The next phase of the Trump administration’s economic offensive against Iran is shifting the pressure from Tehran itself to the countries that continue to sustain its oil, gas and commercial lifelines, creating difficult choices for some of Iran’s largest remaining trading partners.
China, Iraq, Turkey, India and the United Arab Emirates face different degrees of exposure as Washington threatens to expand secondary sanctions against businesses, financial institutions and intermediaries dealing with Iran. The risks range from disruption to critical energy supplies in Iraq and Turkey to financial and diplomatic complications for China, the largest remaining buyer of Iranian crude.
At the centre of the campaign is access to the U.S. financial system. Washington can continue targeting tankers, traders, smaller refiners and companies involved in Iran’s sanctions-evasion networks. But extending the measures to major financial institutions and businesses with significant U.S. interests would raise the economic cost for both Iran’s trading partners and the United States itself.
The Trump administration initially stopped short of taking that step. Its latest sanctions package targeted almost 60 individuals, companies and vessels and expanded restrictions across shipping, aviation, technology, gold and digital assets. Major Chinese banks were not included in the first round, leaving Washington with a more consequential escalation option if the measures fail to sufficiently restrict Iranian trade.
U.S. Treasury Secretary Scott Bessent has indicated that countries will be given time to reduce their exposure before tougher measures are enforced. However, he has also signalled that a major financial institution could become the subject of an announcement before the end of the week. Two larger Chinese banks have already been warned that they could face secondary sanctions if Iranian funds are detected moving through their systems.
China remains Washington’s biggest test
China represents the most difficult target because of the scale of its Iranian oil purchases and the depth of its financial and commercial relationship with the global economy.
The country takes more than 80% of Iran’s seaborne crude, making it Tehran’s largest remaining source of hard-currency oil revenue. Iranian shipments to China reached about 1.58 million barrels per day earlier this year before the war and U.S. blockade began disrupting flows. Shipments subsequently fell to approximately 823,000 barrels per day in July and around 534,000 barrels per day so far in August, according to the figures cited in the source material.
China’s Iranian oil trade has also developed mechanisms intended to limit exposure to U.S. sanctions. Independent “teapot” refineries purchase significant volumes, while ship-to-ship transfers and other practices are used to obscure the origin of cargoes. Transactions are frequently settled in Chinese currency through intermediaries that are less exposed to the U.S.-dominated financial system.
Washington has repeatedly targeted individual Chinese refiners, trading companies and vessels linked to the Iranian oil trade. Those measures have disrupted parts of the network without eliminating the underlying flow. Iranian exports to China were still around 1.58 million barrels per day as recently as February, despite intensified U.S. sanctions.
Major Chinese banks, however, represent a different level of risk. Unlike smaller companies operating primarily within the Iranian trade, large financial institutions remain dependent on access to dollar clearing and the wider international financial system. Sanctioning them could therefore generate consequences well beyond the Iranian oil market.
The decision is also complicated by the broader U.S.-China relationship. President Donald Trump and Chinese President Xi Jinping are scheduled to meet in Washington in late September as both governments seek to preserve the trade agreement reached last November covering U.S. tariffs and Chinese rare-earth supplies.
Beijing has consistently rejected unilateral U.S. sanctions, while previous American measures have failed to prevent Iranian crude from reaching Chinese refiners. China is therefore likely to remain the clearest test of whether Washington is prepared to impose significant secondary sanctions at the risk of triggering wider economic and diplomatic repercussions.
Iraq faces the most immediate energy dilemma
For Iraq, the sanctions threat is less about commercial exposure than the country's dependence on Iranian energy.
Iranian natural gas supplies between 30% and 40% of Iraq’s electricity generation, according to the figures cited in the source material. Iraq imports approximately $4 billion to $5 billion worth of Iranian gas annually to support its power stations, making continued access to those supplies critical to the country's electricity system.
That dependence has become more difficult to manage as the wider war has damaged Iraq’s oil revenues. Iraq’s state finances are heavily reliant on crude exports, while naval blockades and maritime fighting in the Persian Gulf have severely disrupted its ability to move oil. Following the closure of the Strait of Hormuz, southern Iraqi crude exports fell by 75%, with monthly oil revenue dropping to approximately $1.2 billion.
Washington’s threat to impose “tremendous economic consequences” on countries providing an economic lifeline to Iran therefore places Baghdad in a particularly difficult position. The Iraqi government must balance compliance with U.S. sanctions against the need to keep Iranian gas flowing to its power stations.
A full enforcement of secondary sanctions could create severe pressure on Iraq’s electricity system, with the potential for major power disruptions affecting millions of people during peak demand periods. The country’s previous U.S. sanctions waivers for Iranian energy supplies could consequently become increasingly important if Washington moves to tighten enforcement.
Turkey has alternatives, but replacing Iranian gas will be costly
Turkey is less dependent on Iranian energy than it was when its long-term gas relationship with Tehran was established, but the loss of Iranian supplies could still increase costs and expose weaknesses in its energy system.
Turkey imported 4.5 billion cubic metres of Iranian natural gas during the first half of 2026, a 34% year-on-year increase. Iranian supplies exceeded Russian gas during the period, with only Azerbaijan supplying more gas to Turkey.
