IN 1973, a group of European banks decided they needed a common way to send each other payment instructions. The cooperative they founded, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), was based in Belgium.
They chose a neutral country so that it would sit in neither of the two cities that dominated international finance. By the end of 1975, it had 270 member banks across fifteen countries, and it kept growing until it was a piece of infrastructure indispensable to the world economy.
SWIFT does not move money. It carries the instructions that tell banks to move it, more than ten billion messages a year, behind transactions worth $1.25 quadrillion. Membership was not much of an option. The writers of SWIFT’s official history called it an “obligatory passage point” since “if you want to participate in financial services, you must join because there is no real alternative.”1Henry Farrell and Abraham Newman, Underground Empire: How America Weaponized the World Economy (New York: Henry Holt and Company, 2023), 27.
Through the 1990s, American officials asked SWIFT for its data and were “politely rebuffed.” The cooperative told Washington that if it were ever subpoenaed, it would move the data overseas. Its chief executive claimed, “we don’t do subpoena.” After September 11, as Henry Farrell and Abe Newman recalled, the US spurned the refusal, and SWIFT “quickly discovered that it absolutely did ‘do subpoena’ when it had no other choice.”2Farrell and Newman, Underground Empire, 63–64.
One of SWIFT’s main data centers sat in Virginia, mirroring everything that crossed the network, and the international banks on its governing board were themselves within reach of American regulators. Within a decade, Congress had moved to force Iranian banks off the network, and the European Union wrote the regulation that made it binding on the cooperative.
Sanctions via SWIFT worked because most large banks had joined it, though the power was exercised from Washington.
Once Iranian banks lost access, a payment to Tehran had to be arranged bank by bank, or not at all. Sanctions via SWIFT worked because most large banks had joined it, though the power was exercised from Washington. That asymmetry is what people are flagging when they say the world economy has been weaponized.
This weapon has been aimed at Iran for two decades. In June of last year, and again since February, it has been used alongside the other kind. The harder question is what the weapon is made of.
Imperialism’s Three Mechanisms
The words often used for global forms of economic coercion are colonialism, imperialism, hegemony, and empire, and they get used interchangeably by people who mean different things by them. The classical disputants—Kautsky, Lenin, Hilferding—disagreed about imperialism far less than their reputation suggests.
For all three, the profits specific to imperialism came from cartels rigging competition so as to sell dear and buy cheap, from interest on capital lent abroad, and from money made issuing and trading shares. None of them found a new way of squeezing work out of workers.3. Jukka Gronow, On the Formation of Marxism: Karl Kautsky’s Theory of Capitalism, the Marxism of the Second International and Karl Marx’s Critique of Political Economy (Leiden: Brill, 2016), 293–94, doi.org/10.1163/9789004306653. Giovanni Arrighi’s complaint was that whatever those mechanisms were during the early twentieth century, they were not the ones that operated after 1945, and that by the end of the 1960s, the theory of imperialism had become a “Tower of Babel.”4Giovanni Arrighi, The Geometry of Imperialism: The Limits of Hobson’s Paradigm (London: Verso, 1983), 17.
Behind the quarrel over which word to use lies a narrower question about how global inequality is produced and how it changes—or doesn’t—over time. Most of the answers come down to three mechanisms. The first is exploitation, where value produced in one place is appropriated in another, whether through unequal exchange, coercive pricing, debt service, or some other route.
The second is exclusion, where access is shut off or granted only at prohibitive cost—to trade, to credit, to technology, to financial markets. The third is cumulative advantage, where the terms a latecomer has to meet—the rules of trade, the currency transactions are settled in, the standards a product must satisfy, the technological frontier itself—were set by whoever arrived first, so that catching up costs more the further back a country starts.5Giovanni Arrighi, “The Developmentalist Illusion: A Reconceptualization of the Semiperiphery,” in Semiperipheral States in the World-Economy, ed. William Martin (Westport, CT: Greenwood Press, 1990), 16–17.
Sociologists study the same three at local levels, where they go by exploitation, opportunity hoarding, and the struggle over who counts as what and who set the rules.6Charles Tilly, Durable Inequality (Berkeley, CA: University of California Press, 1998); Rogers Brubaker, Grounds for Difference (Harvard University Press, 2015), 10–47. The international versions are not the domestic ones scaled up, and nothing guarantees that a mechanism producing inequality within a country produces it the same way between them.
