US says Hezbollah takes orders from Iran, must disarm

The regime needs hard currency to defend the rial, pay its military and security forces, and keep salaries, pensions, and subsidies flowing. Reports from across the country already describe wages months in arrears, delayed pension payments, and near-daily protests by workers and retirees.

It also needs imports that can physically arrive in the country. China provides neither, with its overland rail corridor being marginal next to the seaborne trade the blockade cut off.

When the Islamic Republic sells oil to China it is paid in yuan, which it already had more than it could spend before the blockade was in place.

The lifeline that China provides to the Iranian regime has proven to be not as helpful in a crisis. While China buys almost all of Iran’s oil, is the largest supplier of the consumer goods Iran imports, and supplies the components that built the regime’s weapons systems, those transactions are entirely on China’s terms.

The relationship is structured around what China wants: the Islamic Republic isn’t paid in currency it can readily deploy. Its main revenue source is largely stuck in China in yuan and can only be swapped for imports that are blocked by the blockade.

China’s private sector is so connected to the rest of the world that it is susceptible to de-risking under pressure.

While Beijing gives cheap cover by condemning American sanctions and ordering its companies to ignore them, its real support has not escalated with the conflict, with the exception of a deniable shoulder-fired missile deal that may not have made it through.

The bank in Dubai

On Friday morning, Treasury named the bank Secretary Bessent had been promising all week, and as I predicted, it was not Chinese.

The Financial Crimes Enforcement Network proposed a rule to cut the UAE branches of Banque Misr, Egypt’s second-largest bank, off from the international financial system, saying they had processed roughly 1.8 billion dollars for 103 companies tied to Iranian shadow banking networks.

The proposal is subject to a 30-day comment period and, if finalized, would cut Banque Misr’s UAE branches off from US correspondent banking.

The choice of a UAE bank reflects that the Emirates is where the regime gets what it needs most. The hard currency comes back through Dubai, where front companies and brokers deal with the world on Iran’s behalf and exchange houses convert the proceeds into currency the regime can spend at home. Dubai functions for Iran the way Hong Kong functions for China.

The same traders supply the imports Iran cannot buy directly, Western machinery, electronics, and parts, purchased in their own name and re-exported across the Gulf. The Emirates also moved Iranian fuel oil, which it sold into the regional ship-fuel market through Fujairah, one of the world’s largest bunkering hubs, where blending stripped its Iranian identity. The blockade now cuts off the Iranian supply.

Even the oil money parked in China depends on this channel. What the regime manages to repatriate from those accounts moves through the Emirates, which is why a trade halt announced in Abu Dhabi reaches revenue earned in Shandong.

The pressure is landing on a country that has already turned against the Iranian regime. The Islamic Republic has fired missiles at the Emirates, and on August 19th, Abu Dhabi announced that all trade and financial transactions with Iran were halted.

American officials had pressed Abu Dhabi for years over the exchange houses and trading companies serving Iran, but the attacks aligned incentives between the U.S. and UAE as a shared security concern. The halt has no precedent in a country that has served as Iran’s commercial gateway for decades, and its value will be decided by enforcement.

The land border

What is of importance in Turkey is the remaining cross-border trade. Petrochemicals and metals earn less than oil, but the proceeds are in currency the regime can spend. The goods are also easier to sell, since petrochemicals and metals don’t carry the same fingerprint as Iranian crude, and can disappear across the border into Turkish plants to be resold.

Washington has designated small and mid-sized Turkish buyers of these commodities for years without meaningfully slowing the trade. The larger importers that have so far gone untouched are most susceptible to the renewed pressure campaign.

The UAE’s suspension leaves Turkey as one of the few channels the Islamic Republic has left, a major hub it can reach by land. Turkish banks are unlikely to handle displaced Iran business, especially after Halkbank’s decade-long criminal case ended this year with a deal barring Iran business that touches the U.S., after its deputy general manager went to American prison. Turkey’s banks avoid the regime’s business rather than process Iran-linked payments. After United Nations sanctions snapped back, Ankara froze the assets of dozens of Iranian entities, including Bank Sepah.

If the pressure on buyers is effective, what remains of the regime’s business in Turkey is what has always run outside the system, cash collected in Turkey and carried across the border.

