America’s once-feared financial weapon is showing signs of wear, and the shift in how Washington handles its most powerful economic tools is becoming impossible to ignore.
For decades, the United States Treasury’s ability to cut off governments, companies and individuals from the global financial system gave Washington extraordinary leverage over adversaries — without firing a shot. That era appears to be drawing to a close.
The clearest sign came last week, when the Treasury Department announced it would allow Russian oil tankers currently stranded at sea to deliver their cargo to India — a direct relaxation of sanctions that have been in place since Moscow’s invasion of Ukraine in 2022. Treasury Secretary Scott Bessent argued the move could drive down global oil prices by unlocking hundreds of millions of barrels of crude.
Critics, however, say the decision sends a damaging signal. Daniel Tannebaum, a senior fellow at the Atlantic Council and former compliance coordinator at the Federal Reserve Bank of New York, argued the move weakens America’s position at a time when it is simultaneously confronting Iran. “If we can bear the pain to confront Iran, why not to pressure Russia too?” he said.
The inconsistency is part of a broader pattern that has developed across both Trump terms. In Iran, years of maximum-pressure sanctions — including the withdrawal from the Obama-era nuclear deal — failed to shift the government’s behaviour or halt its nuclear programme. Last month, the United States and Israel launched strikes aimed at eliminating that programme entirely. In Venezuela, extensive economic penalties badly damaged the country’s economy but were ultimately insufficient to dislodge President Nicolás Maduro. A US military operation in January was needed to capture him.
Experts who study economic statecraft say the outcomes reveal a fundamental misunderstanding of what sanctions can realistically achieve. Edward Fishman, of the Council on Foreign Relations, said the administration consistently set goals that were beyond what the tools could deliver. Adam Smith, a former Treasury sanctions official, put it plainly: sanctions change the conditions on the ground but rarely deliver a decisive blow on their own.
Meanwhile, internal tensions at Treasury have grown. Several career staff at the Office of Foreign Assets Control resigned following the imposition — and subsequent lifting — of sanctions on a Brazilian Supreme Court justice. The under secretary for Terrorism and Financial Intelligence also departed last month amid disagreements over a controversial financial monitoring order issued in Minnesota.
At the same time, enforcement of the Corporate Transparency Act — designed to expose hidden company ownership and combat money laundering — has been quietly wound down, with the department citing the burden it places on small businesses. Opponents of that decision warn it creates new openings for illicit finance.
Russia’s so-called shadow fleet of unmarked tankers, long flagged by Washington as a sanctions-evasion risk, may now feature in whatever revised Russia policy takes shape in the coming months.
How the administration navigates these competing pressures — easing restrictions on one adversary while escalating against another — will define the next phase of American economic statecraft.
