US Secondary Sanctions: A Timeline of Financial Weaponry

Secondary sanctions are often called “extraterritorial”. Washington has always disputed that. When Treasury wrote the CISADA rules in 2010, it argued that the law did not regulate what foreign banks did abroad; it set conditions on their access to the US financial system. Former Treasury official David Cohen put the choice to foreign banks bluntly: was a relationship with a designated Iranian bank worth losing access to the US? Critics, especially in Europe, call that a distinction without a difference.

Most cross-border trade, commodity sales and trade finance are priced and settled in US dollars. To move dollars, a bank outside the US typically needs a correspondent account at a US bank, which clears the payment through the US system. That link is the choke point. Washington does not need to control a bank in Shanghai, Istanbul or Dubai; it only needs to control whether that bank can keep its US correspondents.

For a large bank the calculation is lopsided. The fees from a sanctioned customer might run to tens of millions of dollars. Losing dollar clearing could cost billions, and every other customer would feel it. So banks exit not only what is sanctioned, but much of what might be. That is the chilling effect: one public enforcement action changes the behaviour of thousands of institutions that are never named.

The Iran and Libya Sanctions Act, signed on 5 August 1996, threatened penalties on foreign companies investing in Iran’s energy industry. It was a blunt tool, rarely enforced and loudly resisted by Europe, which passed a blocking statute that November. Helms-Burton, aimed at foreign firms in Cuba, had come five months earlier and met the same resistance.

The breakthrough came in 2010. CISADA moved the lever from markets to money: a foreign bank serving Iran’s Revolutionary Guards or its designated banks could be barred from US correspondent accounts. The NDAA of December 2011 extended the threat to the Central Bank of Iran, which handled oil payments, but offered an exemption to countries that cut Iranian oil purchases significantly every six months. In March 2012 SWIFT disconnected Iranian banks under EU rules, and in July Treasury made an example of Bank of Kunlun.

The effect was to separate the oil from the money. Iran could still ship crude, and buyers could still want it, but paying became hard. India paid part of its bill in rupees through UCO Bank; other buyers built up Iranian money in escrow accounts that Iran could spend only locally. That pressure helped bring Iran to the 2015 nuclear deal, under which most of these secondary sanctions were lifted on 16 January 2016.

CAATSA, signed on 2 August 2017, brought secondary sanctions to Russia’s arms trade. Section 231 requires the President to impose at least five of twelve listed sanctions on anyone making a significant transaction with Russia’s defence or intelligence sectors. It was first used on 20 September 2018 against China’s Equipment Development Department for buying Su-35 fighters and S-400 equipment, and on 14 December 2020 against Turkey’s defence procurement agency over its S-400s, the first CAATSA sanctions on a NATO ally.

India bought five S-400 regiments in October 2018. It was never sanctioned. The difference shows how secondary sanctions really work: the law may be mandatory, but whether and when to use it remains a political judgment about the target’s value to Washington.

Meanwhile the US left the Iran nuclear deal on 8 May 2018 and restored its Iran sanctions by 5 November, with more than 700 designations including over 70 Iran-linked financial institutions. When oil waivers ended on 2 May 2019, India cut Iranian crude to zero.

After the invasion of Ukraine in February 2022, the first wave of sanctions was mostly primary and coordinated with allies: frozen central-bank reserves, Russian banks blocked and removed from SWIFT. As Russian trade moved to China, Türkiye, the UAE, Central Asia and India, Washington turned to the third countries.

Executive Order 14114 of 22 December 2023 let Treasury sanction any foreign bank that conducts significant transactions for Russia’s military-industrial base. On 12 June 2024 that base was redefined to include every person blocked under EO 14024, so a foreign bank dealing with VTB or Sberbank was now at risk. Gazprombank followed on 21 November 2024, along with a warning about Russia’s SPFS messaging system. Then energy: Gazprom Neft, Surgutneftegas and more than 180 tankers on 10 January 2025, and Rosneft and Lukoil on 22 October 2025.

The Trump administration added a new instrument: the secondary tariff. Instead of threatening banks, it threatened whole trading partners. From 27 August 2025 India paid an extra 25% tariff on its exports to the US because it bought Russian oil. It was removed on 7 February 2026, after India committed in a trade deal to stop importing Russian oil.

The 2025 “maximum pressure” directive against Iran became something larger after the US military conflict with Iran began in late February 2026. Under the label Economic Fury, Treasury went after the Shamkhani oil network, shadow-banking facilitators and weapons procurement networks. On 28 April it told banks it was prepared to use secondary sanctions against those serving China’s teapot refineries, which take most of Iran’s oil.

On 24 August 2026 Treasury Secretary Scott Bessent launched Operation Economic Outcast, calling it an “economic D-Day”. Using Executive Order 13902, Treasury declared Iran’s digital assets, technology, gold, aviation and shipping sectors open to sanctions, so that anyone, anywhere, operating in them could be designated. Bank actions followed quickly: Banque Misr’s UAE branches on 28 August, Türkiye’s Golden Global Bank on 4 September, and Russia’s VTB on 14 September.

The 5 October 2026 OFAC alert summed up the new posture. Foreign banks still dealing with Iran “could be targeted at any time without advance notification”. The era of warnings, waivers and 180-day reviews was over.

Few countries have been tested by US secondary sanctions as often as India. It needs cheap energy, buys most of its heavy weapons from abroad, prizes strategic autonomy, and depends on dollar finance and the US market. Each round has forced a trade-off between those interests, and the outcomes have varied: India complied on Iranian oil in 2019, held out on the S-400, absorbed a tariff over Russian oil in 2025 and then agreed to stop buying it in 2026.

The paradox is that success breeds resistance. The more often the dollar system is used as leverage, the stronger the incentive for China, Russia, Iran and even friendly countries to build systems that do not depend on it. So far none of those systems comes close to replacing the dollar at scale. But each round of secondary sanctions is also a round of investment in the alternatives.

In 1996 secondary sanctions told foreign companies not to invest in Iran. In 2010 they told foreign banks not to serve its banks. In 2017 they told arms buyers not to buy from Russia’s defence industry. By 2026 they told anyone, anywhere, not to operate in whole sectors of Iran’s economy, and warned banks they might get no notice at all.

The weapon never fired a shot. It worked through choices: a bank deciding a customer was not worth its dollar access, an insurer declining a voyage, a refiner switching suppliers. As long as access to the US financial system is worth more than the sanctioned business, those choices will keep going Washington’s way. The open question is how long that remains true.