Iraq’s oil and dollars

The Iran-Iraq border provides an accessible path through the blockade for the Islamic Republic to get its oil out. Iranian crude and fuel oil are blended with Iraqi cargoes, onshore and in ship-to-ship transfers at sea, and sold as Iraqi product. The smuggling earns the regime and its proxies at least a billion dollars a year. The regime collects its share of earnings from the U.S. dollars in Iraq’s own banking system.

The pressure on Iraq’s dollar system is already built and can tighten. Iraq sells its oil for dollars that are held at the Federal Reserve Bank of New York, and for years its banks drew those dollars through a central bank auction that Iranian networks used to buy hard currency. The Treasury Department and the New York Fed barred roughly two dozen Iraqi banks from that window, and at the end of 2024 the auction was shut and replaced with correspondent channels open only to vetted banks. In April, Washington reportedly blocked a shipment of nearly 500 million dollars in banknotes to Baghdad. Electronic transfers continued, and physical deliveries resumed months later.

Pressure here will take the form of policing the correspondent channel, monitoring the vetted banks and cutting off any that move money for the regime, with continued outreach to Baghdad. Iran-backed militias, which hold seats in parliament and units in Iraq’s security forces, run the oil trade across the border, a problem that has confounded policymakers for years due to the Islamic Republic’s meddling in Iraq.

But if the regime cannot turn the proceeds into dollars, the fact that oil crosses the border is less important and turns into the same problem the regime has in China.

What the Islamic Republic needs from its neighbors is what China cannot give it, money it can spend and imports that can arrive. That is why the campaign started in the Emirates rather than Beijing, and why the pressure everywhere aims at the point where the regime’s earnings become usable.

Stopping the trade at the source is not required. If the proceeds cannot be converted, the oil and goods crossing Iran’s borders earn the regime what its oil sales to China earn — money it cannot readily deploy.

The Islamic Republic has made the work easier, firing missiles at its neighbors’ cities and critical infrastructure and mining and attacking the strait its neighbors’ economies depend on. The countries that carried Iran’s business for years now have their own reasons to end it.

Published in The Guardian on August 20, the open letter addressed political prisoners facing imprisonment, torture and execution under the Islamic Republic while also condemning US and Israeli military action against Iran.

“We write in solidarity with Iran’s political prisoners, who are trapped between two blades of a scissors,” the letter said, describing one blade as the Islamic Republic’s authoritarian rule and the other as the US-Israeli military assault.

The letter called for an end to executions and the release of political prisoners, arguing that opposing foreign military intervention should not mean remaining silent about repression inside Iran.

What followed was a fierce argument, particularly among figures on the political left.

Several people initially listed as signatories withdrew their names. Historian Robin D.G. Kelley said the published version was not exactly what he had initially seen.

University of Toronto professor Nisrin Elamin said she disagreed with the content and the process through which her name was added, arguing that the letter created a “false and harmful equivalency” between Iran and Israel.

Academics Rashid Khalidi and Nadia Abu El-Haj also removed their names. Other critics went further, characterizing the letter as contributing to efforts to manufacture consent for war.

Human rights lawyer Gissou Nia said the intensity of the reaction surprised her because she regarded the original statement of solidarity as “the bare minimum.”

For Nia, the dispute is about more than a single letter. She worries that ideology and disinformation can distort how international audiences understand repression inside Iran.

“There’s been a massive problem in terms of how narratives have been constructed since January of this year,” Nia told Iran International’s English language podcast Eye for Iran.

She pointed to internet shutdowns, restrictions on independent reporting and competing accounts of the January crackdown. Nia accused some commentators outside Iran of amplifying narratives that shifted responsibility for the killings away from the Islamic Republic despite evidence implicating its forces, describing some of the rhetoric as “mass atrocity denial.”

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  At least 916 executed in Iran since January - rights group

The stakes are particularly high amid a dramatic rise in executions.

The Abdorrahman Boroumand Center for Human Rights in Iran documented over 900 executions in the first seven months of 2026, including 56 on political or national-security charges. Its database now lists 967 reported executions this year.

Political prisoners welcome attention, with reservations

Roya Boroumand, executive director of the Abdorrahman Boroumand Center, said some former political prisoners she works with were pleasantly surprised to see prominent figures in Western academia and on the left publicly acknowledge their plight.

But the response was not without criticism.

Some felt politics weighed too heavily in the letter and questioned comparisons between their experiences under the Islamic Republic and injustices in Western countries. Others asked why China and Russia were absent if the principle was solidarity with prisoners more broadly.

