US sanctions Iran’s shadow banking channels moving oil proceeds from China

WASHINGTON — The Treasury Department on Friday issued sanctions on three Iranian foreign currency exchange houses, aiming to cut off Tehran’s financial lifelines and force it to reopen the Strait of Hormuz. 

The move came as President Donald Trump said he was “not satisfied” with the latest Iranian offer to permanently end the war, which killed thousands of people, mostly in Iran, before a ceasefire was reached on April 8. 

 “They’ve made strides but I’m not sure if they ever get there,” Trump told reporters at the White House on Friday. 

To increase pressure on Iran, the Trump administration has issued a blitz of new sanctions in recent weeks under its so-called Operation Economic Fury campaign. The latest sanctions announced by the Treasury Department’s Office of Foreign Assets Control target exchange houses that it said facilitate billions of dollars in foreign currency transactions for Iran each year. Because Iran largely conducts its oil trade in Chinese yuan, these exchange houses are key to converting those revenues into more usable currencies for the Iranian military and its proxies, according to an OFAC news release.

Last week, the department blacklisted China's second-largest teapot refinery, which it said generated hundreds of millions of dollars in revenue for Iran. Before the war, China accounted for roughly 80% to 90% of Iran’s oil exports, much of it moved by a shadow fleet of vessels to evade sanctions.

“Iran is the head of the snake for global terrorism,” Treasury Secretary Scott Bessent said in a statement. “We will relentlessly target the regime’s ability to generate, move, and repatriate funds, and pursue anyone enabling Tehran’s attempts to evade sanctions.”

Iran delivered its latest proposal to end the war to Pakistani mediators on Thursday evening, Iranian state news agency IRNA reported. The United States and Iran held an initial round of direct talks in mid-April in Islamabad that ended in an impasse over Iran’s nuclear program and its stockpile of highly enriched uranium. 

“We do not detail private diplomatic conversations,” White House spokesperson Anna Kelly told Al-Monitor when reached for comment about the Iranian proposal. 

“President Trump has been clear that Iran can never possess a nuclear weapon, and negotiations continue to ensure the short- and long-term national security of the United States,” Kelly said. 

Trump, who met with top oil executives at the White House on Tuesday, said this week he’s preparing for an extended blockade after a six-week US-Israeli bombing campaign severely weakened Iran's military capabilities but didn't force concessions on its nuclear program.  

Iran’s oil-dependent economy is reeling under the blockade, with the rial plunging to a record low of 1.8 million to the dollar on Wednesday. Meanwhile, Iran’s effective closure of the Strait of Hormuz has disrupted roughly 20% of global oil flows, pushing crude prices from about $70 a barrel earlier this year to above $120. Data from S&P Global Market Intelligence said that only eight ships passed through the strait on Thursday.

This developing story has been updated since initial publication.