Treasury Secretary Urges Squashing Iran's Economy

You have seen the Treasury secretary standing before cameras, asking allies to join in a plan to squash Iran’s economy, and you have seen the headlines that followed, full of the satisfaction that comes from watching a hostile regime’s currency slide and its markets shudder. You have not yet looked for the merchant in Hamburg or Milan who signed a contract eighteen months ago, believing his government’s assurances that the door to Iranian trade would stay open, and who now must unwind that contract at a loss he will never see mentioned in any communique. Let us follow the money a little further, and introduce the people who have been left out of the account.

The word chosen was “squash,” and it is worth pausing on, because a squashed thing does not reform itself - it simply stops functioning. An economy is not a single lever that a finance ministry can push down; it is millions of small transactions, and when you squash it from outside, you do not squash the regime’s grip on power, you squash the layer of society that depends least on the regime and most on ordinary commerce. The bazaar merchant, the small manufacturer, the family that imported medical equipment through channels now closed - these are the first to feel the weight, long before the men who control the Revolutionary Guard’s finances feel anything at all. That is the first iteration of consequence, and it is visible enough that even sympathetic observers concede it. The second iteration is less visible and more interesting.

When you squash the legitimate economy, you do not eliminate demand; you relocate it. Someone must still supply Iran with the goods its people want, and if the honest channels are closed, the dishonest ones expand to fill the space. Smuggling networks, currency black markets, front companies registered in third countries - these do not appear from nowhere. They are built, staffed, and defended by people who profit precisely because the legal alternative has been squashed. The regime the sanctions were meant to punish often ends up controlling these very networks, since only an entity with the reach and immunity of the state can operate a black market at scale and survive the enforcement efforts arrayed against ordinary smugglers. So the plan produces, in year two, not a weakened state but a state newly enriched as the monopoly gatekeeper of a scarcity it did not create but now profits from managing.

Now turn to the allies the Treasury secretary is asking to join him. Each of these governments has its own exporters, its own energy buyers, its own diplomatic relationships in the region that took years to build and can be spent in an afternoon. When a foreign minister in Paris or Tokyo agrees to squash Iran’s economy at Washington’s request, he is not spending an abstraction called “pressure.” He is spending the goodwill of his own shipping companies, the contracts of his own engineering firms, and quite possibly the safety of his own citizens who happen to be traveling in the region when tempers rise. None of this appears in the announcement, because the announcement only describes what is being done to Iran. It says nothing about what is being asked of Lyon or Osaka, and it certainly says nothing about the years those cities will spend rebuilding relationships that a single press conference can unravel.

I do not say this because I think tyranny should go unanswered - I have never argued that a candlemaker’s petition against sunlight deserves respect merely because it is sincere, and I will not argue that a hostile regime’s grievances deserve respect merely because sanctions are painful. I say it because a policy that is celebrated only for what it visibly punishes, and never examined for what it invisibly builds - smuggling empires, black-market fortunes, resentments in allied capitals - is not a strategy. It is a transaction in which someone always pays, and the reporting has simply not yet introduced you to who.

Ask yourself, when the currency chart is shown next month with satisfaction, who is standing just outside the frame, counting money the sanctions handed him.