hit Russia in March 2014, Moscow looked at what Tehran had built and started adapting it. The People’s Bank of China and the Russian central bank, in talks since 2010, signed their first yuan swap line in October 2014. Russia began building the System for Transfer of Financial Messages, its answer to SWIFT. It initially had very little volume, as the yuan swap line was used minimally, especially after June 2017 when the US Treasury cut the Bank of Dandong off from the US correspondent banking system over North Korean related transactions, the first time Washington sanctioned a Chinese Bank. Then in 2022, Moscow was further hit, this time with unprecedented sanctions. Some of its banks were cut off from SWIFT, a terrain Iran had been negotiating in for over a decade; BNP was fined nearly $9B in 2014. Iran showed Russia how to move oil through third-party shipping, settle trades in bilateral currencies and gold, route payments through regional banks like the Bank of Kunlun, and keep industrial supply chains running under blockade. What Russia brought when the full shock came in February 2022 was scale. Russian trade volume forced the Chinese payment architecture, which had existed at modest utilization, to operate as a general-purpose rail.
It’s important to note that these sanctions operate at variable geometry based on US interest. Türkiye has continued to buy oil from Russia while selling drones to Ukraine, a situation Washington probably prefers to turn a blind eye to considering Türkiye’s position in NATO. The Biden administration quietly allowed India to continue buying discounted Russian crude through 2022 and 2023 to keep global supply on the market and contain price increases. The Trump administration rolled it back, pressuring India with an additional 25% tariff in August 2025, after which Modi reassured him in October 2025 they would stop; Reliance Industries stopped buying Russian oil in November 2025. Trump lowered the tariffs on India from 50% to 18%, saying Modi agreed to replace Russian oil with Venezuelan oil in February 2026, before reissuing a new 30-day waiver in March 2026 to again stabilise markets six days after launching the war with Iran.
The BRICS Architecture Becomes Operational
The architecture Russia and China had been building around Iran since the JCPOA years now carried three sanctioned economies and increasingly any neutral party that wanted to shield itself from the same type of aggression. The bilateral yuan swap lines between the People’s Bank of China and the Russian central bank, first signed in 2014 and renewed through the 2020s, were the seed. The Cross-Border Interbank Payment System, launched by China in 2015 as a parallel to SWIFT, became the backbone. By 2024 CIPS had direct participants in more than a hundred countries. The BRICS Contingent Reserve Arrangement, in place since 2015 but rarely, if ever, used, and the BRICS Pay initiative, yet to be deployed at scale, are turning what had been bilateral infrastructure into a multilateral layer available to the Global South. This secondary option to settle international payments is on the BRICS agenda this year; some reports suggest a launch before year-end.
Iran joined BRICS on January 1, 2024. It joined the Shanghai Cooperation Organisation as a full member in July 2023. It signed the Comprehensive Strategic Partnership Treaty with Russia in January 2025, a forty-seven-article document ratified by both parliaments by mid-year. The Eurasian Economic Union free trade agreement with Iran entered into force in May 2025. Together they form a system in which a country that wants to trade with Iran can settle bilaterally without touching a dollar, without clearing through a Western bank, without insuring with a Lloyd’s syndicate, and without fearing that compliance with American secondary sanctions is the price of doing business.
The Washington view of sanctions rested on the condition that the United States remained the economic center of gravity that every trading economy had to orient itself around. That condition is gone. In 2000, China was the primary trading partner of ten countries, most of them sanctioned, isolated, or both. By 2012 Chinese total trade had surpassed American total trade. By 2024 China was the largest trading partner of more than 120 countries and among the top three of many more. The American market remains large. It is no longer the center of gravity.
Between 2022 and 2025, Russia, China, and Iran each absorbed and survived the coercive instruments Washington brought against them. Each tested a different pillar of American coercive power. Each failed.
The dollar remains dominant in reserves at 58 percent, down from 72 percent in 2001, and in foreign exchange transactions at 88 percent, roughly unchanged. The yuan has reached 3 percent of SWIFT payments and 2 percent of global reserves. The trend is what matters. The shift has run for twenty years without reversing because it reflects the underlying trade geography. The sanctions remained on the books. The mechanism that had made them coercive did not.
The Admission
The clearest evidence that the coalition has broken comes from a December 2025 report by the Foundation for Defense of Democracies, a Washington think tank that has been the intellectual engine of maximum-pressure sanctions policy since the early 2000s, titled Winning the Race of the Red Queen. The report’s purpose is to argue for tighter enforcement. Its premise, stated plainly on the page, is that current enforcement is failing. The specific admission: “Trump’s campaign thus far has not meaningfully hindered Iran’s oil exports. In fact, in 2025, the rate of Iran’s oil exports did not differ significantly from the rate of oil exports in the same period in 2024.” The December report is the most explicit statement in a year of monthly FDD analyses documenting the same failure.