Arrighi’s own account was that such arrangements are remade rather than designed. Leading firms and governments pursue advantage, the world economy is reorganized in the course of it, and the mechanisms of one period in historical capitalism are not necessarily those of the next period.7Giovanni Arrighi, The Long Twentieth Century: Money, Power, and the Origins of Our Times (London: Verso, 1994).
These three processes of inequality do not move together across space either. A country can be integrated deeply into world markets and shut out of the machinery that governs them.
The revenue that comes in can make particular families, firms, or ministries very rich while leaving the country’s relative economic position exactly where it was. SWIFT is a case of exclusion, which is why cutting a country off can stop its trade dead without altering anything about what it produces or what its exports are worth.
Weaponized Interdependence
The current name for this form of coercion is “weaponized interdependence.” It has been widely adopted as a synonym for globalization in reverse, but this carries a suggestion its authors do not intend. From the late nineteenth century, economic integration was supposed to make war less likely.
That was the standard liberal claim which continued through the postwar decades. Countries that trade heavily with one another have too much to lose from fighting, so the more they trade, the less they fight. Political scientists Henry Farrell and Abraham Newman, who coined the concept just a few years ago, do not begin from that assumption.8Henry Farrell and Abraham Newman, “Weaponized Interdependence and Networked Coercion: A Research Agenda,” in The Uses and Abuses of Weaponized Interdependence, ed. Daniel W. Drezner, Henry Farrell, and Abraham L. Newman (Washington D.C.: Brookings Institution Press, 2021), 305–22, doi.org/10.5040/9780815750352.ch-017.
Coercion through trade is old, they note. But a buyer or seller could usually walk away, even if the weaker party paid a price. There is no other partner for a networked system of finance that almost every country uses. SWIFT is Belgian, but any bank dealing in dollars must hold an account at an American bank, which is where a dollar payment is finally completed, and where it can be stopped.9Farrell and Newman, Underground Empire, 24.
The First World War is when this kind of coercion acquired a legal form and a permanent home. The victors wrote the use of sanctions as an economic weapon into Article 16 of the Covenant of the League of Nations, which, in Nicholas Mulder’s account, “transformed it from a wartime to a peacetime institution.” Sanctions outlived the League itself and carried on into the United Nations.
The postwar world economy bore “the permanent imprint of economic warfare” and sustaining it required an effort to make pressure on civilians “both technically legal and politically legitimate.”10Nicholas Mulder, The Economic Weapon: The Rise of Sanctions as a Tool of Modern War (New Haven, CT: Yale University Press, 2022), 2, 6, doi.org/10.12987/9780300262520. Coercion of this kind needs a densely connected world to travel through, which worked most effectively in the decades before 1914 and the present.
Middle East in the Crosshairs
The Middle East had an early encounter with it. Through the middle of the nineteenth century Ottoman Egypt was a trading hub between Asia and Europe. The Suez Canal was dug by Egyptian workers and substantially financed from Egyptian revenues, and its completion made Britain far more interested in controlling the region, at the expense of both Cairo and Istanbul.
Egyptian debt then mounted, and it became “an excuse—if not a reason—for the penetration of British agents into governance.” What arrived was not an army. The agents were “the accountant and the banker—something like 1,300 of them by 1882—who ensured that state receipts would get channeled to debt repayment.” Egyptians who saw control of their own revenues passing to foreigners rose against the arrangement in 1882. British troops landed, a garrison stayed on, and Egypt was left “barely sovereign, but not quite conquered.”11Jane Burbank and Frederick Cooper, Empires in World History: Power and the Politics of Difference (Princeton, NJ: Princeton University Press, 2011), 304, doi.org/10.1515/9781400834709.
A century later, a standard description of the Middle East was that it had been left out of—or its leaders refused to join—a new wave of economic globalization. World foreign direct investment came to $900 billion dollars in 1999, and developing countries took $200 billion of that.
Excluding Israel, the Middle East took about $8 billion. It was called the least globalized region and yet, in other ways, the region was highly integrated. It was closer to what Fred Halliday called “differential integration,” since what the region exported was energy and capital.12Fred Halliday, The Middle East in International Relations: Power, Politics and Ideology (Cambridge: Cambridge University Press, 2005), 265, 305, doi.org/10.1017/CBO9780511790829.
