The latest sanctions imposed on Iran by the Trump administration—said by Tehran to be so restrictive on Iranian banks’ participation in the global financial system that they will “blow up” remaining channels for the Islamic Republic to pay for food and medicine imports—may not amount to so much, according to Brian O’Toole, a former senior adviser to the director of the US Treasury’s Office of Foreign Assets Control (OFAC).

Writing for the Atlantic Council think tank, where he is a nonresident senior fellow with the Atlantic Council’s Global Business and Economics Program, O’Toole said: “The latest round of sanctions, somewhat predictably, are more window dressing than anything of strategic import, as Iran’s banking sector was already subject to a substantial level of sanctions. Instead, the sanctions may be more directed at creating difficult conditions for the resumption of the Iran nuclear deal under a potential Joe Biden administration. However, that is not to say that there will be no impact. Indeed, the Iranian rial fell even further against the US dollar in the aftermath of the sanctions—an event that harms ordinary Iranians as well as the government. Policy actions like these are a continuation of a foreign policy toward Iran that appears characterized by spite rather than achievable policy ends.”

The October 8 sanctions targeted 16 Iranian banks for operating in Iran’s financial sector and one for weapons of mass destruction (WMD) proliferation. Secondary sanctions now apply to all large Iranian banks—only primary sanctions had applied to these banks before under a separate sanctions executive order. “This may seem like a major escalation, but most international trade with Iran was already subject to secondary sanctions in practical terms, so the effect of those newly relevant secondary sanctions is likely to be limited,” O’Toole added.

He also observed that foreign trade for Iranian entities requires access to foreign currency reserves, most of which are held by the heavily sanctioned Central Bank of Iran (CBI). “It is possible that these newly-sanctioned banks were able to conduct some smaller trade transactions without tapping the CBI—and therefore bringing US secondary sanctions into play—but at a strategic level it is hard to understand how these banks could be conducting any significant trade in areas covered by US secondary sanctions anyway,” O’Toole said, adding: “Finally, Iran’s malign activity was already subject to secondary sanctions, so this action will do nothing to curb Iran’s ballistic missile development, support for terrorism, and other troubling behavior.”

One other area where there is unknown impact, said O’Toole is whether any of the banks sanctioned will be cut off from the world’s predominant bank-to-bank messaging system, the Society for Worldwide Interbank Financial Telecommunications (SWIFT). “The United States has secondary sanctions that target financial messaging services to banks that have been sanctioned for terrorism or WMD reasons. De-SWIFT-ing has long been a rallying cry in the sanctions world, but it is hardly the silver bullet many presume it to be. Not having access to SWIFT can make communications more difficult for banks, but is not crippling, especially for banks that have been subject to sanctions for so long,” assessed O’Toole.

He added: “It is clear that these financial messaging sanctions apply to the one bank designated under WMD authorities—Hekmat Iranian Bank. Some commentators have pointed to the reference in the underlying sanctions executive order used to target the other sixteen as a justification for extending this prohibition. The Treasury Department did not address the issue in its press release or written guidance, but I am skeptical that such sanctions will apply.”

O’Toole concluded: “All in all, the above [situation as described in the analysis] hardly seems ‘crippling’ or indicative of impending economic collapse. Instead, the real goal with this action may have been to appease those in Congress calling for tougher action and to complicate any attempt by a prospective Biden administration to re-enter the Joint Comprehensive Plan of Action (JCPOA). The Biden campaign has made clear that if Iran returns to compliance with the nuclear commitments under the JCPOA, a Biden administration would also return to compliance by lifting sanctions enumerated in the deal.”