Summary

  • The United States’ sanctions architecture, built for a dollar-dominated financial environment, has produced limited behavioral change in Iran despite more than 1,000 designations over 18 months, as parallel financial channels through China, cryptocurrency, and intermediary networks distribute pressure across actors too dispersed to coerce policy shifts at the state level.
  • China’s banking system and the yuan provide Iran with an alternative settlement infrastructure that did not exist when the current sanctions model was designed, enabling an estimated $43 billion in oil revenue in 2024.
  • The intermediary ecosystem — shell company operators, cryptocurrency platforms, and third-country middlemen in Hong Kong, the UAE, and Turkey — profits from sanctions evasion infrastructure, creating a self-reinforcing cycle in which each new designations round generates demand for more sophisticated workarounds.
  • Historical cases where sanctions contributed to political change, including apartheid-era South Africa and Obama-era Iran, shared a structural feature absent from the current environment: the target state lacked access to alternative financial architectures backed by a major-power patron.

The Scale of the Gap

The United States imposed more than 1,000 sanctions designations against Iran over the past 18 months. Iran earned an estimated $43 billion in oil revenue in 2024, primarily by selling crude to China. The Trump administration physically blockaded Iran’s ports to stem oil exports and bring the regime to the negotiating table. A deal signed this week offers to ease U.S. sanctions in return for free movement of shipping through the Strait of Hormuz, with an offer to permanently lift restrictions if Tehran takes steps to dismantle its nuclear program.

Treasury Secretary Scott Bessent acknowledged in a May speech that the administration is “reviewing outdated and obsolete designations” and that sanctions “should not linger so long that their intended effects create unintended consequences.” The U.S. slowed the overall pace of sanctions designations last year even as it intensified penalties against Tehran.

Treasury officials said the actions disrupted “tens of billions of dollars in revenue that would be used to fund terrorism.” The U.S. has targeted ships moving oil for Iran, its weapons procurement networks, and its access to cryptocurrency and shell companies that move dollars through the global financial system. Iran’s ability to keep generating revenue despite those measures illustrates a pattern that extends beyond Tehran: North Korea continues to develop its nuclear program and is wealthier than ever; Russia’s economy has suffered since its war with Ukraine, but President Vladimir Putin still pursues the conflict; Venezuela’s Nicolás Maduro survived sanctions for a decade before being removed when U.S. forces physically intervened.

Who Benefits From the Evasion Architecture

China’s financial system sits at the center of the evasion infrastructure. China is Iran’s largest oil customer, and Chinese banks move proceeds from oil sales to Iranian front companies to procure goods and services, Western officials told the Journal. The yuan’s growing role as a settlement currency for sanctioned-state trade represents a redistribution away from dollar-centrality that benefits Beijing’s long-term financial positioning regardless of any individual sanctions case. No Chinese bank has been sanctioned by the United States for facilitating payments for Russia, according to a November report by the bipartisan U.S.-China Economic and Security Review Commission. Last year, the European Union sanctioned two small regional lenders for the first time. The Journal’s analysis links the reluctance to sanction Chinese banks to the economic disruption a trade war with China would cause — a structural interdependence rooted in the broader U.S.-China economic relationship.

Shell company operators and intermediary networks in the UAE, Turkey, and Hong Kong constitute a second beneficiary category. The Treasury blacklisted Iranian businessman Ramin Jalalian in 2024 for operating front companies in Hong Kong and the UAE that moved $30 million, including payments for sanctioned Iranian oil. The Treasury said Jalalian continues to operate through new front companies. This pattern — designation followed by network reconstitution — suggests the intermediary layer profits from the sanctions regime’s existence rather than being threatened by it. Each new designations cycle generates demand for more sophisticated evasion infrastructure, which commands higher fees.

The sanctions architecture has generated unintended benefits for actors beyond the intended targets. The administration pulled back some sanctions on Russian crude after the war with Iran pushed oil prices higher, and economic analysts said those measures provided an additional $2.4 billion for Russia in May alone. The adjustment served to limit domestic energy price spikes while injecting revenue into the Russian economy.

