Iran suspends trade with Iran after UAE cut ties last week

BEIJING, 28 AUGUST 2026 —

Iran Struggles to Maintain Trade Flows as U.S. Pressures Partners to Sever Ties

The latest push came after the United Arab Emirates last week suspended trade relations with Iran, marking the start of Washington’s renewed campaign to isolate the Islamic Republic. Iran’s foreign commerce has long been concentrated among a small group of partners, leaving it with few alternatives as pressure mounts.

The success of the U.S. strategy hinges largely on China, Iran’s top trading partner and the largest buyer of its crude oil. Russia, another target of sweeping U.S.-led sanctions and embroiled in its own military conflict and economic crisis, is unlikely to provide significant financial support to Tehran.

Regional players such as Turkey, Pakistan and Iraq maintain delicate balancing acts, maintaining ties with both Iran and the U.S. to avoid exposure to secondary sanctions threatened by U.S. Treasury Secretary Scott Bessent.

“Those who stand with the United States will reap the rewards of our partnership,” Bessent said Monday while unveiling the plan, dubbed “Operation Economic Outcast.” “Those who tether themselves to the Iranian regime should expect to share in the isolation.”

Despite decades of sanctions, Iran reported $125 billion in global trade in 2024, according to Trade Data Monitor, a private firm. The country is not a member of the World Trade Organization. The bulk of its declared trade, however, was concentrated among a handful of partners.

The UAE, China and Turkey supplied nearly three-quarters of Iran’s merchandise imports. Four countries—China, Iraq, the UAE and Turkey—accounted for more than two-thirds of its non-oil exports.

The UAE played a particularly critical role as Iran’s largest source of imported goods and a key financial intermediary. As a re-export hub, the UAE processed shipments from foreign suppliers reluctant to deal directly with Iranian customers, facilitating Iran’s access to global markets.

“From Iran’s perspective, the UAE can be replaced, but the Iranians are openly saying it’s not going to happen overnight,” said Alex Vatanka, a senior fellow at the Middle East Institute in Washington.

China, Iran’s largest reported export market and a key supplier of essential parts and products, holds significant leverage due to its manufacturing dominance and control over critical mineral supplies. Beijing has so far avoided direct involvement in the U.S.-Israel conflict in the region, continuing to purchase Iranian crude through opaque trading networks that bypass sanctions.

“China has experience helping an ally survive sanctions—it has long been North Korea’s economic lifeline and main diplomatic backer,” said Daniel Fried, an Atlantic Council fellow and former U.S. ambassador to Poland. “We will want the Chinese to go a lot farther than they have gone in the past. But it’s a lot harder now.”

David Lubin, a senior research fellow at Chatham House, noted that aggressive U.S. action against major Chinese banks and businesses could reignite trade tensions ahead of Chinese leader Xi Jinping’s planned meeting with President Donald Trump in Washington next month.

“China has more room than Iran’s other partners to resist U.S. pressure,” Lubin said. “I don’t see China playing ball by any means.”

Iranian Parliament Speaker Mohammad Bagher Qalibaf, who has led negotiations over the past six months, was in Iraq on the day the UAE suspended trade ties. He described his visit as aimed at “speeding up efforts to expand joint cooperation among all countries in the region, without foreign interference.”

The dominance of the U.S. dollar in global trade and finance means Iran’s partners are unlikely to risk Washington’s wrath lightly, Vatanka said.

“We’re still at a point where if the U.S. wants to hurt you, it will matter,” he said.

Turkey, which settled a long-running U.S. dispute in July over a state-owned bank’s role in an oil-for-gold sanctions-evasion scheme, has since seen its sanctions lifted over its purchase of a Russian missile system. Analysts suggest Ankara is unlikely to risk renewed confrontation.

“I really don’t think Turkey would like to become the next country helping Iran evade sanctions right now,” said Riccardo Gasco, an analyst at the IstanPol think tank in Istanbul.

Iran remains a import source for Iraq, where it wields influence through allied political factions and armed groups. Baghdad has sought closer economic and security ties with Washington, though the U.S. retains significant control over Iraq’s foreign currency reserves, which are held in the Federal Reserve Bank in New York.

Oman, a traditional mediator between Washington and Tehran, now faces heightened risks after Trump threatened the Gulf state last week over ongoing negotiations with Iran regarding the future management of the Strait of Hormuz.

Alternative trade routes could emerge through ports such as Gwadar in western Pakistan, said Peter Harrell, a visiting scholar at Georgetown University. “Ship an intermodal container of drone parts to one of the ports in western Pakistan and unload it onto a truck to drive across the border into Iran,” he suggested.

Pakistan, a key ally and economic partner of China in the region, faces competing pressures. It is mediating between Tehran and Washington while maintaining deep security ties with Saudi Arabia, Iran’s longtime regional rival.

With the Strait of Hormuz largely blocked and Russia’s war in Ukraine disrupting Black Sea shipping routes, Iran has sought to develop a “road of life” via the Caspian Sea, according to Nikita Smagin, an independent analyst and former Russian state news agency contributor.

Details not yet available on the full extent of disruptions to Iran’s trade flows or the timeline for alternative supply chains. The evolving situation underscores the challenges Tehran faces in sustaining its economy amid intensifying U.S. pressure and shifting regional alliances.