Through the 1990s, an amount roughly equal to everything the region produced in a year was sitting in banks and financial markets outside it, between $150 and $200 billion, the highest such outflow anywhere in the world. From oil revenues, 40 percent went into Western weapons, and a further 40 percent went into Western assets, while capital-poor states in the same region borrowed from Western lenders—often from the very banks holding the deposits.13Raymond Hinnebusch, “Globalization, the Highest Stage of Imperialism? Core-Periphery Dynamics in the Middle East,” in The Middle East and Globalization: Encounters and Horizons, ed. Stephan Stetter (London: Palgrave Macmillan, 2012), 34, doi.org/10.1057/9781137031761_2.
Through the 1970s, these same oil revenues built the financial arrangement later turned against the region. As Adam Hanieh writes, Gulf petrodollars “worked to cement the US dollar as the leading international reserve currency, strengthened the dominance of Anglo–American financial institutions, and underpinned the explosion of debt across most of the rest of the world.”14Adam Hanieh, Crude Capitalism: Oil, Corporate Power, and the Making of the World Market (London and New York: Verso, 2024) 24.
In the early 1970s, roughly a fifth of the oil sold across borders was still priced in sterling, so pricing it in dollars “was not a foregone conclusion.”15Hanieh, Crude Capitalism, 185. Yet within thirty years, the United States would be turning access to dollars into a means of enforcement against individual governments. The weapon worked because of the dollar’s position, and that position had been paid for in significant part out of the region’s surpluses.
Containment of Iran
By the 1990s, Washington had decided to isolate Iran and Iraq at the same time, a policy its authors called dual containment. In practice it meant, in Halliday’s summary, “sanctions on oil exports, the seizure of financial assets held abroad, and, in the case of Iraq, an attempted invigilation of all foreign financial transactions.”16Halliday, The Middle East in International Relations, 287.
The apparatus that would do this at scale was assembled for a different purpose. It was built after 2001 to trace the finances of non-state networks, and it ran through the Office of Foreign Assets Control, a Treasury unit that had spent decades administering sanctions lists. American officials, Farrell and Newman write, “gradually inched ever closer to a once unimaginable proposition: What if the United States could use its power to cut a country out of the map?” Iran, they continue, “became the test case.” The tools had been designed for counter-terrorism finance, and the target was now an economy of eighty million people.17Farrell and Newman, Underground Empire, 67, 72–74. When a bank in Frankfurt pays a bank in Karachi in dollars, both hold accounts at American institutions and the payment is a pair of entries across those accounts in New York, so US law reaches—and can claim jurisdiction over—a transaction between two foreigners.
A bank that loses the ability to clear dollars is finished as an international bank. Foreign banks then police themselves, at their own expense and in advance, remaining risk averse even when opportunities arise. When Washington reimposed sanctions on Iran in 2018, the European Union and its regional banks “dutifully followed,” even though its governments had signed the agreement being torn up by the US and had opposed the decision publicly.18Mehran Kamrava, Iran’s Look East Policy: New Directions (Ithaca, NY: Cornell University Press, 2026), 1, doi.org/10.1515/9781501784569.
Effects of Economic Coercion
Over the history of this type of economic coercion, two effects tend to recur. The first is that the political change that strongarmed sanctions were meant to produce does not happen on its own. Indeed, the political sequence that sanctions are supposed to induce rests on a rather crude theory of state–society relations.
Cut a country off from trade and finance, the reasoning runs, and hardship will trickle upward from the population to the government, which will then either change course to relieve it, or else lose the ability to govern. What usually happens instead is that a government under this pressure shifts the burden downward onto the people least able to refuse it, so the hardship stops well short of the officials it was meant to coerce.
Reviewing cases of sanctions and economic blockades since 1688, historians Stephen Broadberry and Mark Harrison found that immediate success for perpetrators of sanctions “was exceptional.”19Stephen Broadberry and Mark Harrison, “Economic Warfare and Sanctions since 1688: An Overview,” in Economic Warfare and Sanctions Since 1688, ed. Stephen Broadberry and Mark Harrison (Cambridge: Cambridge University Press, 2026), 24–25, doi.org/10.1017/9781009474887. In the case of the embargo on Japan in 1940, Elizabeth Schumpeter (née Boody) warned against assuming that economic pressure would make the Japanese army leave its occupation of China. “Human nature does not react in that way,” she wrote, “unless on the point of exhaustion.”20Mulder, The Economic Weapon, 257.