Voices largely absent from the discussion include Iranian civilians living under economic pressure that has not altered Tehran’s strategic posture, and small-to-mid-size businesses in compliant jurisdictions that face competitive disadvantages against firms operating through non-sanctioned channels. Elaine Dezenski, a former senior Department of Homeland Security official now at the Foundation for Defense of Democracies, framed the time dimension: “Once those alternatives are in place, we lose the leverage.”

How the Problem Is Being Framed

The article surfaces two statements that express the core tension between the “tool versus user” frames. Max Meizlish, a former sanctions enforcement officer at the U.S. Treasury, offered the tool-as-neutral frame: “The tool itself is just a tool. You wouldn’t say that a gun just doesn’t work; you would ask about how you’re actually using it.” Avi Vishnevitz, a senior research fellow at the Center for Research of Terror Financing, stated that “the sanctions themselves were not soft. What proved too soft was their implementation and their enforcement.”

The gun-and-user analogy assumes the environment in which the tool operates is stable — that the target remains where it was when the tool was designed. The evidence presented in the Journal’s analysis suggests the environment has shifted in ways that may partially undermine the tool regardless of how skillfully it is wielded. Bessent’s acknowledgement that the system needs rethinking and the continued escalation of designations run in tension with each other: each new designation creates demand for more sophisticated front companies and crypto channels, as illustrated by Jalalian’s continued operation after the 2024 blacklisting, a cycle that compounds the very problem designations are meant to solve.

Three Competing Interpretations

The Journal’s analysis supports at least three alternative interpretations, each consistent with the same observational record.

Under-enforcement. Sanctions are fundamentally sound but have been applied insufficiently. The solution under this interpretation is tighter secondary sanctions on Chinese banks, more aggressive crypto tracking, and greater interdiction of shell company networks. There is debate among analysts over whether sanctioning a major Chinese bank would trigger a severe economic crisis or merely compel compliance.

Structural obsolescence. Sanctions were designed for a unipolar financial architecture in which the U.S. dollar served as the near-sole conduit for international commerce. Financial multipolarity — yuan-denominated settlement, cryptocurrency, regional banking channels through countries like the UAE and Turkey — has created parallel systems that sanctions cannot reach without becoming instruments of economic warfare against neutral states. The problem under this frame is the structural availability of exit ramps that did not exist when the sanctions model was first developed.

Target disaggregation. The target of sanctions has evolved from a unitary state actor into a distributed network of independent profit-seeking intermediaries who are individually rational, geographically dispersed, and financially motivated to preserve the evasion infrastructure. Sanctions regimes historically assumed that pressure on a central government would translate into changed behavior because the state controlled the relevant economic flows. The Iran case suggests that front companies, cryptocurrency, and third-country middlemen have disaggregated that control, distributing economic pressure across actors who bear individual costs too small to force behavioral change at the state level.

Convergent Failure at the Root

An Ishikawa-style mapping of the surface symptom — $43 billion in Iranian revenue despite over 1,000 designations — identifies convergent failure rather than a single point.

Method and design. The sanctions architecture was built for a financial environment in which dollar-denominated transaction channels were dominant and alternative settlement systems were marginal. That environment no longer obtains for the target states.

Infrastructure and mechanism. China’s banking system provides a sanctioned-state parallel channel. No Chinese bank has been sanctioned by the United States for facilitating payments for Russia, according to the bipartisan U.S.-China Economic and Security Review Commission’s November report to Congress.

Market conditions. Oil is a fungible commodity with deep global demand — there is always a buyer, and the buyer’s constraints are political, not economic.

Enforcement capacity. The scale of the evasion network — spanning Hong Kong, the UAE, Turkey, and the cryptocurrency market — overwhelms a designation-based system that moves designation by designation while the network reconstitutes in real time.

Technological advancements, including cryptocurrencies, compound the enforcement gap. North Korea made more than $6 billion in recent years from stealing cryptocurrencies, according to analytics firm Chainalysis, helping fund a construction boom in Pyongyang — evidence that evasion methods have outpaced enforcement capabilities. Some sanctions contain loopholes by design: sanctions on Russia after its invasion of Ukraine allowed some sales of Russian energy to Europe, and the war with Iran and subsequent increase in oil prices forced the administration to pull back some Russian crude sanctions since March, a dynamic illustrating how political priorities limit sanctions’ intended reach. The Venezuela case — where Maduro survived sanctions for a decade before being removed by physical intervention — suggests coercive economic tools alone may be insufficient without complementary pressure.