Still, Boroumand said support for Iranian political prisoners should be welcomed rather than subjected to an ideological test.

“You can't criticize people for doing the right thing because the victims they are talking about are not the right victims in your politics,” she said.

Boroumand said political imprisonment can follow Iranians long after they leave a cell. Prisoners may endure physical and psychological torture and lose jobs, educational opportunities and their health. After their release, they may remain under state surveillance, while their relatives can also face pressure over their activities.

Even exile does not necessarily end it. Former prisoners can receive calls from interrogators and see relatives inside Iran summoned over social media posts made abroad.

“You have to face the people who say you don't exist or you don't matter,” Boroumand said.

Why Iran becomes an ideological argument

Journalist and author Jay Solomon said the backlash should also be understood through the ideological legacy of Iran’s 1979 revolution.

For parts of the anti-imperialist left, he said, the revolution came to symbolize a historic defeat for US power. The Islamic Republic later cast itself as a leading opponent of the United States and Israel, creating a political framework in which criticism of Tehran can be seen as weakening that broader struggle.

Solomon said he was struck by the “callousness” of some responses, which he interpreted as effectively asking political prisoners to accept their suffering for the sake of a broader geopolitical cause.

He also pointed to a political purity test in which criticism of the Islamic Republic can quickly generate accusations that critics are serving Western or Israeli interests. Solomon compared the dynamic with other ideological movements that became increasingly intolerant of internal criticism.

That rhetoric is particularly significant in Iran, where authorities themselves have long portrayed dissidents as agents of foreign powers.

For Iran’s political prisoners, the debate is anything but theoretical. They are living through an escalating campaign of executions and repression while arguments continue abroad over how their suffering should fit into competing political narratives.

“Solidarity is really being in solidarity with people and their plight,” Nia said, “regardless of the politics.”

Shipping between Dubai Creek and Iranian ports has fallen sharply. At a terminal historically used by wooden dhows trading with Iran, a security guard told the FT vessels were now heading to Oman and India. “No more Iran since last week,” he said.

The disruption matters because Dubai has for decades served as one of Iran’s most important gateways to international trade and finance. Pre-war commerce between Iran and the UAE was worth nearly $30 billion annually.

“The UAE is the only avenue for Iranian imports, as Iran has access to no other major container port other than Jebel Ali in Dubai,” Esfandyar Batmanghelidj of the Bourse & Bazaar Foundation told the FT.

The effects are increasingly visible in Dubai’s traditional trading districts. But the economic break remains far from complete.

Bank Melli and Bank Saderat, both under US sanctions, continue serving customers through more than a dozen UAE branches combined, despite US Treasury Secretary Scott Bessent calling for every Bank Melli branch worldwide to be closed. The two Iranian banks have more than 12 branches between them in the UAE, according to the report.

A Bank Melli employee said daily transactions, lending and letters of credit had seen no significant disruption and that the bank had recently renewed its license with the UAE central bank.

“We’re used to this,” the employee said, referring to previous sanctions.

Iranian airlines are also still flying to Dubai, the Iranian Business Council remains operational and Iranian produce continues to reach markets in the city.

Iranian traders are meanwhile adapting. One Tehran businessman told the FT that goods had been stockpiled in Turkey, some shipments were being rerouted through Oman and cargo could still be sent from Dubai to Bandar Abbas using false destinations on shipping documents.

“We are bypassing the blockade in the same way we have been bypassing sanctions,” he said. “Not much has changed.”

Washington increased the pressure Friday by moving to cut the UAE branches of Egypt’s Banque Misr from access to US financial institutions over alleged Iran-related activity.

The campaign comes after the UAE announced it was suspending trade and financial transactions with Iran. But analysts told the FT that centuries-old commercial ties and Dubai’s reliance on trade make a complete separation difficult.

Iranian officials repeatedly say around 20 million liters of fuel are smuggled out of the country every day, costing Iran between $4 billion and $5.2 billion a year. But the figure is far less precise than it is often presented.

Official statements generally refer to “fuel,” not gasoline alone, and include diesel and other petroleum products. In July 2026, Keramat Veys-Karami, head of the National Iranian Oil Products Distribution Company (NIOPDC), said gasoline was less vulnerable to smuggling than diesel and identified transport allocations as a major source of leakage.

The government has not published the refinery, depot, tanker, customs and station-level data needed to show that 20 million liters physically disappear from the regulated system each day. Without a product-by-product balance, the figure cannot be treated as a measured flow of smuggled gasoline.

