From Oil to Oman: 10 Ways to Economically Cripple Iran’s War Machine

Now is the perfect time to tighten the financial thumbscrews on Iran. The clerical regime has been significantly weakened by the unprecedented Israeli and U.S. military attacks on the Islamic Republic in June. Still, Tehran has the capability to rearm and rebuild its nuclear weapons facilities, and that means Washington should now target the Islamic Republic’s sources of cash, materiel, and international support. Here are the top 10 ways the United States should economically cripple Iran’s war machine.

1. The U.S. should deny the regime oil revenue by cutting off Chinese buyers.

Approximately half of Iran’s oil export revenue goes to the country’s military, funding nearly half of its military budget in 2024. Independent Chinese “teapot” refiners purchase about 90 percent of Iran’s oil exports. The U.S. Treasury Department has sanctioned multiple Chinese refineries and port terminal operators in 2025 for facilitating this trade, but more decisive action is needed.

Targets could include large conglomerates such as Wanda Holdings Group, which operate fully integrated vertical supply chains built in part on Iranian oil. Treasury sanctioned Wanda’s subsidiary Shandong Baogang International Port Co., Ltd. (BIPC) in May, yet other Wanda companies linked to BIPC remain undesignated.

Via closed pipelines, Wanda moves Iranian oil through BIPC to wholly owned subsidiary refineries like Shandong Tianhong Chemical Co., Ltd., which then sends derivative chemical products to Shandong Keluer Chemical Co., Ltd., a majority Chinese state-owned joint venture between Sinopec and Wanda. Washington should sanction these entities.

2. The U.S. should target the Chinese banks enabling Iran’s oil economy.

The United States must sanction the Chinese banks facilitating prohibited dealings with Iran. Additionally, senior Treasury officials should conduct targeted outreach to banks in foreign jurisdictions that may be enabling the flow of Iranian oil to China. This outreach should include providing evidentiary overviews of declassified intelligence that concretely demonstrates how certain banks are engaging in sanctionable activity, and advice that if they do not change, the United States will swiftly impose sanctions on these malign financial actors.

Treasury’s efforts should begin with foreign counterparts in jurisdictions where leaked documents suggest banks may be facilitating dealings involving Iranian oil, including Hong Kong, the Netherlands, Qatar, the United Arab Emirates, Malaysia, Singapore, Oman, Turkey, and the United Kingdom.

3. The U.S. should sanction the Chinese chemical manufacturers supplying Iran with missile fuel.

Without missile fuel, Iran’s ballistic missiles would sit dormant. Chinese companies help make sure they stay ready to fire. In June, Iran reportedly ordered thousands of tons of a fuel precursor, ammonium perchlorate, from Chinese suppliers, which Western officials estimate is enough to fuel 800 Iranian missiles. Months earlier, a report highlighted two Iranian ships docked in China loaded with enough chemical precursors to produce fuel for around 260 mid-range Iranian missiles.

The United States should sanction the Chinese manufacturers providing precursor chemicals to Iran. Washington should also consider designating transactions involving Chinese ammonium perchlorate and another precursor, sodium perchlorate, as a primary money laundering concern, pursuant to Section 311 of the USA PATRIOT Act. This would require firms to provide additional reporting to Treasury on the nature of the transactions.

4. The U.S. should cut off the ports and banks dealing in Iranian missile fuel.

Once produced in China, the compounds and precursor chemicals used for ballistic missile fuel production are loaded onto vessels, passed through foreign ports, and paid for by Iranian intermediaries in cash or oil. Treasury has targeted multiple entities and individuals involved in this illicit flow from China to Iran, but Washington has yet to specifically designate any Chinese financial institutions or other systemically significant financial intermediaries. The United States must target the relevant logistics chain and financial enablers by designating the shippers, port operators, and banks facilitating these transactions.

5. The U.S. should shut down Iraqi oil smuggling.

Beyond China, Washington must combat the threat of Iran’s oil smuggling networks within Iraq that generate the regime an estimated $1 billion per year. This effort would entail moving beyond high-level talks with Iraqi officials to designating Iraqi state-owned entities and political leaders who authorize and facilitate such schemes.

Earlier this month, Treasury designated a network of companies and an individual responsible for smuggling blended and rebranded Iranian oil through Iraqi channels. This is a step in the right direction, prompting attention from Iraqi legislators concerned about the potential for more sweeping sanctions. Unfortunately, it fails to materially address the level of direct and indirect support Iraqi officials provide for this illicit trade. In addition to leveraging Iran-related sanctions authorities, the United States should consider imposing Global Magnitsky Act sanctions on Iraqi officials whose corruption threatens the country’s future.

