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In this week’s MBN Agenda: Washington is trying to turn the Iran war into a contest of economic leverage by bombing Iran’s latest minelaying efforts in the Strait of Hormuz, using Venezuelan oil as a hedge against higher gas prices and deploying its “economic D-Day” to choke Tehran’s access to U.S. dollars. But the hardest pressure point runs through China, just as Xi Jinping courts regional partners and heads to Egypt.
Elsewhere, Gulf states are split over how far to follow Washington’s Iran sanctions, the U.S. is betting on promises from Syria’s government, Beirut is wavering over expelling Iran’s former ambassador and Baghdad faces trouble disarming Iran-aligned militias.
Vivian Lee, Sakina Abdallah and Asrar Chbaro contributed to this week’s Agenda.
Washington Signals
Hormuz Becomes the War
The U.S. government spent the weekend attacking Iran’s leverage from two directions. On Friday, President Donald Trump announced a deal giving the United States a huge stake in Venezuelan oil reserves, pitching it as a way to replenish U.S. supplies and eventually bring down gas prices. On Sunday, U.S. forces then struck Iranian positions on the Strait of Hormuz’s Larak Island after they said Iran’s Revolutionary Guards were about to lay sea mines nearby.
The two moves suggest the opening of a new phase of the now six-month war.
Trump has declared a “zero tolerance” policy on Iranian mines after claiming the main Hormuz shipping lane had been completely cleared. When U.S. forces then saw what they described as an imminent attempt to mine it again, they bombed the mine launchers – and then stopped. Iran retaliated with some missiles on a U.S. base in Jordan, but the exchange did not immediately set off a renewed broader conflict, though Trump did vow on Monday to “hit them hard” in return.
For now, the American goal looks narrower than it did earlier in the war: keep Hormuz moving and prevent Iran from driving energy prices higher, and steadily increase economic pressure on Tehran. The Venezuela deal fits that strategy. Its oil will take years to develop at scale but the promise of 65 billion barrels at least gives Trump an answer to Iran’s ability to make Americans and others pay more at the pump, which remains Tehran’s strongest card.
Meanwhile, U.S. Treasury Secretary Scott Bessent’s promised “economic D-Day” got its first big test Friday when he moved to cut the UAE-based branches of Egypt’s Banque Misr out of U.S. dollar transactions. The U.S. Treasury said the Egyptian bank processed roughly $1.8 billion for firms linked to Iran’s shadow banking system, making it an important conduit for Tehran’s access to dollars.
But the hardest nut for Bessent to crack is China. Chinese entities buy more than 80% of Iran’s exported crude oil, making China’s banks and oil traders far more important to Tehran’s survival than the financial channels Washington is now closing through Banque Misr. That economic relationship is on full display this week as Chinese President Xi Jinping meets Iranian President Masoud Pezeshkian, Russian President Vladimir Putin and other world leaders at the latest Shanghai Cooperation Organization summit in Kyrgyzstan.
From there, Xi heads Tuesday to Egypt, a longtime U.S. security partner and home to the bank Washington is now targeting. Beijing is steadily expanding its footprint around the Suez Canal and its military ties with Cairo, including through joint air exercises. China’s foreign ministry says relations with Egypt are now “at their best in history,” a reminder that the same governments Washington is leaning on to isolate Iran are cultivating Beijing as an alternative.
In the end, there is a limit to how far Washington can take its strategy without running into Beijing. It can bomb the Iranian minelayers, close the regime’s dollar conduits and use Venezuelan oil to reduce Tehran’s economic leverage. Fully squeezing the Iranian regime, though, would require confronting the Chinese banks that sustain Iran’s oil trade, which would open a much larger fight just weeks before Xi’s high-stakes talks with Trump in Washington on Sept. 24.
QUOTE OF THE DAY
In fact, everyone has a breaking point. Iran thought it had found Trump’s. Trump may yet find theirs. It’s too early to call.
— Brett McGurk, former senior U.S. national security official, arguing that the balance of leverage in the Iran war may be shifting slightly toward Washington.
