# Secondary Sanctions **Secondary sanctions** are penalties on a *foreign* person (typically a bank, trader, refiner or shipper with no U.S. connection) for dealing with a party the United States has already sanctioned. Primary sanctions bind U.S. persons. Secondary sanctions coerce everyone else, and the coercion runs on access to the U.S. market and the dollar-clearing system rather than on any jurisdiction over the target. ## How the lever works Almost every large international dollar payment settles through a correspondent account at a U.S. bank. Cut a foreign bank off from those accounts and it can no longer move dollars for its clients, which for most banks is fatal. So the threat does most of the work. The real reach of a designation is the **de-risking** of foreign banks that were never named and drop the business rather than test Treasury. That is why secondary sanctions are both the most effective tool in the system and the most resented by allies. ## Legal anchors - **Iran:** the Iran Sanctions Act (1996) first penalized foreign firms investing in Iran's energy sector; later statutes and the "significant transaction" test in Executive Order 13902 (2020) extended the reach to foreign banks and sectors. - **Russia, Iran, North Korea:** the 2017 [[CAATSA]] made several secondary measures mandatory. In December 2023, Executive Order 14114 let Treasury cut off foreign banks that facilitate Russia's military-industrial base. - **The general authority:** most designations run through the [[International Emergency Economic Powers Act]] and are carried out by the [[Office of Foreign Assets Control]] (see [[Sanctions Designation Pipeline]] and [[Specially Designated Nationals List]]). - A [[Foreign Terrorist Organization]] designation produces a stronger version of the same effect through the criminal "material support" statute. Europe's answer since 1996 has been its **blocking statute**, which forbids EU companies from complying with certain U.S. secondary sanctions. In practice large European banks comply with Washington anyway, because the dollar matters more to them than the EU fine. ## The 2025–26 turn: secondary tariffs and refinery designations The second Trump administration added a new instrument: the **secondary tariff**, aimed at a whole country instead of a company. | Date | Action | Result | |---|---|---| | Aug 6, 2025 | Extra 25% tariff on Indian goods over Russian oil purchases (effective Aug 27), for a combined 50% | Combined U.S. tariff on most Indian goods reaches 50% | | Oct 22, 2025 | [[Rosneft]] and [[Lukoil]] added to the SDN list (effective Nov 21) | India's Russian crude imports fell from about 1.5M to 0.94M barrels a day within two weeks (Carnegie) | | Feb 6, 2026 | The India penalty tariff removed after a U.S.–India trade deal | The tariff worked as a bargaining chip | | Apr 2026 | Treasury letters to banks in China, Hong Kong, the UAE and Oman threatening secondary sanctions; then the designation of Hengli Petrochemical's Dalian refinery (about 400,000 barrels a day) and some 40 shippers and tankers over Iranian oil | Imposed during the [[Iran War 2026 Timeline]] and the U.S. blockade of the [[Strait of Hormuz]], weeks before a Trump–Xi meeting | Hengli is one of China's biggest independent refiners. Earlier Iran-oil designations had mostly hit smaller "teapot" refineries supplied by the [[Dark Fleet]], which have little exposure to the U.S. financial system and so little to lose. ## Why it matters Each use of the lever is also an argument for building payment rails that avoid it. That is the core of the [[De-dollarization]] case, and the reason [[Dollar Dominance]] and secondary sanctions should be read together: the tool is only as strong as the dollar system it rides on. ## See Also - [[Sanctions Designation Pipeline]] · [[Specially Designated Nationals List]] · [[Office of Foreign Assets Control]] - [[CAATSA]] · [[International Emergency Economic Powers Act]] · [[Tariffs]] - [[Dollar Dominance]] · [[De-dollarization]] · [[Central Bank Swap Lines]] - [[India]] · [[China]] · [[Iran]] · [[Russia]]