US 'Economic Isolation' Campaign Against Iran: Hard to Achieve Goals
Jeffrey D Sachs, Sybil Fares
The latest US sanctions targeting Iran, dubbed 'Economic Isolation,' are unlikely to succeed as Pakistan and China refuse to comply. The campaign risks triggering Chinese rare earth retaliation and deepening global economic instability, while many nations see the US as abandoning multilateralism.
Last week, Pakistan announced it would not comply with the latest US sanctions on Iran and would continue trade with its neighbor. This statement came just days after China issued a similar declaration.
The sanctions package, unveiled by US Treasury Secretary Scott Bessent on August 24 under the banner of an “Economic Isolation” campaign, was described as “the harshest sanctions in history,” aimed at creating “the largest coordinated economic isolation in world history.” Earlier, President Donald Trump called it “ECONOMIC D-DAY” on social media and warned of “tremendous economic consequences” for any nation supporting Iran.
Since six months of US bombing and a naval blockade yielded no victory, the current plan is to strangle Iran economically into submission. However, this approach is widely seen as illegal, cruel, and destined to fail for several reasons.
First, economic sanctions rarely topple governments; they impoverish populations, empower security forces controlling smuggling, and give the sanctioned nation a rallying point for national unity. Second, calculations on global oil markets show that removing Iran's oil exports would worsen the stagflation shock already hitting Europe, Japan, and other US allies due to the closure of the Strait of Hormuz.
More importantly, this campaign targets China, which buys over 80% of Iran's oil exports. If the US sanctions the Bank of China or the Industrial and Commercial Bank of China, Beijing is unlikely to respond with a mild diplomatic note—it may instead restrict rare earth exports.
China has already tested and won on this issue. In April 2025, Beijing imposed export licenses on heavy rare earths in response to Mr. Trump's tariffs, and within weeks, US and European carmakers had to halt assembly lines due to a shortage of rare earth magnets. By October 2025, China unveiled a larger package, and Washington conceded, agreeing to roll back newly expanded restrictions on Chinese firms in exchange for Beijing suspending the measures for one year.
The April export licenses remain in place, and the suspension of the October measures ends in November. Mr. Bessent chose this timing—just over two months before China's expanded rare earth regime returns and weeks before a planned visit by Chinese President Xi Jinping to Washington—to signal to Beijing that it must side with or against the US. This is a trap of America's own making.
Beijing has made its position clear. Chinese Foreign Ministry spokesperson Lin Jian stated: “China has repeatedly expressed firm opposition to illegal unilateral sanctions that have no basis in international law or UN Security Council authorization. Economic warfare and maximum pressure provide no solutions.”
This view is not exclusive to the Chinese government. Article 2(4) of the UN Charter prohibits the threat or use of force against the territorial integrity or political independence of any state. The US departure from the UN Charter goes far beyond the Iran issue.
The US is now the least aligned with UN-based multilateralism among the 193 member states. In January 2026, Washington withdrew from over 60 international organizations. In 2025, the US voted with the international majority in only 5% of recorded UN General Assembly resolutions.
At this point, every government should draw three conclusions. First, the US has abandoned the UN Charter. Second, US security commitments are unreliable. Third, reliance on dollar-based trade leaves nations vulnerable to American sanctions.
Across the globe, countries are moving toward new defense arrangements, such as the Mecca Agreement between Saudi Arabia, Türkiye, and Pakistan. They are also shifting away from US dollar payments and reducing holdings of US Treasury bonds in foreign exchange reserves. Many are adopting China's open-source AI models instead of paying for proprietary US versions.
Ancient history seems to be repeating itself. The historian Thucydides recorded the Athenian generals' taunt to the Melians in 416 BC: “The strong do what they can; the weak suffer what they must.” Just twelve years later, Athens was defeated by Sparta. Today's America may be mocking Iran and others similarly, but governments worldwide will not blindly follow Washington into disaster.
