Can an ‘Economic D-Day’ End the Iran War?

0:05This week marks six months since the war with Iran started. A war that the U.S. launched along with Israel and that President Trump initially said would last only weeks. Right from the beginning, we projected four to five weeks, but we have capability to go far along. Now, as the war carries on with no end in sight, the U.S. announced the beginning of a new phase, one led by Treasury Secretary Scott Besant. In the Second World War, D-Day marked the historic beginning of a campaign with our allies to target and drive the enemy from its positions, including those... Yesterday, Besant held a highly anticipated press conference to announce what he called an economic D-Day on Iran.

0:54In that same spirit, we are launching an economic onslaught against Iran's financial connections around the globe. It was billed as a key moment in the larger war against Iran. There were dozens of reporters there. That's our colleague Brian Schwartz, who reports on economic policy. It was supposed to be this moment for Secretary Pesant to kind of take a leading role in shaping how the U.S. was going to respond against Iran's economy.

1:31And I mean, what do you make of the comparison with D-Day? Well, I mean, D-Day, you think of, you know, Americans running on the beaches of Normandy, fighting the Nazis. This is a momentous hour in world history. This is the invasion of Hitler's Europe. I don't think this is an apt comparison, but if you're the Trump administration, you need to show the world that you're willing to go pretty far in taking on Iran. And this is the latest piece of that. Our objective is to sever every economic lifeline that sustains this tyrannical regime until Tehran stands alone. Besson threatened the countries and entities still doing business with Iran with a new set of sanctions.

2:19We know who they are. They know who they are. So when the hammer of U.S. Treasury actions falls upon them, they will have no one to blame but themselves. I think there's this sense that the military campaign is only doing so much to bring Iran to the table. The Chinese secretary and the president are moving to do this, which is kind of put an economic stranglehold on Iran in the hopes that they'll cry uncle and give in to the U.S.'s demands.

2:51Welcome to The Journal, our show about money, business and power. I'm Jessica Mendoza. It's Tuesday, August 25th.

3:04Coming up on the show, can this economic D-Day end the war with Iran? Thank you.

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4:56Brian, as we've said, the war on Iran's been going on for months. Why make this announcement now? I think the administration's on a little bit of political pressure. You know, we're heading into the midterms at a few months. This war is not really popular. Gas prices are still up. In most cases, when I filled my tank to the day, regular gas was like somewhere around$4.45. That's right. You know, so that's why I think they pushed out this idea of this being the next phase and trying to take on that country. So far, the U.S. has struggled to bring the war to an end. A ceasefire that had been set up in June expired last week, without the countries reaching a peace agreement.

5:37The Strait of Hormuz is operating at a fraction of what it was before the war began. In the meantime, according to Wall Street Journal reporting, the U.S.'s munition stockpile is running low. A spokesperson for the White House disputed that there was a shortage. Still, Brian says the administration is moving in a different direction. I think it comes down to questioning how much of an impact the military strategy has had, right? There's a big difference between using strikes and negotiations ongoing versus using strikes and negotiations ongoing. And there's a result at the end of that where there's substantive deal, the actual deal that the two countries can be satisfied with.

6:16So since that seemingly isn't entirely working, in comes Secretary Bestin's concepts of let's try to put an economic stranglehold on a run. OK, let's return to this economic D-Day announcement. What details did Besant lay out in terms of these new sanctions? What were we able to take away from that press conference? So there's a few things. He announced that there was over 60 entities, individuals and the like, who are under these newer sanctions. Even though Iran has already been heavily sanctioned, the regime still has various trading partners around the world, helping to keep its economy afloat.

6:54They enable Iran to access nuclear and missile technology, carry out cyber operations, and earn revenue from oil. The administration is now sanctioning over 60 of those partners and threatening more on anyone still doing business with Iran, all with the goal of cutting off Iran's remaining economic lifelines. Treasury has mapped every node, every facilitator, and every network that Iran has used to smuggle oil and evade sanctions. The Treasury has a lot of tools in the tool chest to investigate these companies, these people and the countries at large. It's only just a question of whether these kind of scare tactics by the Treasury Department is going to work to push back on some of these people or countries themselves.

7:42It didn't sound like the Treasury Secretary named any names. No, he did not. Is there a sense of why? No, he didn't name anyone. And that was that was a little surprising to me, to tell you the truth.

7:58The fact that Besant didn't name China in particular stood out. China is Iran's biggest trading partner, and usually its number one buyer of oil exports. But Washington so far has been reluctant to seriously confront Beijing over its support for Iran. If he tried to levy sanctions on China or China-related entities that do business with Iran, that's a big deal. But that is a little bit complicated right now because the president is trying to have a stronger relationship with China. And despite all the back and forth with China and threatening trade wars and all that, the president really does, from everything he has said publicly, wants to have a better relationship with China than previously.

8:39Besant was asked about China during yesterday's press conference. Is the very delicate trade truce with China something that could prohibit you from going that far and taking that very big step? We want to make clear here today that no one is above the reach of U.S. sanctions. That if they facilitate transactions and are part of the ecosystem that turns Iranian oil into money, into repression, they will be targeted. A Chinese foreign ministry spokesman said that economic warfare will only heighten tensions and could disrupt the global economy. Another thing Besant said was that President Trump is going to be making phone calls to world leaders to kind of request or ask that they stop doing business with Iran.

9:29Do you see that moving the needle? I did find it notable that he disclosed that. That was interesting. I don't think I've ever seen that reported elsewhere. The president was making direct phone calls to world leaders say, please don't do business with Iran. You know, the president has a, to be fair to him, a really unique relationship, especially with NATO and various European allies, that at least they're going to take his call and hear him out. Now, are they going to necessarily go about and do exactly what he wants? I don't think so. I think there's still going to be pressure on him from various people around the world to get this sorted out quickly.