6. The U.S. should crack down on Iraqi banks supporting Iran.

Iraq’s banking system plays a significant role in facilitating Iranian access to the Western-led global financial system. Iraq’s largest state-owned financial institution, Rafidain Bank, stands accused — most notably by U.S. Rep. Joe Wilson (R-SC) — of laundering billions of dollars for the benefit of Iran and its proxies. Iran-aligned businessmen use fraudulent invoices and nominee buyers to extract hard currency from Iraq’s financial system — money that is then rerouted across the region to support Iran’s Islamic Revolutionary Guard Corps.

While the Central Bank of Iraq has acted in response to pressure from the United States by banning at least 30 local banks and payment service firms from engaging in dollar transactions due to their ties to Iran, more can be done. Washington should impose sanctions on these firms, with Treasury issuing narrowly tailored general licenses as necessary to engage with sanctioned Iraqi banks and prevent a crisis from emerging in the country’s turbulent banking sector.

7. The U.S. should sanction Hezbollah’s financial infrastructure in Lebanon.

Lebanese Hezbollah provides another conduit for laundering Iranian funds. Watchdog groups continue to flag Lebanon as a jurisdiction of primary money laundering concern and have called for its designation as such under Section 311 of the USA PATRIOT Act. Sanctioned Hezbollah-linked entities such as Al-Qard Al-Hassan (AQAH) move funds through Lebanon’s exchange house sector and operate in the gray zone between regulated and unregulated financial institutions.

Treasury should engage with potentially unwitting Lebanese financial institutions and implement information-sharing agreements with them to disrupt the flow of funds benefitting Hezbollah. Treasury should also sanction banks, such as the Middle East & Africa Bank (MEAB), that appear complicit in supporting Hezbollah. MEAB is implicated in a lawsuit brought forward by American families of terror victims and open source reports as supporting AQAH. Washington should also sanction MEAB chairman Ali Hejeij for providing material support to AQAH.

8. The U.S. should disrupt proxy financing in Gaza and Yemen.

Washington has sanctioned Iranian-linked and terror-enabling Gaza-based firms such as Al-Markaziya Li-Siarafa and the Arab China Trading Company, as well as sham charities, including the Gaza-based Al Weam Charitable Society. These entities exemplify how Iranian proxy funding to Gaza often travels through networks of exchange houses and front companies by exploiting regulatory gaps in countries such as Turkey that serve as illicit finance hubs. Combating this threat will require greater due diligence from U.S. correspondent banks.

Meanwhile, Iran’s financial linkages to Yemen serve as a major access point to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network. Treasury sanctioned the International Bank of Yemen (IBY) in April, noting that the bank “is controlled by the Iran-backed Houthis and provides the terrorist group access to the bank’s [SWIFT] network.” Still, Washington can do more by designating financial institutions in Houthi-controlled territory, including the Central Bank of Yemen (Sanaa).

9. The U.S. should pressure Qatar to counter terrorist financing.

Qatar is a major non-NATO ally with whom the United States has agreed to jointly combat terror finance. Nevertheless, Qatar provides safe harbor and refuge to some of the world’s most prolific terrorist financiers, including those at the highest levels of Hamas leadership. However, according to the latest assessment from the Financial Action Task Force (FATF), Qatar has not prosecuted a terrorist financier since at least 2018. The United States should demand more from Qatar and threaten to label the country a jurisdiction of primary money laundering concern pursuant to Section 311 of the USA PATRIOT Act, absent a significant course correction. The United States should also push for Qatar’s inclusion on the FATF grey list of countries requiring increased monitoring.

10. The U.S. should disrupt Omani support for Iran and its proxies.

Oman is emerging as both an enabler of Iranian illicit financial flows and a key transshipment point for Iranian proxy weapons smuggling. In May, during a visit to Oman, the governor of the Central Bank of Iran discussed the prospect of jointly establishing a bank with Oman to “increase banking and trade exchanges.” According to the central bank governor, improved political ties between Oman and Iran “will certainly help … open new monetary and banking horizons.” These appear to include “easier financial settlements and direct cash exchanges” and “the issuance of bank guarantees for Iranian and Omani traders.”

Washington should disrupt any attempt by Oman to facilitate trade with Iran by presenting Muscat with a pre-approved list of strategically significant sanctions targets that the United States will designate should Oman not change its position.

Max Meizlish is a senior research analyst for the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD), where Susan Soh is a research associate. For more analysis from Max, Susan, and FDD, please subscribe HERE. Follow Max on X @maxmeizlish. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.