The US Treasury moved Friday to cut the UAE branches of Egypt’s Banque Misr off from direct access to the US financial system over alleged dealings with Iran, marking the first major action in Washington’s new “Economic D-Day” campaign against Tehran.
The Treasury’s Financial Crimes Enforcement Network proposed barring Banque Misr’s six UAE branches from correspondent banking access to US financial institutions, restricting their ability to conduct dollar transactions.
Treasury estimates the branches processed about $1.8 billion in transactions between January 2024 and June 2026 for 103 companies potentially linked to Iran’s shadow-banking networks, describing the operations as a “critical node” in Tehran’s access to US dollars.
“Treasury promised to sever every economic lifeline Tehran has left and finally end the threat of the Iranian regime,” Treasury Secretary Scott Bessent said.
“We also warned that Iran’s enablers cannot continue to enjoy access to the US dollar and the global financial system,” he added. “Banque Misr UAE decided to find out the hard way.”
Bessent had previewed a “major announcement” involving secondary sanctions against an international bank earlier this week as he launched what Washington has called an “Economic D-Day” against Iran and institutions that facilitate its trade.
The measure is narrower than Bessent’s warning initially suggested. It applies only to Banque Misr’s UAE branches, leaving its Cairo headquarters and branches in countries including France, Germany, Saudi Arabia, Lebanon and Djibouti able to continue conducting dollar transactions.
The proposed restriction is also subject to a 30-day public comment period before taking effect.
The Financial Times said the limited scope highlighted Washington’s reluctance so far to target major Chinese banks and other large financial institutions involved in financing Iranian trade, amid concerns over potential disruption to global markets and retaliation.
China remains particularly important to Tehran. Chinese purchases of Iranian oil account for about 45% of the Iranian government budget, according to the US-China Economic and Security Review Commission, cited by the FT.
The Treasury separately sanctioned Reza Mohammad Taeedi, general manager of Iran’s Bank Melli branch in Dubai, as well as a Hong Kong-based company it accused of helping launder money for a sanctioned Iranian exchange house.
Banque Misr UAE did not immediately respond to a Reuters request for comment on Friday, while Reuters said it was unable to reach Taeedi.
The measures come as Washington seeks to intensify economic pressure six months into its war with Iran while avoiding measures that could cause wider financial disruption. Iran has urged other countries not to participate in the new US sanctions campaign.
The activity is an early test for Operation Economic Outcast, the Trump administration’s campaign to cut Iran off from global finance, trade, aviation and shipping. Treasury Secretary Scott Bessent has warned that foreign entities continuing to deal with Tehran could face US penalties, while Washington has initially given governments and companies a short period to wind down ties.
Yet the Journal found little visible change in Dubai this week.
Bank Melli Iran, which Bessent specifically called on foreign governments to close, was still operating its two Dubai branches. At its multistory Deira location, about a dozen tellers continued serving Persian-speaking customers after the US announcement.
Employees said they had received no order to close. Bank Melli has operated in the UAE since 1969, before the country was established, and Dubai’s ruler inaugurated its first branch.
“We put our trust in God on what happens next,” one employee told the Journal.
Iranians in Dubai said they were preparing alternatives if banks eventually close, including the centuries-old hawala system, which moves money through trusted intermediaries without conventional cross-border transfers. So far, they said, that has not been necessary.
The situation contrasts with a crackdown earlier in the war, when the UAE closed the Iranian Hospital and Iranian Club, temporarily barred Iranian passport holders from entering or transiting the country and canceled some visas, including those of long-term residents traveling abroad.
The hospital and club remain closed, but Iranians told the Journal that widespread visa cancellations appear to have stopped and some visas have been restored.
Iranian airlines also continue regular direct flights to the UAE. Emirates, Etihad and FlyDubai are not flying directly to Iran, although some services use Iranian airspace. Iranian restaurants and cafes in Dubai remain open.
That activity sits uneasily with the UAE Foreign Ministry’s announcement last week that it was halting trade, commercial exchanges and financial transactions with Iran.
