Larry C. Johnson – Sanctioning a Ghost: Europe’s Empty Gesture Against Iran

Once again the EU demonstrates its helplessness. Besides, the Germans are experts in cheating in these matters.

Larry C. Johnson is a former CIA officer and intelligence analyst, and former planner and advisor at the US State Department’s Office of Counter Terrorism. As an independent contractor, he has provided training for the US Military’s Special Operations community for 24 years. Today he runs the website Sonar21

Cross-posted from Sonar 21

US Treasury Secretary Scott Bessent announced today that the European Union has “officially joined” the American sanctions campaign against Iran — Operation Economic Outcast — and framed Tehran’s choice in the usual absolutes: complete global isolation and a subsistence economy, or a path back to normalcy. It made a commanding headline. It is a hollow one. You cannot embargo a trading partner you have already stopped trading with, and in economic substance that is precisely what Europe did years ago. Today it merely issued a press release about it.

The trade Europe is threatening to withdraw barely exists

One number frames the entire affair. In 2025 the whole of the European Union traded about €3.7 billion in goods with Iran — roughly $4 billion — against Iran’s total foreign trade of some $182.6 billion. Europe therefore accounts for about 2 percent of Iran’s commerce. That is the sum of the leverage now being brandished: a rounding error dressed up as a thunderbolt.

And it is a hollow 2 percent, because the flow runs almost entirely one way. Europe still sells Iran a little machinery, chemicals, and pharmaceuticals — about €3 billion, or 4 to 5 percent of Iran’s import bill. It buys almost nothing back: EU imports from Iran were €0.76 billion, under 1 percent of Iran’s exports, since Europe no longer takes meaningful Iranian oil. Germany, Italy, and the Netherlands make up nearly two-thirds of even this remnant. Withdraw it in full and you bruise a few exporters in Stuttgart and Milan far more than you trouble the treasury in Tehran.

Europe’s leverage was spent years ago

The collapse Europe is now formalizing already happened, slowly, over more than a decade. EU–Iran trade topped €27 billion in 2011 and reached €20.7 billion in 2017, during the nuclear-deal window — a period when Europe genuinely was a major Iranian partner, on the order of 15 to 20 percent of Tehran’s trade. The 2018 US withdrawal began bleeding it out; the trend never reversed; a fresh EU sanctions package in January 2026 drained it further. By 2025 it stood at €3.7 billion. Europe dismantled its own bridge to Iran plank by plank across seven years, and Iran long since built new ones — to China above all, which takes the bulk of its oil, and to the UAE, Turkey, and Iraq for the rest. The marginal Iranian barrel is priced in Shandong, not Rotterdam. There is nothing left in Europe’s hand to take away.

Sanctioning from a sickbed

Here is what makes the gesture worse than empty: Europe is declaring economic war on Iran at the precise moment its own major economies can least afford one — and while they are being bled by the very war Europe is now underwriting.

The eurozone crawled through the first quarter of 2026 at 0.1 percent growth, its weakest in nearly a year, with the composite PMI stuck in contraction and energy inflation running near 11 percent. That last figure is the tell, because it is a direct transmission of this war: the Iran shock and the throttling of the Strait of Hormuz sent fuel prices surging into economies that, unlike the United States, import their energy. The European Central Bank has warned that a prolonged conflict could tip Germany and Italy into technical recession by year’s end.

The particulars are grim. Germany — Iran’s largest European trading partner, and thus the country with the most of that thin trade to forfeit — is also the continent’s biggest casualty. It has already endured two straight years of recession, its manufacturing base has shrunk some 15 percent from its 2017 peak in what economists now call outright deindustrialization, its automotive crown jewel is shedding tens of thousands of jobs, and unemployment sits at a twelve-year high. A recession in 2026 would be its fourth in four years, an outcome with no post-war precedent. France is paralyzed in parallel — a deficit near 5.1 percent of GDP, its fifth prime minister in two years, growth downgraded toward 0.4 percent. Italy limps along near 0.5 percent, its consumers acutely exposed to exactly the energy swings this war is producing.

So the tableau is this: a bloc whose largest economy is deindustrializing under an energy shock, whose second-largest is fiscally ungovernable, and whose third is one bad quarter from recession, has volunteered to prolong the conflict driving its energy bill — by forgoing a trickle of trade that costs Tehran almost nothing and its own exporters rather more. Germany torches a bridge it could use while standing in a house that also is burning.

The one caveat, and why it fails too

In fairness, Operation Economic Outcast was never really about Europe’s own thin trade with Iran. It is a secondary-sanctions weapon — the threat to bar any firm or nation dealing with Iran from the dollar system — and Europe’s theoretical value lies not in the goods it stops selling but in the financial and shipping chokepoints it controls: euro clearing, European banks, the reinsurance and protection-and-indemnity clubs that underwrite tankers. But that leverage aims at Iran’s trade with third countries, chiefly China — and Bessent has conspicuously declined to say whether Washington will actually sanction Chinese banks, because everyone understands what that would cost. Iran, meanwhile, has spent seven years rebuilding its commerce on Chinese banks, yuan settlement, barter, and a shadow tanker fleet engineered to be untouchable by European paperwork. The US naval blockade ostensibly has done more to choke Iranian exports this year than any designation list will. Europe adding its signature raises the compliance risk for the handful of European firms still tempted by Iran. It does essentially nothing to the Chinese refiners who are the actual market.

A sanction is worth what it denies a target that the target cannot easily replace. By that measure Europe’s hand is all but empty: its direct trade with Iran has withered to roughly 2 percent of Tehran’s commerce, in goods Iran already sources from China, Turkey, and the Gulf, and the one channel where Europe might still matter points at a Beijing that Washington will not confront. What makes the move not merely futile but faintly self-destructive is that Europe is making it from a sickbed — its industrial engine stalling, its energy costs inflated by this very war — in order to prolong the fight that is inflating them. The announcement signals Western unity and puts the EU on the record. As a blow against Iran, it is a spent cartridge fired from a trembling hand.

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