For most of history, imposing serious economic pressure required the deployment of military forces: ships blockading ports, armies laying siege to cities. As recently as the 1990s, the United Nations embargo on Iraq relied on warships patrolling the Persian Gulf. But over the past two decades, America has pioneered a more potent and nimble style of economic warfare. In a world where finance and supply chains are deeply globalized, Washington learned to leverage economic chokepoints—such as the U.S. dollar and advanced semiconductor technology—against rivals. Now, by merely signing documents in the Oval Office, the president can impose economic penalties far more severe than the blockades and embargoes of old.
This new age of economic warfare began innocuously enough: with Stuart Levey, a little-known lawyer who led a brand-new division of the Treasury Department from 2004 to 2011, trying to prove President George W. Bush wrong. Iran’s nuclear program was racing forward in the mid-2000s, and Bush lamented that America had “sanctioned ourselves out of influence” with the country. The only options, seemingly, were to go to war or let Iran join the ranks of nuclear-armed states. Levey set out to show there was another way.
In the years that followed, Levey and his colleagues overhauled U.S. sanctions policy. They drew on their legal expertise and their understanding of the financial sector’s risk calculus to conscript multinational banks into a campaign to isolate Iran from the world economy. Prodded by Congress, they tested the limits of their new economic weapons—they even found a way to freeze more than $100 billion of Iran’s oil money in overseas escrow accounts. Over time, this economic pressure helped spur political change in Iran and opened a path to the 2015 nuclear deal. The United States had managed to put Iran’s nuclear aspirations on hold—as Barack Obama boasted, “without firing a shot.”
The Iran deal had its critics, but one thing was beyond dispute—sanctions worked. In fact, the deal’s toughest opponents argued that America had traded them away too soon: The pressure was working so well that if the U.S. had just kept it up, the Iranian regime might have permanently relinquished its entire nuclear program or, better yet, collapsed. But a key reason the sanctions were so successful—winning grudging acceptance even from the likes of China, India, and Russia—was that Obama expressly deemed them a means to an end. They were intended to pressure Iran to concede to nuclear constraints and then be lifted. This is just how things played out.