Its dollar value is equally uncertain. Twenty million liters a day amounts to 7.3 billion liters a year. Valuing that at $4 billion assumes a loss of about 55 cents per liter; a $5.2 billion estimate puts it at 71 cents. Officials rarely explain whether those figures represent replacement costs, forgone subsidy value, foreign black-market prices or smugglers’ revenue.

What the numbers show

Data released after the war reveal a strained gasoline balance, but do not account for smuggling on the scale claimed.

NIOPDC reported that between March and mid-July 2026, Iranian refineries produced around 109 million liters of gasoline a day, with another 12 million liters supplied through blending. Average consumption stood at 129 million liters.

In late June and early July, daily distribution rose to 134.5 million liters, partly because of increased road travel and Iran’s aging vehicle fleet.

Fuel-card data reveal another problem with interpreting headline numbers. Before the three-tier pricing reform introduced in December 2025, NIOPDC was loading the equivalent of 172 million liters a day in entitlements onto fuel cards belonging to 32 million eligible vehicles, even though actual consumption was around 131 million liters.

The reform reduced those entitlements to about 135 million liters a day and was followed by a six-percent fall in consumption.

But the original gap did not mean that more than 40 million liters of fuel were physically disappearing each day. It was a gap between theoretical entitlements and actual consumption—an important distinction when assessing the scale of diversion.

Establishing how much fuel actually disappears requires comparing refinery dispatches with depot receipts, tanker movements and station-level sales, rather than treating unused or inflated card allocations as physical fuel.

The border-province problem

One argument for the scale of gasoline smuggling focuses on allocations to provinces along or near Iran’s borders. But no published NIOPDC series located for 2025–2026 verifies the claim that Kerman, Hormozgan, Kurdistan and Sistan and Baluchestan together receive 17.5 million liters a day.

Nor can their “normal” demand reliably be put at 14–15 million liters without data on vehicle registrations, fuel-card transactions, agricultural demand and interprovincial traffic.

Available evidence shows why population alone is a poor measure of legitimate demand. Kerman consumed 586 million liters of gasoline during the summer of 2025, equivalent to around six million liters a day, making it one of Iran’s five largest provincial consumers.

In July 2026, the government approved an additional 20-liter third-tier quota for private vehicles in Kerman, Hormozgan and Sistan and Baluchestan, citing long distances and inadequate public transportation.

The provincial figures therefore raise a question rather than provide an explanation. If verified allocations exceed plausible consumption by only a few million liters a day, much of the claimed national leakage must occur elsewhere, or consist of diesel and other fuels rather than gasoline.

An organized supply chain

There is considerably firmer evidence for large-scale organized smuggling and diversion.

Pakistani traders and transporters told RFE/RL in May 2026 that at least six million liters of Iranian gasoline and diesel were entering Pakistan each day. A leaked Pakistani intelligence report identified around 2,000 vehicles and 1,300 boats involved in the trade and described payments moving through hawala networks.

That points to a substantial and organized cross-border economy. But even the six-million-liter estimate accounts for less than one-third of the 20 million liters Iranian officials say are smuggled daily—and it includes both gasoline and diesel.

Evidence from inside Iran points more clearly to the organized networks behind large-scale diversion.

In November and December 2025, judicial officials in Hormozgan said an investigation known as the Toofan case had uncovered 35 interconnected smuggling networks that allegedly moved more than four billion liters of fuel over several years. Authorities opened cases against 753 people described as major participants.

These remain judicial allegations rather than final findings. But the scale and structure described by investigators point to something considerably larger than subsistence smuggling by residents of impoverished border communities.

Where does the fuel disappear?

One of the strongest official clues lies further upstream, in the way fuel allocations are administered.

NIOPDC says around 60 million liters of diesel are allocated to transport operators every day through electronic waybills and acknowledges that inaccurate information about end users creates opportunities for diversion.

The evidence therefore points not to a single route or group of smugglers but to overlapping channels: manipulated fuel entitlements, transport documentation, bulk tanker movements, maritime trafficking and informal payment networks.

That does not establish that Iran’s official estimate of 20 million liters smuggled each day is wrong. It shows that authorities have not published the data necessary to establish what those millions of liters consist of or where they leave the regulated system.

