U.S. Weapon Against Iran and Foreign Companies: What Do Secondary Sanctions Mean?

Bissent described the new measures as an "economic day of victory," saying Washington wants to sever Iran's financial ties worldwide, warning countries not to continue dealing with Tehran or risk depriving their major companies of access to the dollar‑based financial system, according to Reuters.

Those subject to these rules include U.S. citizens and permanent residents wherever they are, any person or company located within the United States, and companies incorporated under U.S. law and their foreign branches, according to the Office of Foreign Assets Control (OFAC).

If a Chinese or Indian refinery purchases Iranian oil in yuan or rupees and executes payments through non‑U.S. banks, there may be no direct U.S. link to the transaction, but the refinery and bank could face secondary sanctions for dealing with a targeted sector or entity.

The transaction can combine both types; if a European bank processes payments linked to Iran through a correspondent bank in New York, the passage of funds through the U.S. financial system creates a U.S. link, potentially turning the matter into a violation of direct sanctions, as well as the possibility of secondary sanctions.

Secondary sanctions derive their power from the importance of the U.S. market and the dollar in the global economy; a foreign bank that needs to settle payments in dollars typically relies on correspondent accounts at U.S. banks, and losing those accounts can isolate it from a large portion of international trade.

OFAC also confirms that non‑U.S. entities generally do not face secondary sanctions for humanitarian goods trade, provided the transaction does not involve parties listed for reasons related to terrorism or the proliferation of weapons of mass destruction, and does not exceed the conditions specified in the licenses.