Rob Denning Pakistan has told Washington it is under no legal obligation to honour the United States' unilateral sanctions on Iran, Bloomberg reported this week. The rebuff lands as CNBC reported that Treasury Secretary Scott Bessent's newest round of Iran sanctions has "turbocharged" global adoption of China's yuan.
US sanctions work because banks worldwide fear losing access to dollar clearing more than they fear losing an Iranian client. That fear is the enforcement mechanism: no international police force is needed when defying Washington risks being cut off from the world's reserve currency.
Pakistan's public refusal removes one link in that chain. If a government simply declines to treat US unilateral sanctions as binding and settles the underlying trade in yuan instead, the dollar's coercive reach narrows exactly where Washington needs it most — with Iran's trading partners.
HYPOTHESIS: sanctions pressure on Iran is accelerating a shift away from dollar settlement that ultimately weakens US sanctions leverage itself. Supporting this: CNBC's direct link between Bessent's own Iran sanctions and faster yuan adoption, plus Pakistan's explicit refusal to treat those sanctions as binding — two independent signals pointing the same direction. Against this: neither report quantifies how much trade has actually shifted to yuan, and one country's refusal to enforce sanctions is not proof that dollar dominance itself is eroding.
What to watch: whether other Iran trading partners follow Pakistan's line, and whether the Treasury responds with secondary sanctions against Pakistani entities — the next test of how much enforcement leverage Washington actually has left.