The UAE was Iran’s second-largest trading partner before the war, with bilateral trade of around $27 billion annually, about 80% of it Emirati exports to Iran.
The relationship extends far beyond official trade. Hundreds of thousands of Iranians live in the UAE, particularly Dubai, gaining access to global finance and freedoms unavailable under the Islamic Republic while bringing billions of dollars in Iranian capital into the Emirates.
Those links have survived despite Iran firing more than 2,800 missiles and drones at the UAE during the war, according to the Journal.
Chatham House associate fellow Neil Quilliam told the Journal that UAE economy is ”so closely integrated and intertwined with the Iranian economy, you can’t just simply sever economic trade and activity overnight.”
The US has long focused on Dubai’s role in Iranian finance. Former Treasury official Matthew Levitt said the UAE has the second-largest number of US-sanctioned individuals and companies linked to Iran after China.
A US Treasury Financial Crimes Enforcement Network study cited by the Journal found Dubai-based companies moved $6.4 billion in potential Iranian shadow-banking funds in 2024, accounting for 71% of the global total identified.
The first Operation Economic Outcast sanctions targeted nearly 60 Iran-linked people, companies and vessels operating across countries including the UAE, China, Singapore and Switzerland.
Washington nevertheless faces its own dilemma. The UAE is a major US security partner, provides military basing access, invests heavily in sectors including artificial intelligence and was a principal Arab signatory of the Abraham Accords with Israel.
Dubai, unlike oil-rich Abu Dhabi, also depends heavily on trade, finance and foreign capital.
“There will be some in the UAE who say, ‘Whatever the price of calm, that is what we need to do,’” Levitt told the Journal, suggesting some officials may regard continued Iranian access to banking and supply chains as preferable to greater confrontation.
Iranians in Dubai also fear the prolonged war could weaken the UAE economy, cost them their jobs and force them back to Iran. Some have already moved to third countries.
The German Foreign Ministry, responding to questions from Iran International, said Bank Melli and its Hamburg branch were already covered by wide-ranging EU restrictions.
“Bank Melli Iran is already subject to far-reaching sanctions at EU level, and this of course also applies to Bank Melli's branch in Germany,” the ministry said.
The ministry did not say whether Germany was considering closing the Hamburg branch or whether Washington had formally asked Berlin to do so.
US pressure
The questions follow US Treasury Secretary Scott Bessent's launch earlier this week of “Operation Economic Outcast,” a campaign aimed at cutting Iran's financial and commercial links abroad.
Bessent specifically targeted Bank Melli, saying “every Bank Melli branch must be shuttered.”
The German Foreign Ministry said Berlin had taken note of Bessent's announcement and remained in talks with Washington and other partners.
“The federal government has taken note of US Treasury Secretary Bessent's announcement and is in constant contact with the US as well as other partners in the EU and in the region regarding further measures against Iran,” it told Iran International.
Berlin gave no indication in its response that a decision had been made on the future of the Hamburg branch.
EU sanctions
The European Union reimposed nuclear-related sanctions against Iran in September last year after France, Germany and Britain triggered the snapback mechanism the previous month.
The measures restored asset freezes on listed Iranian entities and broader restrictions on trade and financial activity.
Bank Melli is explicitly listed under the EU measures along with all its branches and subsidiaries.
EU documents describe Bank Melli as Iran's largest bank, owned and controlled by the Iranian government, and say it provides services to the Ministry of Defense and Armed Forces Logistics.
Under the sanctions, funds and economic resources belonging to or controlled by listed entities must be frozen, and funds or economic resources generally cannot be made available to them directly or indirectly.
EU rules also restrict transfers involving Iranian banks and their branches, while providing exemptions and procedures under which competent authorities can authorize certain transactions.
German oversight
The German Foreign Ministry said the Bundesbank was responsible for implementing EU and UN financial sanctions under Germany's foreign trade framework and referred questions about banking supervision to BaFin.
