How the US-Israeli war is collapsing the sanctions regime on Iran

OPINIONOPINION, OpinionHow the US-Israeli war is collapsing the sanctions regime on IranCircumvention mechanisms already exist and the conflict is encouraging more entities to work with them.By Ali A Ghareh DaghiPublished On 28 Apr 202628 Apr 2026ListenListen (7 mins)SaveClick here to share on social mediashare-nodesSharefacebookxwhatsapp-strokecopylinkgoogleAdd Al Jazeera on GoogleinfoPeople walk in Tehran Bazaar, amid a ceasefire between US and Iran, in Tehran on April 21, 2026 [Majid Asgaripour/WANA via Reuters]For years, sociologists and political scientists have warned that sanctions do not work. They do not topple targeted governments; instead, they hurt their citizens. And yet, the use of sanctions has only expanded, with the US leading the charge. As a result, there is now increasing evidence that this over-reliance on such punitive measures has led to their growing ineffectiveness. The US-Israel war on Iran has made that all the more obvious.The conflict carries the potential to push further the process of weakening the effect of US sanctions, which had already been ongoing, and reshape the preferences of both regional and global actors through different mechanisms, including de-dollarisation, alternative trading methods such as barter, and informal transfer networks like hawala.The US relies on the dominance of its currency in global trade to leverage the sanctions it imposes. Sanctioned states are unable to carry out sanctioned trade because buyers and sellers process payments in dollars.The spread of cryptocurrency as an alternative payment method across the world has provided a way to circumvent this problem. Over the past few years, Iran has come to heavily rely on cryptocurrency for financial transactions.A report by blockchain data platform Chainanalysis shows that cryptocurrency flows to sanctioned entities went up remarkably in 2025, with their value rising 694 percent to a record $154bn – up from $59bn in 2024. In the final quarter of the year, the Islamic Revolutionary Guard Corps (IRGC) alone accounted for 50 percent of value received – a total of $3bn. Advertisement Iran converts cryptocurrency holdings into renminbi, which is then used to buy Russian goods or conduct trade across Asian markets – embedding itself further into an alternative financial architecture that strengthens the renminbi.The war on Iran may now expand the pool of economic actors willing to use cryptocurrency to deal with the Iranian state and entities. When Tehran took control over the Strait of Hormuz, a chokepoint through which approximately 20 percent of the world’s oil and LNG passes, it began demanding transit tolls from vessels navigating the strait.The fees, typically starting at $1 per barrel, were payable in Bitcoin or renminbi, and reports have shown that a number of vessels and companies paid. Unlike stablecoins such as USDT, Bitcoin is fully decentralised and cannot be frozen by any issuer.With approximately 175 million barrels currently loaded onto tankers in the Gulf, even partial toll collection could make considerable revenue if the strait reopens.The use of renminbi is also significant. China is the biggest buyer of Iranian oil, and it pays in its own currency. But other countries have also started using the renminbi. In 2024, 30 percent of China’s external merchandise trade was paid for in its currency.The toll mechanism is particularly significant in encouraging more companies to use the renminbi precisely because it has…

This excerpt is published under fair use for community discussion. Read the full article at Al Jazeera – Breaking News, World News and Video from Al Jazeera.