The second is that the firms, banks, and governments that have to keep trading rearrange themselves around the restriction, in ways that outlast the sanctions and are difficult to undo. Outside Iran, one adaptation was to route around the chokepoints. Bank of Kunlun, for instance, a small Chinese institution, “at times was responsible for more than two-thirds of all financial transactions between Beijing and Tehran.”
The US “was not able to fine Bank of Kunlun because it had little, if any, financial interactions with the American banking system.”21Shirzad Azad, East Asia and Iran Sanctions: Assistance, Abandonment, and Everything in Between (Cham: Springer International Publishing, 2022), 77, 220, doi.org/10.1007/978-3-030-97427-5. At larger scale, pricing oil in renminbi gives China a way to go on buying it even if Washington were to cut the country out of dollar finance.22Hanieh, Crude Capitalism, ch. 12.
Inside Iran, adaptation produced a new type of actor. Cut off from SWIFT and exposed to secondary sanctions—which fall on foreign banks and firms for dealing with Iran—the state could not sell oil and be paid through banks. Instead, it had to sell through private intermediaries who held the proceeds and were supposed to hand them back. Iranians call them “trusts,” and the “trust economy” is a neologism that entered the language after 2018.
These are persons, companies, or networks holding the foreign currency an oil cargo earns on behalf of the government, on the strength of a relationship rather than a contract anyone could enforce abroad. These trusts post guarantees and deposit the proceeds with domestic banks under Central Bank supervision.
Then the Central Bank allocates the currency to importers of needed goods. Using them, one account in Shargh puts it, “is not a voluntary choice but a necessity arising from the conditions of sanctions.”23Sahar Majd, “Untold Things about the Trust Companies,” Shargh, July 29, 2026.
The agent banks tell the Central Bank that the currency arrived, and no one can match that claim against what the trust actually received, because publishing how the networks move money would show the US and other sanctioning governments which routes to close. In July the head of the state inspectorate said on television that ninety-four billion euros in currency obligations had gone unsettled and, perhaps in an effort to shame them, claimed that some of the trusts had betrayed the country.24Mehdi Beik Oghli, “The Trusts’ Betrayal,” Etemad, July 28, 2026, reporting the statement of Zabihollah Khodaian, head of the General Inspection Organization.
Denouncing them is easier than dislodging them, since what was improvised as an emergency workaround has hardened into a new layer of intermediaries. Economist Alireza Soltani argued that the trusts are “beneficiaries of the sanctions conditions” and “over time become defenders of the economic sanctions,” because “the sanctions have been sweet for them, and they cannot easily give up the profit that comes from moving currency.”25Alireza Soltani, “Trusts under the Umbrella of Sanctions,” Donya-e Eqtesad, July 28, 2026.
From Sanctions to War
As of this writing, the war that resumed at the end of February is still running, now mainly as a blockade. Israeli and American strikes killed the top leadership of the Islamic Republic, including the supreme leader, and no schism followed, no defections and no meaningful split.
The subsequent naval blockade likewise produced no capitulation. Reviewing three centuries of cases, from the Anglo–French wars through the Allied blockade of Germany to sanctions on Rhodesia and South Africa, Broadberry and Harrison find no instance in which pressure of this kind delivered its intended result on its own. They also find that when sanctioning powers added force against rulers unwilling to concede and with somewhere else to turn, the usual result was a wider war rather than a capitulation: Italy answered sanctions by drawing closer to Germany, and Japan answered them at Pearl Harbor.26Broadberry and Harrison, “An Overview,” 10–11, 21–25.
The sanctions campaign had spent twenty years acting on that assumption, with hardship expected to do slowly what the strikes were meant to do in weeks.
The campaign was sold to various publics, in part, as liberation, as the removal of a government standing between Iranians and their aspirations, and its planners assured others that pressure applied from outside could split the institutions holding the Iranian state together and hazard that organized opponents could replace them. The sanctions campaign had spent twenty years acting on that assumption, with hardship expected to do slowly what the strikes were meant to do in weeks.
Bombing and blockade are in that sense different instruments aimed at the same thing, a division inside the Iranian elite that force from outside promises to widen. Yet divisions of that kind were not hidden in Iran, and what was hashed out in the open was an argument over terms and leverage.