The Bundesbank says its Financial Sanctions Service Center is Germany's authority for implementing restrictions on capital and payments.
BaFin declined to comment to Iran International on possible measures involving Bank Melli, citing legal confidentiality requirements concerning individual financial institutions.
The regulator told Iran International that Bank Melli remained in its official database and said any final measure that could legally be made public would be published on its website.
BaFin has previously acted against the Hamburg branch.
The regulator said in October 2021 that it had imposed a credit ban on the branch on September 7 of that year after finding that it had breached the four-eyes principle required under German banking rules.
Iran International has also asked the Bundesbank how the restored EU sanctions are being implemented in relation to Bank Melli's Hamburg branch. The central bank had not responded by the time of publication.
For now, Germany has confirmed that EU sanctions apply to the branch but has not said it plans to close it, even as Washington presses foreign governments to shut Bank Melli operations abroad.
The US president told Al Jazeera he had set no deadline for ending a conflict now in its seventh month.
"I have no time schedule, none," he said, calling economic warfare and military strikes against Iran "both effective."
His remarks followed Monday's launch of Operation Economic Outcast, a Treasury campaign that named nearly 60 Iran-linked individuals, entities and vessels and widened the threat of secondary sanctions against anyone still doing business with Tehran.
Iran points to economic toll
Iranian officials are now describing the pressure in language they avoided for months.
President Masoud Pezeshkian said Iran was facing "the worst conditions of an economic war." Executive Vice President Mohammad Jafar Ghaempanah said domestic gasoline production was insufficient and the US naval blockade was preventing imports.
“Continuing on this path is impossible,” Ghaempanah said.
Tehran is fighting the campaign diplomatically as well. Foreign Minister Abbas Araghchi called on the United Nations to condemn Operation Economic Outcast as "economic terrorism," saying its purpose was to sever Iran's lawful economic ties through secondary sanctions and exclusion from the US financial system.
The confrontation has also pulled in Beijing. China said on Tuesday that its economic cooperation with Iran was conducted within international law and should not be disrupted, rejecting what it called illegal unilateral sanctions.
Parliament Speaker Mohammad-Bagher Ghalibaf welcomed that position, saying Iran-China ties "need no one's permission."
Hormuz remains the leverage
While conceding the economic damage, it also showed no sign of softening its position on the Strait of Hormuz.
Revolutionary Guards spokesperson Hossein Mohebi said Iran and Oman had reached understandings on their respective shares of the strait's waters and revenues after about a month of talks.
That went further than the joint Iranian-Omani statement issued on Tuesday, which announced an interim framework for a temporary shipping corridor and joint mine-clearing but said nothing about revenues. A senior Iranian source told Reuters on Wednesday that no final agreement had been reached.
The effect on shipping was visible the same day. An Indian tanker attempting the southern route through the strait turned back after an Iranian warning, according to the Revolutionary Guards-affiliated Fars news agency, which said the route had carried no traffic in the previous 24 hours.
Mohebi set the price plainly. "If the United States stops obstructing and returns to the memorandum, we can reopen the Strait of Hormuz within the framework of the understanding reached," he said. Otherwise, he said, it stays closed.
Diplomacy continues in parallel
Regional governments are still working to keep a route open.
Qatar's prime minister and foreign minister, Sheikh Mohammed bin Abdulrahman Al Thani, travels to Tehran on Thursday for talks on reducing tensions and creating conditions for dialogue.
Qatar said the discussions would cover freedom of navigation in the strait and efforts to restore the conditions that prevailed before February 28, when the 40-day war began.
Washington continues to describe a negotiated outcome as preferable even while expanding the economic campaign.
US Energy Secretary Chris Wright said on Wednesday that the administration's "strong desire" was to end Iran's nuclear program through negotiations and inspections administered by the International Atomic Energy Agency.
"Our number one objective is they will not possess nuclear weapons," Wright said. "If we can do it through negotiation and inspections, that is absolutely the desired way."
He added that Washington was prepared to destroy Iran's nuclear facilities and industrial capacity by military means if necessary.
