Situation Briefing. Updated September 13, 2026.
The short version
The dollar's coercive power comes from clearing, not from trade. A bank with no US presence is exposed because its dollar payments pass through American institutions.
Sanctions have not collapsed any target economy. They have reorganised those economies around parallel infrastructure that did not exist a decade ago.
The enforcement model has shifted from exclusion to physical interdiction: naval blockades, tanker strikes, and vessel interceptions. That is an admission that financial exclusion alone stopped working.
By 2025, central bank gold holdings exceeded their US Treasury holdings for the first time since the mid-1990s. That is the price signal that matters.
The instrument depletes with use. Every application teaches targets and bystanders to reduce exposure, and the lesson is learned by people who were never sanctioned.
What this situation is
The sanctions architecture is the set of legal and financial mechanisms through which a handful of states, principally the United States, restrict other states' access to the global economy. It has three layers, and only one of them is about trade.
Primary sanctions prohibit a country's own citizens and firms from dealing with a target. Straightforward, and by themselves weak.
Secondary sanctions are the real instrument. They penalise third-party firms for dealing with a target, even where no US person or territory is involved. A British bank can be exposed for transactions it conducted entirely outside the United States. The mechanism is dollar clearing: because most dollar payments settle through American financial institutions, the exposure reaches entities that operate nowhere near US soil. The same logic extends beyond banking into energy, shipping, insurance and technology.
Export controls restrict specific goods and technologies, increasingly with extraterritorial reach through de minimis thresholds that follow controlled content into third-country manufacturing.
The whole edifice rests on one fact: the dollar is the settlement currency, and settlement runs through infrastructure the US can reach. Not GDP, not military force. Plumbing.
How it was built, and how it got overused
The architecture emerged incrementally, and each expansion looked reasonable in isolation.
Post-2001 terrorist financing rules built the compliance machinery. The Iran programme in the 2010s proved secondary sanctions could bring a large oil exporter to the table. After 2022, the Russia programme applied the tools at unprecedented scale, including the freezing of central bank reserves, which was the genuinely novel step. Reserves had previously been treated as close to untouchable, on the theory that seizing them would make every other central bank reconsider where it parked its money.
It did exactly that.
The effects on Russia were real and are worth stating precisely, because both triumphalist and dismissive accounts get this wrong. The Moscow Exchange suspended trading in dollar and euro instruments in 2024, pushing activity into over-the-counter markets with worse pricing and wider spreads. Currency basis spreads widened. The central bank has projected a structural liquidity deficit for 2026. Cross-border payments became slower and more expensive.
What did not happen was collapse. Instead, roughly 90 percent of bilateral trade settlement with China had shifted to yuan or rubles by late 2024, and by early 2026 the Chinese currency and gold made up most of the Russian central bank's accessible reserves.
The parallel system
The targets did not just evade. They built.
Payment infrastructure. China's CIPS settlement system, BRICS mechanisms, bilateral local-currency arrangements, central bank digital currencies and the mBridge project. None of these matches SWIFT for reach or liquidity. They do not need to. They need to be sufficient for the trade the participants actually conduct with each other.
Gold. The cleanest signal in the whole picture. Physical gold cannot be frozen inside a banking system because it does not live inside one. Central bank purchases rose accordingly, and by 2025 the value of central bank gold holdings passed their US Treasury holdings for the first time in roughly thirty years. That was not driven by sanctioned states. It was driven by everyone watching what happened to Russian reserves and drawing a conclusion.
The shadow fleet. Aging tankers conducting ship-to-ship transfers to obscure cargo origin, an Iranian technique that Russia adopted and scaled.
Digital rails. The Financial Action Task Force identified stablecoins, peer-to-peer transactions, offshore exchanges, OTC brokers and cross-chain bridges as critical enablers of sanctions evasion in 2026, with 83 percent of surveyed jurisdictions having implemented the Travel Rule. Note the paradox inside this: dollar stablecoins are popular in Iran precisely because they offer dollar exposure, and they are also the most vulnerable to being frozen by their issuers. The escape route from the dollar runs partly through the dollar.
Formalised bilateral architecture. On September 8, 2026, reporting described Iran and Russia moving from coordination into operational financial architecture, centred on trade settlement mechanisms that bypass SWIFT entirely.
Sources: Mesirow, FATF, central bank reserve data.
Sanctions are a depleting asset. Each use extracts value from a stock of trust built over eighty years, and the stock does not replenish. The dollar's coercive power has always depended on the belief that it would rarely be used coercively.
Why enforcement went physical
The most telling development of 2026 is not a new designation. It is that the enforcement model moved from the financial system into the water.