That relationship faces a major break. A 25-year agreement under which Turkey could purchase up to 9.6 billion cubic metres of Iranian gas annually through the Tabriz-Ankara pipeline expired at the end of July. The war has prevented Ankara and Tehran from negotiating a replacement agreement.
Turkey has developed alternative sources since the original agreement was signed. It has increased pipeline imports from Azerbaijan and Russia, expanded LNG infrastructure and added floating storage and regasification units. Those options mean the disappearance of Iranian gas would not necessarily leave Turkey without adequate supplies.
The problem is cost and geography. The Tabriz-Ankara pipeline delivers gas directly into eastern Turkey, where replacing those volumes with LNG or supplies from other pipeline sources can be more difficult and expensive. Iranian pipeline gas has also historically been among Turkey’s cheaper sources.
The broader economic pressure is already significant. Turkish manufacturers and textile producers are facing higher shipping costs and tighter supply chains, while the country depends on Iran and the wider Gulf region for inputs ranging from petrochemicals and helium to aluminium and approximately half of its fertiliser requirements.
Fuel prices have risen by about 50%, while Turkey’s energy import bill is projected to exceed the value of its total exports by as much as $40 billion this year. Further restrictions on Iranian trade could therefore intensify an energy-cost problem that is already weighing on Ankara’s economy and inflation.
India’s Iran Trade Faces Fresh Pressure
India has a considerably smaller exposure to Iranian crude than China, but the country remains vulnerable to both sanctions pressure and the broader rise in energy costs caused by the conflict.
Indian government data cited in the source material show that India imported $707 million worth of Iranian oil during the first half of 2026 under U.S. exemptions.
Trade between India and Iran has already contracted sharply under previous sanctions. Bilateral trade fell to $1.63 billion in the 2025/26 financial year from $17 billion in 2018/19, representing a decline of more than 90%.
The remaining relationship is now dominated by Indian exports, including basmati rice, tea and pharmaceuticals, leaving India with a substantial trade surplus with Iran. Much of that commerce has traditionally passed through Dubai.
The UAE’s decision to suspend financial and commercial dealings with Iran has already disrupted that route, forcing Indian exporters to consider alternatives, including Turkey. Any additional U.S. restrictions could further narrow the channels through which India maintains its remaining trade with Tehran.
India’s larger vulnerability, however, comes from the impact of the conflict on global energy prices. The world’s third-largest oil consumer imports close to 90% of its crude requirements. Higher energy costs therefore place additional pressure on the rupee, inflation and the government’s energy bill, even where Indian purchases of Iranian crude remain limited.
UAE has moved ahead of Washington
The United Arab Emirates occupies a different position because it has already taken steps to sever much of its remaining economic exposure to Iran.
Before the war, the UAE was one of Iran’s most important commercial lifelines. It exported approximately $21 billion worth of goods to Iran in 2024, equivalent to around 30% of Iranian imports. Dubai also served as a major financial, logistics and re-export centre for Iranian businesses seeking access to international markets.
That relationship has now been sharply curtailed.
On August 19, the UAE suspended financial and economic dealings with Iran until further notice after detecting two ballistic missiles launched from Iran towards maritime traffic near Emirati waters. Tehran denied targeting the UAE.
The decision effectively puts Abu Dhabi ahead of Washington’s latest sanctions campaign by removing much of the commercial exposure that could otherwise place Emirati companies at risk of secondary sanctions.
The economic consequences for the UAE are nevertheless significant. Iran had been the UAE’s largest source of imports before the war, while Dubai’s commercial links with Iranian traders and businesses had developed over decades. Cutting those channels reduces the risk of confrontation with Washington but also removes billions of dollars in established trade.
The sanctions dilemma is spreading beyond Iran
The five countries therefore face very different consequences from Washington’s latest pressure campaign.
China has the largest commercial exposure and represents the greatest potential financial and diplomatic challenge for Washington if major banks are targeted. Iraq faces the most direct energy-security risk because Iranian gas supplies a substantial share of its electricity generation. Turkey has alternatives to Iranian gas but could face significantly higher replacement costs. India’s already diminished trade with Tehran is vulnerable to further disruption, particularly through Dubai, while its much larger concern is the impact of higher global oil prices. The UAE has already moved to cut much of its Iranian exposure, reducing its direct sanctions risk while sacrificing substantial commercial activity.
The first round of sanctions therefore appears to be only one stage of the campaign. By targeting nearly 60 individuals, companies and vessels while leaving major Chinese banks untouched, Washington has retained the option of escalating from sanctions on Iran-linked networks to the financial institutions that enable the remaining trade.
That escalation would carry a different set of consequences. Sanctioning small refiners, tankers and traders can disrupt Iranian commerce without necessarily affecting the broader global financial system. Targeting major banks, however, could force governments and companies to choose between access to the U.S. financial system and continued commercial or energy ties with Iran.
The outcome will depend on how far Washington is prepared to push that choice. For Iran, the stakes are clear: China remains the dominant buyer of its seaborne crude, Iraq depends heavily on its gas, Turkey still requires Iranian energy despite having alternatives, India retains a shrinking but commercially relevant relationship, and the UAE has already begun dismantling one of Tehran’s most important commercial gateways.
Trump’s “economic D-Day” is therefore no longer confined to Iran. Its next phase could determine how much of the country’s remaining trade survives, and how much economic pressure Washington is ultimately willing to impose on the partners that keep it alive.