The Trump administration has opened another front in its economic campaign against Iran, this time targeting the country’s largest automakers and railway companies. The move follows a series of U.S. actions over the past five weeks that have moved from banking and aviation to cryptocurrency, foreign procurement networks and now major parts of Iran’s domestic transportation and industrial system.
On Thursday, the Treasury Department formally designated Iran’s automotive and rail sectors for sanctions and immediately applied the new authority to some of the country’s largest companies. The targets include Iran Khodro and SAIPA, which dominate Iran’s domestic automobile market, as well as Iran Khodro Diesel, Pars Khodro and Zamyad. Islamic Republic of Iran Railways, Raja Passenger Train Company and Railway Transportation Company were also targeted. The designations were made under Executive Orders 13902 and 13871 - both imposed in the first Trump administration - which target key Iranian industrial sectors.
Treasury alleged that “Iran’s automotive and rail industries have been coopted by the regime and the Islamic Revolutionary Guard Corps (IRGC),” and claimed that the automotive industry is a “lucrative cash cow for the IRGC to siphon funds from an ostensibly commercial venture.” However, some of these assertions seem questionable. Iran Khodro and SAIPA have been losing money for years and have huge debts. They have largely survived through government support, bank financing and accounting measures. While IRGC-connected figures could plausibly benefit from deals with each company, their financial outlook more closely resembles struggling companies kept alive by the state than a profitable source of funding to exploit.
Treasury noted that the automotive industry is Iran’s largest economic sector outside oil and gas, indicating that Iran Khodro and SAIPA together account for more than 90 percent of the domestic auto market. By designating the automotive and rail sectors themselves, Washington also created broader authority to sanction companies and individuals doing business with them. The same action targeted foreign suppliers in Turkey, the United Arab Emirates, Indonesia and Hong Kong.
The measures are the latest phase of Operation Economic Outcast, the campaign Treasury Secretary Scott Bessent launched in late August. Since then, Washington has rolled out successive rounds targeting Iran’s banking connections, airlines and their foreign suppliers, cryptocurrency and alternative payment networks, military procurement abroad and financial links with Russia. The aviation measures have already contributed to Iranian carriers losing access to several international destinations, directly affecting civilian travel.
This week’s move into automobiles and railways takes the campaign deeper into Iran’s domestic economy. The auto sector is particularly significant because of its size and the extensive network of manufacturers, parts suppliers, dealerships and workers connected to it. Millions of Iranian households also depend on domestically-produced vehicles and replacement parts in a market where imported cars remain expensive and restricted.
But the structure of the industry has changed considerably since earlier rounds of U.S. sanctions. European manufacturers once played an important role in Iran’s automobile industry, particularly French companies. Much of that presence disappeared after the United States withdrew from the nuclear agreement and restored secondary sanctions in 2018. Iran’s automotive industry is now considerably more dependent on China and other Asian suppliers than on Europe.
That shift is visible in Thursday’s sanctions themselves. Treasury targeted two Hong Kong-based companies that it says supplied parts to Iran Khodro and SAIPA, alongside companies elsewhere in Asia and the Middle East.
The rail sanctions come as overland transportation has also become more important to Iran during the war. With maritime commerce severely constrained, Tehran has increasingly looked toward land routes connecting Iran with China, Russia and Central Asia. Cargo trains traveling from Xi’an in central China to Tehran increased from roughly one per week before the war to one every three or four days after the U.S. blockade began, according to Bloomberg.
Iran has also continued developing north-south transportation links with Russia and Central Asia. These routes remain far too small to replace maritime trade, but their importance has increased as Iran searches for alternative ways to move goods. The new sanctions therefore reach both Iran’s domestic passenger and freight networks and infrastructure Tehran has increasingly relied on to adapt to wartime restrictions.
How far Washington can restrict those alternatives will depend heavily on countries outside Iran. China and Russia have both rejected important elements of the U.S. pressure campaign, and neither has indicated that it intends to enforce the latest unilateral sanctions. Beijing has repeatedly said it opposes U.S. sanctions imposed without authorization from the United Nations Security Council and has defended its economic relations with Iran.
China is particularly important. It remains Iran’s most important major economic partner, a principal buyer of Iranian oil and an increasingly important source of vehicles, manufactured goods, technology and industrial components. Reuters reported in September that Iran and China have used a mechanism linking Iranian oil revenues to purchases from Chinese suppliers, allowing billions of dollars in trade to take place outside conventional Western banking channels.
Washington can sanction individual Chinese companies and threaten firms with secondary sanctions. But without substantial cooperation from China, restricting Iran’s remaining international trade becomes considerably more difficult.
The widening sanctions campaign comes as disruption to global energy markets remains another major consequence of the war. Some energy cargoes continue to move through the Strait of Hormuz, including an increase in LNG shipments during September, but the broader disruption continues to affect fuel markets, particularly refined products such as diesel. Governments have discussed releases from emergency reserves while Washington has pressed partners to take measures to increase supplies.
At the same time, indirect negotiations between Iran and the United States continue. Qatar has maintained shuttle diplomacy between the two governments, and Iranian Foreign Minister Abbas Araghchi this week received Washington’s response to an Iranian seven-day confidence-building proposal. Discussions have included the Strait of Hormuz, economic measures and a possible path toward broader nuclear negotiations. No breakthrough has been announced.
The pace of the sanctions announcements shows the importance the Trump administration is placing on economic pressure alongside its military and diplomatic strategy. In little more than a month, Washington has successively targeted banking connections, aviation, alternative payment systems, foreign procurement networks, Russia-linked financial channels and now automobiles and railways.
The new sanctions are also being imposed on an economy already under unusually intense pressure. Unlike during earlier rounds of “maximum pressure,” Iran is now also facing a physical blockade that has sharply constrained its ability to export oil and conduct maritime trade, while U.S. sanctions simultaneously target banking, aviation, payment networks and now major transportation and industrial sectors.
Iran has developed more extensive trade and financial links with China and Russia to withstand sanctions, but those channels cannot fully compensate for the loss of normal oil exports and maritime commerce. The cumulative pressure has already affected government revenues, access to foreign currency, imports and the broader economy. The addition of automobiles and railways extends that pressure into sectors with direct connections to employment, transportation and household costs.
For now, Washington continues to add new layers of economic pressure while Tehran remains in negotiations without accepting the broader terms sought by the Trump administration. China and Russia, meanwhile, have shown no sign of joining the U.S. effort to economically isolate Iran.
Previous sanctions have demonstrated that Washington can impose substantial costs on Iran, including costs ultimately borne by ordinary Iranians. Yet that pressure has ultimately not been exchanged for concessions at the negotiation table. So far, both Washington and Tehran continue to negotiate while resisting key concessions sought by the other, leaving any path out of the confrontation dependent on reciprocal steps that neither side has yet agreed to take.