Gulf Watch
UAE Backs Sanctions as Other Gulf States Hedge
A worker carries a U.S. flag into a meeting room ahead of U.S. President Donald Trump’s meeting with Gulf Cooperation Council leaders in Riyadh, Saudi Arabia May 21, 2017. Reuters / Jonathan Ernst
Gulf states are reacting unevenly to Washington’s new sanctions as Iran threatens retaliation against countries that help enforce them. The UAE had already suspended trade and financial dealings with Iran before Bessent unveiled the latest campaign, while Saudi Arabia, Qatar, Oman, Kuwait and Bahrain have so far been more cautious about publicly joining the U.S. economic offensive.
Their calculations vary sharply. Emirati officials say Iranian attacks have made continued commerce a security risk, while Oman still wants to preserve its role as a mediator and Qatar is keeping political channels open. But Gulf banks and companies face a harder constraint: Doing business with Iran could now cost them access to the U.S. dollar and the wider international financial system.
That leaves Washington with a lot of influence, but it isn’t clear whether that will translate into political alignment. Gulf governments may comply economically while still resisting a full diplomatic break with Tehran, especially as Hormuz remains contested and Iran continues to threaten retaliation against countries that join the campaign.
Syria Watch
U.S. Bets on Syria as Russia Ties Endure
President Trump meets Syrian President Ahmed al-Sharaa days after his removal from the US terrorism blacklist / AFP.
The Trump administration is betting that ending Syria’s decades-long international isolation will pull Damascus further from Moscow and Tehran. It removed Syria from the U.S. terrorism blacklist last week, only for President Ahmed al-Sharaa to speak with Russian President Vladimir Putin two days later about deepening ties and preserving Russia’s military presence in Syria.
Washington says Sharaa has done enough to justify the gamble but much of the case also rests on what he has promised to do next. The U.S. State Department says Damascus has offered written assurances on terrorism and made further commitments on American regional priorities, while warning that Washington still “maintains numerous options, including sanctions authorities” if it backslides.
Russia and Israel remain the clearest tests. Sharaa has reduced Moscow’s privileged position and agreed to cut Russian oil imports, but has not expelled Russian forces completely. Washington is effectively wagering that engagement can pull Syria further westward over time, a process that it hopes would culminate in an eventual security deal with Jerusalem.
Lebanon Watch
Unwelcome Iranian Ambassador May Stay in Lebanon
Lebanon declared Iranian Ambassador Mohammad Reza Sheibani persona non grata in March.
Lebanon’s effort to curb Iranian influence has run into an awkward test. Beirut declared Iranian Ambassador Mohammad Reza Sheibani persona non grata in March and stripped him of his diplomatic status. But the Lebanese government now appears prepared to let him remain in the country as a private resident.
That would blunt the force of a decision originally meant to reassert Lebanese sovereignty. After Sheibani was accused of interfering in domestic politics and holding unauthorized meetings, Iran refused to recall him and Hezbollah and the Shia Amal movement fiercely opposed his expulsion.
That put the government in what some see as an absurd dilemma. “If the state withdrew his accreditation and declared him persona non grata, it makes no sense for it to later grant him residency,” legal analyst Amin Mohammad Bashir told MBN.
The dispute goes beyond the diplomat. It is another measure of whether Beirut can translate its tougher posture toward Tehran and Hezbollah into enforceable state authority, or whether political pressure at home hollows out its decisions.
Iraq Watch
U.S. Rejects Iraqi Compromise on Militia Weapons
Basra Operations Command Headquarters of the Popular Mobilization Forces.
Washington is pushing back against Baghdad’s search for a face-saving compromise with the many Iran-aligned militias in the country. A U.S. official told MBN that the factions must surrender their weapons to the central government, not just transfer them to the Iran-backed Popular Mobilization Forces.
That puts the United States at odds with a proposal gaining traction in Baghdad, where some political leaders want the PMF to collect and store militia weapons ahead of the Sept. 30 deadline for disarmament and U.S. withdrawal. The arrangement would let the government claim progress while allowing armed groups to avoid appearing to capitulate under American pressure.
The U.S. position narrows Baghdad’s room to maneuver. With Tehran urging factions to resist full disarmament and some Iraqi officials already discussing a delay to the deadline, the coming month will test whether Prime Minister Ali al-Zaidi can satisfy Washington without provoking conflict at home.
