Yves here. Today, we are pleased to introduce Reza Assadi, who explores the complexities of geopolitics, focusing on Iran and the evolving multipolar world order. He argues that the U.S. sanctions against Iran (and Russia) have not merely weakened, but have effectively ceased to function.
The implementation of secondary sanctions was initially successful because they coerced compliance from numerous influential economies by leveraging the constraints of dollar payments and U.S. market access. However, that coalition has dissolved on two significant fronts. Structurally, China has emerged as the primary trading partner for over 120 countries. The successful development of bilateral payment systems has reduced the costs associated with defying sanctions, which have become prevalent outside the Collective West in the wake of sanctions on Russia.
Morally, the U.S.-led sanctions have increasingly been recognized as illegal due to their lack of United Nations authorization. Moreover, the horrific events in Gaza, U.S. complicity in Israeli actions undermining peace initiatives, repeated violations of ceasefires in Lebanon, and the unjustified threat of war on Iran have led to the perception of the U.S as, in the words of Douglas Macgregor, a “leper colony.” America’s ability to exert coercive power is eroding, as its capacity to intimidate alone diminishes, and more nations are choosing not to participate in its agenda.
By Reza Assadi, who analyzes the geopolitics of the post-unipolar world with a focus on Iran and the multipolar transition. He also runs an AI company aimed at building trust bridges, linking topics such as how AI is reshaping the multipolar order, the implications for sovereignty and power, and exploring humanity. This article is jointly published with his site, rezaassadi.substack.com.
Most children who have spent time on a playground understand how a bully operates. The bully may not be stronger than everyone together, but he is more intimidating than any single child willing to stand up alone. The rest remain silent, fully aware that intervening could come at a cost they are reluctant to bear. The bully’s apparent strength relies on the bystanders’ inaction; one child who dares to confront risks sparking others to join in, leading to a moment where the bully’s power becomes purely illusory.
This dynamic plays out at every level—from schoolyards to boardrooms to international politics. The U.S. sanctions regime against Iran, enforced for over forty-seven years, against Russia since 2014, and others like Venezuela and Cuba, has never fully rested just on American might. Instead, it was a political coalition held together by collective willingness to enforce sanctions, based on an implicit understanding that aligning with the target would be costlier than siding with Washington. That coalition, once solid, has eroded.
The Coalition Theory of Sanctions
Primary sanctions impose restrictions on those who enforce them. For example, U.S. primary sanctions prohibit American banks, companies, and citizens from conducting business with the sanctioned target. Their effectiveness is linked to the size of the U.S. economy and the lure of its market. Secondary sanctions expand this regime from a bilateral embargo into a global quarantine, pressuring other nations to comply under threat of exclusion from the dollar system and loss of access to U.S. markets. Effectively, these are penalties levied on those who defy American foreign policy—costs born by third parties.
The success of this mechanism relies on the coalition’s unity. The threat of punishment must outweigh potential benefits. When the dollar system stands as the only substantial global payment network, and the U.S. market remains the largest buyer, the coalition defaults to Washington’s side. Rejecting compliance risks total isolation; capitulating might only mean losing one trading partner. Every bank’s legal counsel reaches this same conclusion, leaving the target isolated not solely due to U.S. pressure, but the rational self-interest of intermediaries.
From 2012 to 2015, the Iran sanctions succeeded because this coalition remained intact. Major economies like India, Japan, and Korea significantly reduced their purchases, while the European Union enacted its embargo. Consequently, Iranian crude oil exports to Europe plummeted from approximately $20 billion in 2011 to nearly zero by 2013. Overall oil exports fell from 2.5 million barrels per day to about 1 million, with revenue decreasing more than 50% from 2011 to 2013, leading to a contraction of 7.4% in the Iranian economy in 2012 and inflation soaring to 40% by 2013. The pain was palpable because the enforcement was collaborative, which was possible only because no participant could perceive a better option than compliance.
The Joint Comprehensive Plan of Action (JCPOA) was not signed due to Iran being broken; rather, it arose from a convergence of interests that rendered the agreement more appealing than the status quo: the desire for Obama’s legacy, European economic interests, Russian and Chinese motives for integrating Iran into their developing frameworks, and Iranian sanctions relief while maintaining sovereignty.
The Russian Case
The most illustrative current example is Russia. Post-February 2022, Washington and its allies imposed one of the most extensive sanctions regimes in modern history against the Russian economy. The ruble plummeted, central bank reserves were frozen, and Russian banks were cut off from SWIFT, with additional secondary sanctions threatened against any nations aiding Russia. For some months, it seemed the sanctions might deliver the coercive results intended by Washington. But by mid-2022, the ruble had stabilized much faster than anticipated, and the expected impacts did not materialize.