Answering that question would require depot balances, tanker GPS records, station-level sales and provincial allocation data. Until those are published, attributing 20 million liters of daily smuggling chiefly to border communities risks mistaking the visible final carriers for the organized supply system that makes diversion on such a scale possible.

China has warned that it would respond if Chinese companies were targeted by any significant expansion of US secondary sanctions related to Iran, prompting Iranian officials to portray Beijing as a potential obstacle to Washington’s effort to further isolate Tehran economically.

The question has become more pressing as the Trump administration weighs whether to extend its campaign to Chinese financial institutions.

Asked Thursday why Washington had not imposed new sanctions on Chinese banks dealing with Tehran, President Donald Trump suggested such measures could already be under consideration.

“You don’t know if I’m doing it. I don’t have to announce everything,” Trump said.

China’s war too?

Some in Tehran see China’s resistance as part of a much larger struggle with Washington in which Iran has become an important front.

Hasan Ameli, the Supreme Leader’s representative in Ardabil province, argued during Friday prayers that Beijing understood that the United States’ ultimate confrontation was with China rather than Iran.

“China fully understands that America’s main war, and the war of the future, is with China, and this war passes through Iran,” Ameli said. “If America gains control over Iranian oil, it will prepare for war with China.”

He described China’s position as “a major opening for Iran’s economy and a heavy blow to American sanctions,” arguing that Tehran could use it to ease Washington’s economic pressure.

Mohammad-Bagher Ghalibaf, Iran’s parliament speaker and the country’s special representative for China, also welcomed Beijing’s position.

“The Iran-China comprehensive strategic partnership is rooted in mutual respect, win-win cooperation, and a shared vision for a multipolar world. This relationship needs no one’s permission,” he wrote on X.

Alaeddin Boroujerdi, a member of parliament’s National Security and Foreign Policy Committee, pointed to China’s importance as one of Iran’s largest oil buyers and called for faster implementation of the two countries’ 25-year cooperation agreement.

“Given China’s opposition to American sanctions against Iran and its role as one of the largest buyers of Iranian oil, there is considerable potential for expanding trade and economic cooperation,” he said.

China’s interests, not Iran’s

But even among those who see China as an important counterweight to US pressure, there is skepticism over a crucial assumption: that Beijing’s interests and Tehran’s necessarily coincide.

Majid-Reza Hariri, head of the Iran-China Chamber of Commerce, said China was not confronting Washington because of any military or ideological alliance with Iran.

“Rather, its economic and strategic interests require it to preserve its trade independence,” Hariri told Khabar Online.

He acknowledged that intensified US pressure could inflict significant economic damage on Iran, but argued that Washington could not cripple the Iranian economy without broader international cooperation.

Relations with China and Iran’s neighbors, he said, remained important to the country’s economic resilience.

Iranian journalist Ata Bahrami similarly argued that Beijing’s position should be understood primarily as a defense of its own sovereignty and growing power rather than a commitment to Iran.

“Their clear message to Washington is: ‘We have grown stronger and you must respect our sovereignty,’” he said. “In fact, Iran is the starting point for demonstrating this power.”

The Hormuz contradiction

The limits of the partnership become more apparent in the Strait of Hormuz, where Iran’s own actions potentially conflict with Chinese interests.

Moderate journalist Ahmad Zeidabadi questioned whether Beijing could be expected to deepen its support for Tehran while Iran keeps closed a waterway through which China receives more than 40% of its oil.

Zeidabadi also pointed to the fact that Ghalibaf has yet to visit Beijing despite his appointment as Iran’s special representative for China, asking whether the delay could reflect Chinese frustration with Tehran’s refusal to end its threat over Hormuz.

The problem goes beyond political differences. Even if Beijing refuses to comply with US secondary sanctions and Chinese buyers remain willing to purchase Iranian oil, Tehran must still be able to move that oil out of the Persian Gulf under a US maritime blockade.

Overcoming that obstacle would potentially require a level of Chinese involvement in Iran’s confrontation with Washington that Beijing has so far shown no willingness to undertake.

The debate inside Iran therefore exposes the gap between diplomatic resistance to US sanctions and the practical ability to defeat them.

Beijing may be willing to protect Chinese commercial interests and challenge Washington’s extraterritorial sanctions, but that is different from assuming the economic—let alone military—costs of Iran’s confrontation with the United States.

For Tehran, China may be Washington’s biggest obstacle in enforcing its economic campaign, but not necessarily Iran’s economic lifeline.