The report names the immediate cause: “Washington has yet to sanction major banks and ports in China that facilitate the exports.” FDD treats this as a fixable enforcement gap. It is not. The concession is harder to dismiss coming from the FDD. Secondary sanctions no longer function because applying them would require punishing major Chinese financial institutions, and Washington will not do that because the systemic financial cost of sanctioning a major Chinese bank is larger than the gain of cutting Iranian oil. The calculation has flipped. The bully has looked at what intervention would cost him and decided to fold. That used to be the bystanders’ move.
What the evidence actually supports is that enforcement cannot be restored, because the architecture that made it possible has dissolved. China is not a third-party bank that can be threatened with exclusion. China is the alternative. Once the alternative exists, the mechanism that made sanctions coercive becomes expensive for Washington.
Why the Coalition Broke
Two conditions converged.
The first is structural. As China became the first or second trading partner for most of the Global South, and a substantial part of Europe, the cost to any given country of aligning with American secondary sanctions rose past the gain. This was a slow process measured in decades, and then a fast one measured in months. The 2020 RCEP agreement made China the anchor of Asian trade. The 2022 ASEAN-China free trade upgrade deepened it. The April 2025 Xi tour through Vietnam, Malaysia, and Cambodia, executed days after the Trump tariff announcement, confirmed what the trade data had already shown: for most of the region, China is the primary partner and the United States is a secondary one whose demands have started to sound like impositions.
By 2026, other countries could also see that Russia survived one of the most comprehensive Western sanctions regimes ever assembled, and survived it while prosecuting a war NATO had committed itself to defeating. China absorbed the American tariff attack in 2025 and forced Washington to retreat within weeks. Iran absorbed the June 2025 war and continued operating. The military coercion that had disciplined the post-Cold War order, the economic coercion that had extended that order through sanctions, and the combined coercion that was supposed to contain Iran specifically all failed within a four-year window. A bystander government deciding whether to comply with American secondary sanctions in 2026 was not making an abstract cost calculation. It was looking at what had just happened to three countries Washington had marked for pressure, and observing that none of them had broken.
The second is moral. Gaza from October 2023 onward. Lebanon in 2024 and the barbaric Israeli attack after the Pakistan-mediated ceasefire, which killed more civilians than any attack on Lebanon since 1980, to which Iran answered by reclosing the strait. The Iran war itself. Conduct that bystanders could tolerate by looking away became conduct that required active endorsement to keep ignoring, and the active endorsement carried a cost the bystanders could no longer absorb. A coalition will hold through quiet harm. It fractures when the harm becomes loud, sustained, and morally unambiguous. The structural shift made refusal cheap. The moral rupture made silence expensive. When both conditions hold simultaneously, the coalition breaks.
What the United States could not do was reach the level of misconduct its Israeli ally was willing to reach and keep the coalition. A bully can intimidate. A bully cannot commit the act that forces the other children to see themselves as complicit, because at that point the bystanders discover that refusal is cheaper than silence. The sanctions coalition held through forty-seven years of Iranian containment. It did not hold through the combination of the Iran war, the Lebanon strike, and the Gaza record compounded against the background of an alternative payment architecture operating at scale.
The Inversion
Sanctions were designed to impose unilateral power through collective enforcement. Once collective enforcement dissolves, the instrument inverts. It becomes a unilateral cost the imposer bears while the target keeps trading. If the United States keeps the sanctions regime on the books, the cost will fall on the American people. Each time a threat fails, it only demonstrates the ceiling of American power. Each threat pushes one more neutral party into the alternative architecture, further eroding American power.
Washington’s position on Iran sanctions has no equilibrium to return to. Forty-seven years of Iranian resistance, a decade of Russian adaptation, twenty years of Chinese institution-building, and one war too far, produced an alternative other countries can now choose. The regime has fallen.
This holds regardless what happens next. A ceasefire that leaves the war frozen would not restore the coalition. An end to the war on Washington’s preferred terms, with every existing sanction kept on the books, would not change the trade data. The architecture that lets a country trade with Iran without touching a dollar, clearing through a Western bank, or insuring with Lloyd’s was built while sanctions were in force. The condition that made secondary sanctions coercive, no usable alternative, is gone, and gone in a way that is not contingent on the current crisis, other than having been exposed. A future administration trying to reconstitute the coalition would face bystanders who have already done the math, used the alternative, and seen it work.
What remains is for the rhetoric in Washington to catch up with the trade data and the military reality on the ground, and that process will take longer because admitting it requires admitting that the instrument of power in the management of the international order no longer works. The king is naked.
Schoolyard 101: The bully wins until the day the other children look at each other and realise they outnumber him. After that day, nothing the bully does restores what he had, because what he had was never his.