The Cross-Border Interbank Payment System established by China as an alternative to SWIFT reported $24 trillion in transactions in 2024, representing a 43% increase from the previous year. A December 2023 executive order threatened secondary sanctions against Chinese banks, creating a temporary slowdown in early 2024. While some regional banks in China suspended transactions with Russia, processing times extended to 18 days, leading to a 16% decline in Chinese exports to Russia by March 2024. However, this effect dissipated, and trade between Russia and China rebounded. By the end of 2024, the financial architecture was functioning on revisions that Washington could not influence.
Trade transactions between Russia and China shifted predominantly to yuan and rubles. The yuan’s share of transactions on the Moscow Exchange grew from 3% at the start of 2022 to 54% by May 2024, eventually reaching 99.8% after the imposition of U.S. sanctions on the exchange in summer 2024. Consequently, Russia-China trade settled almost entirely in these currencies, with Russian finance officials estimating that figure reached 99.1% by late 2025.
Iran had been navigating similar restrictions for nearly five decades. Following the introduction of Western sanctions against Russia in 2014, Moscow looked to Tehran’s experience for guidance. By October 2014, the People’s Bank of China and the Russian central bank signed their first yuan swap agreement, and Russia started developing its own version of SWIFT, the System for Transfer of Financial Messages. Although it saw minimal initial use, especially after the U.S. Treasury sanctioned Bank of Dandong, the aftermath of unprecedented sanctions in 2022 motivated further adaptation. Russian banks cut off from SWIFT followed decisive examples initially set by Iran, which had long been negotiating in these turbulent waters. Russia learned how to circumvent restrictions, settle trades in alternative currencies, and maintain supply chains under blockade. The scale of Russia’s trade volume soon propelled the Chinese payment systems to significant operational capacity.
It’s worth noting that these sanctions operate with variable effectiveness depending on U.S. interests. Türkiye has consistently purchased oil from Russia while selling drones to Ukraine, a scenario Washington seems willing to overlook due to Türkiye’s NATO affiliation. The Biden administration quietly allowed India to continue buying discounted Russian crude during 2022 and 2023 to stabilize global supply. However, this changed when the Trump administration imposed a 25% tariff in August 2025, followed by reassurances from Modi in October 2025 to stop. Reliance Industries ceased Russian oil purchases in November 2025, and tariff adjustments were made amidst ongoing negotiations.
The BRICS Architecture Becomes Operational
The network that Russia and China began constructing around Iran since the JCPOA years now encompasses three sanctioned nations and any neutral parties wishing to shield themselves from similar aggression. The bilateral yuan swap lines, initiated between the People’s Bank of China and the Russian central bank in 2014 and reinforced through the 2020s, became foundational. The 2015 launch of the Cross-Border Interbank Payment System provided a seamless alternative to SWIFT and grew to encompass direct participants from more than 100 countries by 2024. The BRICS Contingent Reserve Arrangement, established in 2015 yet rarely utilized, combined with the yet-to-be-deployed BRICS Pay initiative, is transforming what was once bilateral infrastructure into a multilateral framework accessible to the Global South. The prospect of introducing alternative international payment systems is very much part of BRICS’ agenda this year, with some reports suggesting a potential launch before year-end.
Iran officially joined BRICS on January 1, 2024. It became a full member of the Shanghai Cooperation Organization in July 2023 and signed a Comprehensive Strategic Partnership Treaty with Russia in January 2025. Concurrently, a free trade agreement with the Eurasian Economic Union took effect in May 2025. Collectively, these structures allow nations interested in trading with Iran to do so without utilizing dollars, bypassing Western banks and insurance requirements, effectively neutralizing concerns over compliance with American secondary sanctions.
The foundational view of U.S. sanctions relied on the assumption that the United States remained the primary economic center of gravity for all trading nations. This assumption has changed drastically. By 2000, China was the main trading partner for just ten countries, most of which were under sanctions or isolated. By 2012, China’s total trade exceeded that of the U.S. By 2024, China became the largest trading partner for over 120 nations and ranked within the top three for many more. Although the U.S. market is still significant, it is no longer the central axis around which economies orient themselves.
Between 2022 and 2025, Russia, China, and Iran each managed to absorb and withstand the coercive strategies the U.S. implemented against them, testing various pillars of American power, and each time Washington’s measures failed.
Although the dollar retains dominance in global reserves at 58%—a decrease from 72% in 2001—and in foreign exchange transactions at 88%—roughly unchanged—the key trend is important. This shift has been ongoing for two decades without any reversal, reflecting changes in international trade dynamics. While the sanctions policy remains active, the mechanisms that once made them effective have evaporated.
The Admission
The most explicit evidence of the coalition’s dissolution comes from a December 2025 report by the Foundation for Defense of Democracies, a D.C. think tank that has long been a driving force behind maximum-pressure sanctions policies. The report, titled “Winning the Race of the Red Queen,” aims to advocate for tighter enforcement while acknowledging the failure of current strategies. It concludes, “Trump’s campaign thus far has not meaningfully hindered Iran’s oil exports. In fact, in 2025, Iran’s oil export rates closely resembled those from the same timeframe in 2024.” This report represents a candid admission amidst a series of analyses documenting the failure of sanctions over the previous year.
