Sanctions degrade Iran's capabilities but cannot topple regime alone, ex-Treasury official says

Sanctions can wear down Iran's military machine, but they cannot topple the government by themselves. That's the core argument Kerri Bitsoff, a former official at the Treasury Department's Office of Foreign Assets Control, made in a recent conversation about the decades-long campaign of economic restrictions Washington has imposed on Tehran. Bitsoff spent years at OFAC working on nonproliferation and weapons procurement issues, and now leads investigations at TANGOS, a nonprofit focused on financial crime and sanctions evasion. Her distinction matters because it cuts against a common misunderstanding about what sanctions are supposed to do.

The purpose of sanctions, Bitsoff explained, is not to spark a revolution or force a government from power through economic collapse alone. Instead, they are designed to make the activities a country wants to constrain—in Iran's case, nuclear development and weapons manufacturing—more expensive, slower, and harder to execute. They increase friction at every stage. A missile component becomes costlier to acquire. A tanker carrying oil must navigate through multiple intermediaries, each adding their own markup and risk premium. The regime still functions, but everything it does in pursuit of its strategic goals becomes more difficult and more costly. Sanctions also create conditions for other pressures to take hold, whether diplomatic, political, or otherwise. But they cannot stand alone.

This framework helps explain why simply counting the number of individuals and organizations Washington places on sanctions lists misses the point entirely. A Treasury official could designate thousands of Iranian companies and entities, Bitsoff said, and still fail to meaningfully constrain Tehran's behavior. What matters instead is whether sanctions change the calculus of the actors outside Iran—the banks, shipping companies, suppliers, and intermediaries in places like China, Hong Kong, and the UAE that make it possible for a sanctioned government to keep functioning. The real work of sanctions enforcement happens in identifying the specific weak points in these networks and applying pressure where it will actually disrupt the flow of money and material.

Weapons procurement illustrates how this pressure operates in practice. Sanctions may not prevent Iran from building a missile or drone, but they can force manufacturers to source inferior components at inflated prices. Over time, those degraded parts show up in failed launches or drones that adversaries can more easily jam. The effects take years to become visible, but they accumulate. Similarly, oil sanctions do not necessarily keep Iranian crude off the market entirely. Instead, they make every step of the journey more expensive. A barrel of Iranian oil might pass through several shell companies, travel on an aging tanker with high insurance costs, undergo ship-to-ship transfers in international waters, and finally sell at a steep discount to one of a shrinking pool of buyers willing to accept the legal risk. By the time the transaction completes, Iran has absorbed a massive loss in revenue—a loss that export volumes alone cannot capture.

The Trump administration's renewed "maximum pressure" campaign, launched in February 2025, has targeted procurement networks across China, Hong Kong, and the UAE, focusing on the supply chains that feed Iran's military industries. In June alone, the Treasury Department sanctioned another group of Chinese and Hong Kong-based companies accused of supplying drone components and missile propellant to the Revolutionary Guards. But enforcement, Bitsoff emphasized, is not a one-time event. It is a dial that Washington can turn up or down. After the United States withdrew from the 2015 nuclear deal in 2018, aggressive enforcement drove major international buyers away from Iranian oil. During the early Biden years, when the administration pursued negotiations with Tehran, enforcement eased, and Iran's oil trade adapted by shifting toward smaller Chinese buyers with less exposure to the American financial system. Without sustained pressure, companies treat a sanctions designation as a temporary inconvenience and find ways around it.

Iran has spent years building what Bitsoff called a "sanctions evasion machine," a system largely developed by the Revolutionary Guards during the intense pressure of the early 2010s. The core relies on shadow banking, cash smuggling, deceptive tanker practices, and increasingly, cryptocurrency. But the system is flexible. When one method becomes too risky, Iran pivots to another. China now sits at the center of this apparatus, serving as both the dominant buyer of Iranian oil and the primary source of military components. Most sanctions evasion related to Iran flows through Chinese intermediaries, Bitsoff said—the front companies that move money, the refineries that buy oil, the suppliers that provide weapons parts. Pauses in enforcement against China therefore carry outsized significance, because companies watch American actions closely when deciding what level of sanctions risk they are willing to accept.

Bitsoff stopped short of claiming that economic pressure alone can determine Iran's political future. Sanctions can degrade capabilities and reduce revenues available for military and nuclear programs, and they can create domestic friction as the Iranian public watches resources flow toward weapons and proxy forces rather than economic opportunity at home. But political change ultimately depends on Iranians themselves. What sanctions can do is help establish the conditions in which other forces operate. The United States, she suggested, should think of every possible way to support those forces. The question now is whether sustained enforcement can keep the pressure on, or whether the evasion machine will adapt faster than Washington can respond.