That Iran would deal in some form was not in dispute. In late June, on the widely watched discussion series Azad, three Iranian analysts spent three and a half hours disagreeing about a postwar memorandum, over whether its text mattered at all, whether the $300 billion it offered was bait, and whether Iran should now declare a nuclear deterrent openly. They agreed only that the memorandum recorded the minimum Washington would accept rather than the end of what it would ask for, which is why all three expected US terms to harden as soon as the signatures were dry.27“The Future of the Understanding: Agreement or War? | A Discussion with Rahman Ghahremanpour, Mehdi Kharatian and Mostafa Najafi,” YouTube Video, 3:28:46, posted by “Azad,” June 21, 2026, youtube.com/watch?v=-nEzFe10odo.
The vocabulary that defends sanctions, and now the war, is a century old. By the 1990s, Mulder notes, sanctions were “often framed around nuclear non-proliferation and human rights concerns.”28Mulder, The Economic Weapon, 294. Anyone arguing for a war can pick that vocabulary up, starting from sympathy for a population struggling against its own rulers and finishing at the case for attacking those rulers from outside.
People who already wanted this war reached for it, and a number of self-described human rights advocates went along with them, whether from calculation or from a myopic belief that no other road was open. Dissenting Iranians inside the country have answered that case directly. Amirhassan Rafiei, writing from Tehran, worked through the options historically available to a domestic opposition during a foreign war.
He argues that the closer a political force moves to either pole—full alignment with its own state, or alignment with the invader—the more completely its independence and its standing are destroyed.29Amirhassan Rafiei, “In the Midst of War and Despotism: The Difficulty of Dual Independence,” Naqd-e Eqtesad-e Siyasi, June 13, 2026. Sociologist Saeed Madani, writing recently after being released from four years in prison, rejects both the fantasy of a street mobilization that can be summoned on demand and the route of foreign military intervention.30Saeed Madani, “You Must Have the Courage to Continue, Not the Hope of Arriving,” letter to Asef Bayat, Naqd-e Eqtesad-e Siyasi, July 21, 2026.
The number of people and entities designated by the United States went from 912 in 2000 to over 9,400 by 2021, climbing under every administration of both parties and long predating the current war.31Barry Eichengreen, Money Beyond Borders: Global Currencies from Croesus to Crypto (Princeton, NJ: Princeton University Press, 2026), 230, doi.org/10.1515/9780691280554. Each time a round failed to change Iranian government conduct, the conclusion drawn inside those offices was that the pressure had been insufficient rather than that the instrument was wrong.
The coercion comes from exclusion resting on the cumulative advantage of institutions built decades ago.
Each round also took another course of action off the table, as designations have proved far easier to add than to remove. Layers of intermediaries holding the state’s export earnings all indicate that money is still moving, and in Washington the remedy will likely be further rounds of sanctions designations.
The Diminishing Returns of Exclusion
Placed against the longer history of capitalism, what stands out is not the mechanisms but the mix. Exploitation was where the classical theorists looked for imperialism’s engine, though exclusion was never absent. In this weapon the proportions have reversed. Little is extracted; the coercion comes from exclusion, applied at a scale the practice has never reached, resting on the cumulative advantage of institutions built decades ago.
Such strictures are now aimed at Russia, at China, and at allies who expected to be exempt. Iran lost access and spawned the trusts that still hold a sizable amount of its oil earnings in gray interstitial zones. Each round of restriction therefore tends to deny a little less than the round before it. Hegemony, in Arrighi’s account, required that a leading state’s claim to be acting in a general interest be, in his words, “at least partly true,” and a weapon pointed at friends and rivals alike makes that claim hard to credit.32Arrighi, The Long Twentieth Century, 30.
The weapon losing its bite is not the same as the dollar losing its place, and the dollar has not lost it. The adaptations have been ways of staying outside the US-linked banking system rather than of building a rival to it. The channels being built outside the US orbit remain small.
Yet Britain was the world’s creditor before the United States was, and London the place other countries came to borrow. In 1899, the British Treasury, needing money for the Boer War, borrowed abroad for the first time since the Seven Years War, placing part of it, as Barry Eichengreen puts it, “in, of all places, New York.”33Eichengreen, Money Beyond Borders, 122.
Britain then won that war, and won the two World Wars after it, but the guard changed regardless. Even after that changeover, sterling went on pricing a fifth of the world’s oil for another quarter- century. Twenty years of sanctions brought Iran to the table and no further, and the bombs that followed have not changed that. Each of those failures has cost the United States a little more of the compliance the weapon runs on. ×