The United States blockaded Iranian ports from April 13 to May 29. In September, CENTCOM struck Iranian oil tankers repeatedly, including a vessel off Kharg Island, the terminal through which Iran exported 90 percent of its crude before the war. The EU intercepted its sixth Russian sanctions-evasion tanker in the Mediterranean.
Naval interdiction is expensive, escalatory and slow. Financial exclusion is cheap, deniable and instant. A state that has the second option and chooses the first is telling you the first stopped working.
That is the honest reading of the shadow fleet. When enough tonnage moves outside the insured, tracked, dollar-financed shipping system, you can no longer stop a cargo by threatening a bank. You have to stop the ship.
The contradiction inside the instrument
Sanctions regimes carry a structural tension that becomes acute during energy crises: the sanctioning state wants the target's economy to suffer, and also wants the target's oil on the market so prices stay manageable.
In March 2026, with Brent above $100 and the Strait of Hormuz effectively closed, the US Treasury issued a 30-day licence permitting the purchase of 100 million barrels of Russian oil stranded at sea, explicitly to stabilise energy markets.
Sit with that. Sanctions relief deployed as a price-management tool, on barrels from one sanctioned state, to offset a supply shock caused by a war with another.
This is not hypocrisy so much as an inherent property of the design. Sanctions on commodity exporters are always partly self-inflicted, and the more central the commodity, the more the sanctioning state ends up managing the very market it disrupted. Every carve-out, licence and waiver also teaches the target which pressure is real and which is theatre.
Who wants what
The United States wants coercion without triggering exit. Those goals are in direct tension and the tension is not resolvable. Each designation buys leverage today and erodes the basis of leverage tomorrow.
China is the pivotal actor and is not primarily a target. It is building the alternative infrastructure, and its interest is asymmetric: it benefits from a parallel system existing without needing it to displace the dollar. Optionality is the goal, not victory.
Russia and Iran are the laboratories. Russia combined Iranian shipping technique with North Korean digital finance methods to build a more resilient model than either had alone. The knowledge transfer between sanctioned states is itself a product of the sanctions.
Third countries are where the regime is actually decided. Turkey, the UAE, Kazakhstan, India and the transshipment hubs face a choice between compliance and commerce, and they mostly choose ambiguity. Transshipment through intermediary states remains the single most common evasion tactic because it is the hardest to police.
The EU has moved toward including secondary elements in its own packages, which fragments enforcement standards and creates arbitrage between jurisdictions that are nominally allied.
Banks and insurers are the unwilling enforcement arm, and they over-comply. De-risking means exiting entire countries rather than screening transactions, which pushes legitimate trade into exactly the informal channels the regime was built to close.
Where it stands now
Enforcement is intensifying and interdiction rates remain low relative to total traffic. Iran and Russia are formalising bilateral settlement outside SWIFT while both face escalating pressure. Secondary sanctions remain the central instrument of US policy across Russia, Iran, North Korea and Venezuela programmes.
The dollar has not been displaced and is unlikely to be. What is happening is fragmentation rather than replacement: a smaller share of global transactions passing through infrastructure the US can reach, with the alternatives chosen tactically on cost, liquidity and legal risk rather than ideology.
What to watch
Central bank reserve composition, not currency rhetoric. De-dollarisation announcements are cheap. Gold as a share of reserves is the honest measure, and it has been moving steadily.
Whether a major non-aligned bank takes a secondary sanctions hit and survives. The regime's deterrent power rests on the assumption that exclusion is fatal. One large institution absorbing the penalty and continuing to operate through alternative rails would reprice the entire risk calculation.
CIPS transaction volume relative to SWIFT. Still small. The trend line matters more than the level.
The frequency of licences and carve-outs. Each one is an admission that the sanctioning state cannot absorb the consequences of its own policy, and targets read them precisely that way.
Naval interdiction tempo. If physical enforcement keeps expanding, financial enforcement is failing. The two are substitutes, and the mix tells you which one is working.
Third-country behaviour under pressure. The regime holds or fails at the transshipment hubs, not in Washington or Moscow.
The structural conclusion is uncomfortable for both camps. Sanctions work, in the sense that they impose real and lasting costs. They also fail, in the sense that they have never produced the political capitulation they were designed to force. What they reliably produce is a more fragmented financial system, better-organised evasion networks, and a slowly growing constituency of states that have decided exposure to one jurisdiction's plumbing is a risk worth paying to reduce.
The dollar was never strong because nobody could leave. It was strong because nobody had a reason to.
This Situation Briefing is updated monthly. Last revised September 13, 2026.