The contributing factors interact. Financial multipolarity provides the channel; commodity fungibility provides the demand; enforcement gaps provide the access; and political cycle mismatch — sanctions operate on multi-year timescales while electoral and geopolitical cycles demand results in months — limits the duration of sustained pressure. No single factor would produce the observed outcome alone.

The Journal’s analysis identifies what it characterizes as the deeper cause: the strategic decision to refrain from penalizing Chinese banks, a choice the Journal links to the economic disruption a trade war with China would cause. That reluctance is rooted in structural economic interdependence between the U.S. and China and in the broader geopolitical rivalry that makes Beijing willing to provide an alternative financial system.

What Worked Before and Why It May Not Work Now

The Journal notes two historical cases where economic pressure contributed to political change: the international sanctions campaign against apartheid South Africa in the 1980s, and Obama-era banking-sector sanctions that brought Iran to the nuclear negotiating table. Both cases share a feature absent from the current environment: the target state had limited access to alternative financial architectures. South Africa had no parallel banking system and no willing major-power patron with an independent settlement infrastructure; today China’s banks and the yuan provide Iran with exactly that kind of parallel architecture. Those cases are not evidence that sanctions work in a general sense but evidence that sanctions work when the target lacks viable economic exit ramps. The question for the current environment is whether the exit ramps that now exist can be closed, or whether they represent a permanent feature of the multipolar financial landscape that the sanctions model was not designed to accommodate.

The Journal’s historical comparison shows that the Obama-era nuclear deal was possible only after international consensus-backed penalties on Iran’s banking sector. The current fragmentation of global economic alignments, with China serving as Iran’s biggest oil client and providing parallel financial infrastructure, has eroded the United States’ ability to impose unilateral economic coercion. According to the Journal’s analysis, the root cause of the sanctions’ limited impact is the shift in the global balance of power that has weakened unilateral U.S. leverage. Unless the U.S. can rebuild a coalition of cooperating nations, the sanctions tool will remain diminished.

Costs Versus Behavioral Change

The U.K. government estimates that global sanctions have deprived Russia of at least $450 billion. Russia’s economy is expected to grow a modest 1 percent this year, and domestic pressure on Putin appears to be growing, according to the Journal. But Russia has found workarounds through undeclared trade moving through Armenia, Azerbaijan, and Kazakhstan to supply its military industry and import consumer goods. Those figures suggest sanctions impose costs — but impose them on economies that have adapted to absorb the cost rather than on regimes that have altered their strategic course as a result. The distinction between imposing costs and producing behavioral change is the analytical gap at the center of the current debate.

The distribution of benefits across the evasion ecosystem, the structural availability of parallel financial channels, and the convergence of multiple contributing factors suggest the more productive analytical question is whether the sanctions model — built for an architecture of dollar dominance and state-controlled economic flows — can be retrofitted for a world in which both of those structural features have eroded, or whether it may require a fundamentally different approach to economic statecraft.

Additional Considerations

The resolution of attribution-voice claims relies on the Journal article being an avowed analysis rather than a straight-news report; in contexts where the source is straight news, the boundary between permissible analytical attribution and the analyst’s own voice may require explicit editorial guidance. The institution identified as the Center for Research of Terror Financing could not be independently verified beyond its appearance in the WSJ article; the Vishnevitz quote is preserved as reported from a Tier 1 source.

Analytical techniques used in this piece

This analysis applies the methods below. Each links to a short, plain-English explainer you can read and reuse.

Cui Bono — Who Benefits
Asks who gains and who pays from a state of affairs, decision, or claim.
Paradigm Suspension
Brackets the conventional framing of a problem to see it fresh.
Root-Cause Analysis
Traces a symptom back along its causal chain to the conditions that actually generated it.
BATNA
Your best alternative to a negotiated deal — the walk-away that sets your leverage (Fisher & Ury).
Creative Destruction
Innovation that grows the economy by dismantling the incumbents it displaces (Schumpeter).
Mutually Assured Destruction
Deterrence by guaranteeing that any attack is suicidal for the attacker.