The report indicates the immediate cause of failure: “Washington has yet to impose sanctions on major Chinese banks and ports that facilitate exports.” While the FDD views this as a gap that can be remedied, the reality is more complex. The acknowledgment is significant coming from the FDD. Secondary sanctions have ceased to function because enforcing them would necessitate punishing major Chinese financial institutions, an action Washington is unwilling to take, as the systemic cost would outweigh the benefits of reducing Iranian oil exports. The costs have shifted. The bully has assessed the price of intervention and has chosen to back down—a role typically assumed by the bystanders.
The evidence suggests that restoring enforcement is impossible because the framework that made it viable has dissolved. China is no longer a third-party entity that can be threatened with exclusion; it has emerged as an alternative. With the existence of this option, the costs associated with U.S. sanctions become increasingly burdensome.
Why the Coalition Broke
Two converging factors have contributed to the breakdown:
The first is structural. As China solidified its role as the primary trading partner for most of the Global South and significant regions in Europe, the cost of adhering to U.S. secondary sanctions began to outweigh potential gains. This transition was gradual over decades, but accelerated rapidly. The 2020 RCEP agreement established China as a pillar of Asian trade, a trend that deepened with the 2022 upgrade of ASEAN-China free trade. Furthermore, Xi’s tour through Vietnam, Malaysia, and Cambodia in April 2025, just days after U.S. tariff announcements, affirmed that for many in the region, China’s status as a primary partner has overshadowed the U.S., with American demands perceived as impositions.
By 2026, governments outside the U.S. began to realize that Russia had withstood an extensive Western sanctions regime while actively conducting a war that NATO aimed to oppose. China similarly absorbed American tariff issues in 2025 and compelled Washington to retreat quickly. Iran continued its activities despite the June 2025 conflict. The conventional military coercion maintaining the post-Cold War order, complemented by economic coercion via sanctions, all failed within a four-year span. A government evaluating compliance with U.S. secondary sanctions in 2026 no longer viewed it through an abstract lens; they are examining the outcomes for three nations that were targets of U.S. pressure, none of which capitulated.
The second condition is moral. The situation in Gaza since October 2023 and the brutal assault in Lebanon in 2024, post the Pakistan-mediated ceasefire that resulted in unprecedented civilian casualties, have shifted perspectives. The conduct of the U.S. and its allies could previously be overlooked, but has evolved into actions requiring active endorsement to ignore. This endorsement carries costs that bystanders can no longer afford. A coalition may withstand quiet suffering, but fractures under loud, sustained, and morally clear harm. When both structural and moral factors align, coalitions disband.
What the United States could not accomplish was to reach the level of misconduct exhibited by its Israeli allies without fracturing the coalition. While a bully may intimidate, he cannot commit actions that would lead others to see themselves as complicit. At that point, bystanders realize that noncompliance is easier than complicity. Over the span of forty-seven years, the sanctions coalition maintained its integrity against Iran. However, it broke under the cumulative pressure of the Iran conflict, the Lebanon incident, and the Gaza situation, all underpinned by a growing alternative payment structure.
The Inversion
Sanctions were designed to impose unilateral authority through collective enforcement. Once that enforcement collapses, the dynamics shift. The sanctions become a unilateral burden borne exclusively by the imposer while the target continues to engage in trade. If the U.S. maintains its sanctions regime indefinitely, the costs will ultimately fall on the American populace. Each time a threat fails, it underscores the limitations of American power. Each failed threat nudges another neutral nation towards alternative frameworks, further diminishing U.S. influence.
The U.S.’s stance on Iran sanctions lacks a foundation to revert back to. Decades of Iranian resilience, a decade of Russian adaptation, and twenty years of Chinese institution-building, compounded with one miscalculated conflict, have birthed an alternative that other nations can now adopt. The regime as it once functioned has crumbled.
This reality remains unchanged irrespective of future developments. A ceasefire leaving the status quo stagnant will not restore the coalition, nor will a resolution on Washington’s preferred terms, with existing sanctions in place, affect trade dynamics. The mechanisms enabling trade with Iran without engaging with the dollar or Western financial institutions were developed while sanctions were active. The conditions rendering secondary sanctions effective—namely the absence of viable alternatives—have vanished, and their disappearance is catalyzed by recent events. Any future administration attempting to reconstruct the coalition will confront bystanders who have already tallied the costs, utilized alternatives, and witnessed their effectiveness.
What remains is for Washington’s rhetoric to align with the prevailing trade data and the realities on the ground. This adjustment will take time, as it requires acknowledging that the mechanisms of power in managing the global order have diminished significantly. The emperor has no clothes.
Schoolyard 101: The bully reigns until the moment other children realize their numbers outweigh his. Once that day comes, nothing the bully does can restore his former dominance, as it was never genuinely his to begin with.