10:01Because so many countries need the straighter for moves to be operating at full speed for their countries to thrive. Another demand that Peasant made of countries around the world was to stop working with Bank Melly, the state-owned Iranian bank. It has branches in several European countries and across the Middle East. Every branch of Bank Malay must be shuttered and dark. He made that extremely clear, that the financial institutions that are based in Iran, at least one of them, that have branches all around the world in various parts, all of those branches have to close. That really stood out to me because it suggests that that aspect of Iran's economy might be a big target by the United States.

10:47How big an ask is that of other governments? Yeah, I think it's a big deal. Now, I guess the follow-up would be, well, if a country doesn't force these branches to shut down, what exactly is the Treasury Department going to do? And how are they going to handle that? I'm not so sure about what they could do, but it's a toll order if even some of those branches get shut down because of the Treasury Secretary's demands. Even before Besant's press conference, Iran's top security official had said that Iran will regard any country's support for Washington's economic campaign as an act of war. So Iran's leadership are making it clear that effectively everything that the Treasury Secretary said was bluster, in their opinion, and it's not going to hurt their economy.

11:36What is going on inside Iran's economy? That's next.

12:12Transcription by CastingWords Ask yours at claude.ai slash the journal.

12:24U.S. sanctions have been hurting Iran's economy for decades. And since the war began, conditions have only gotten worse. In that situation, it's really kind of desperate times. They have the equivalence of a survival economy, right? They have an economy that is rationing scarce goods and limiting access to foreign currency, slashing investment. And that's according to analysts that The Wall Street Journal has spoken with. Can you break that down a little bit more? Well, it feels like politically, I mean, that they, from everything I've seen, that they, every time one of these sanction packages comes down, they kind of publicly just kind of brush it off.

13:05I mean, I don't know how else to put it like this. I feel like they show the world, in their opinion, that they can survive these things. And to be fair to them, they have been able to survive. For the Iranian people who have to live with this situation, it's become increasingly difficult to make ends meet. Poverty is rising. Inflation has skyrocketed. The price of milk has more than doubled. And chicken prices have nearly tripled. But when you also look at how the Iranian people are responding, there's no real significant uprising here. I mean, what are the leaders of that country going to do?

13:42Well, they're going to double and triple down on their issues with the United States. That's just politics. Right. It doesn't seem like the economic pressure thus far has pushed Iranian leadership closer to wanting to end the war on the U.S.'s terms, at least. That's right.

14:02Earlier this month, Iran reshuffled its leadership and elevated some veteran hardliners. According to Wall Street Journal reporting, these new leaders are less likely to support negotiations with the U.S. So in terms of these sanctions, at least these new ones, how likely does it seem that they will ultimately lead to Iran capitulating? If they go through with the threats they made at the press conference, then Iran could be in a little bit of trouble here. because when you're being isolated in a war or if there's an attempt to isolate you as a country in a war, but again, you're still negotiating with other countries for various goods and deals and you're surviving through that, that still puts you in a good position.

14:47But if these sanctions that the trade secretary teased out in this press conference come to fruition, that would be a significant blow to their economy. What options would Iran have for retaliation? Well, it would be maybe trying to pressure the United States again through the straight of the moods. You could see Iran trying to strike more at Israel than they already have. You could see Iran trying to strike various military bases more than they already have, because that is something that they have somewhat of an advantage of. They are in proximity to various military bases and battleships that they could strike at any time.

15:20And the U.S. could counter and we could go back and forth on this again. Right. Wouldn't that just sort of then send the U.S. back into a military fight? It could. We could be right back to where we started again if Iran does that. This week, two more oil tankers in the region were struck. The first was claimed by the Iran-backed Houthi militia in Yemen. No one immediately claimed responsibility for the second attack. You said earlier that the administration announced this new phase of the war in part because of pressure from the upcoming midterm elections. Do you get the sense that the Trump administration is trying to delay more military action until then?

15:56Well, I think that they're trying to find better solutions to a problem that was their own creation. I mean, they are in a political logjam right now. They have to find a way to get Iran to come to the table and get to some conclusion, at the very least, around the oil prices. And that goes back to straighter from one. So they have to figure that out in their view quickly because of the midterms coming up.

16:25so six months in you know how far is all of this from what the president seemed to think would happen when the u.s and israel first started doing military strikes against iran you know the president put out a lot of true social posts said a lot of things that he seemed to believe that the the conflict with iran was going to mirror what happened with venezuela as an example right you just go in there you hit the country take out their leadership. And unfortunately for the president, that has not happened here. So now he's kind of in this difficult position, right? What do you do? Do you do you keep on with a military conflict and try to hope their economy depletes by hitting their buildings and wherever else?

17:08Or do you try to go and do this differently through the Treasury Department? And that's why I think he's going with Scott Besson's ideas at this point. What has been most interesting to you about this development in this story, Brian. Well, I think what's interesting is that he's turning to the Treasury Secretary for this. It speaks to how much the president trusts Scott Bessett. Now, the problem is, is that if this doesn't pan out, the president is going to have to hold somebody accountable. And that may end up being the Treasury Secretary. So he's going to be in a little bit of a box here to decide and decipher how this is going to go and be as effective as it could be.

18:01That's all for today, Tuesday, August 25th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by John Emont, Rory Jones, Georgi Konchev, Hena Musavi, Lawrence Norman, Summer Saeed, and Alexander Ward. Thanks for listening. See you tomorrow.