The U.S. Treasury Department on Monday expanded its sanctions campaign against Iran by designating Russia’s second-largest financial institution, VTB Bank, as a critical financial facilitator for Tehran’s Islamic Republic. The move aims to intensify pressure on international entities to sever financial ties with the bank, which is reportedly central to Iran’s efforts to bypass U.S. economic restrictions.

Treasury Secretary Scott Bessent, who introduced the “Operation Economic Outcast” maximum pressure initiative last month, underscored the commitment to targeting all channels that support Iran’s financial networks. He had indicated the forthcoming sanctions during remarks last Friday, although he did not specify the bank at that time. “We are just going to continue with this process until everyone stops dealing with this regime,” Bessent stated.

VTB Bank was previously sanctioned by the United States in 2022 as part of the broader response to Russia’s invasion of Ukraine. Those earlier sanctions already prohibited U.S. persons and institutions from conducting business with the bank. However, U.S. officials assert that VTB has maintained a crucial role in aiding Iran’s financial operations despite these restrictions. The bank reportedly provides clearing accounts to the Central Bank of Iran and other sanctioned Iranian financial entities, facilitating currency exchanges between the Iranian rial and Russian ruble.

With a global network exceeding 1,000 branches and significant operations in countries such as India, VTB has actively expanded its presence in Iran, also reportedly assisting in the transfer of billions of dollars in frozen Iranian assets. Treasury officials suggest this expansion has allowed Iran to sustain international financial connections in defiance of U.S. sanctions.

The latest action reflects a broader shift within the Treasury to more aggressively deploy sanctions against entities supporting Iran. In recent weeks, the department has targeted financial institutions in Turkey and the United Arab Emirates linked to facilitating Iranian sanctions evasion. For instance, Treasury previously took steps to sever the correspondent accounts of the UAE branch of Banque Misr, a state-owned Egyptian bank, from major U.S. banks, though it stopped short of imposing full secondary sanctions.

Despite the increasing scope of these sanctions, the Treasury has so far refrained from targeting China, which remains Iran’s largest trading partner. This restraint has prompted questions about the limits of the U.S. effort to isolate Tehran economically.

Miad Maleki, a former senior Treasury official now with the Foundation for Defence of Democracies, interprets the VTB designation as a strategic signal to China. He highlighted that VTB’s Shanghai branch is the only Russian bank integrated into China’s payment system and serves as a major conduit for trade between the two countries. By linking VTB to Iran sanctions, Treasury implicitly warns Chinese banks that maintaining ties with VTB equates to exposure to Iran-related risk, which “no bank in Shanghai, Hong Kong or Mumbai wants on its books,” Maleki said.

VTB Bank did not immediately respond to requests for comment regarding the new sanctions. The full impact of the latest measures remains to be seen, given pre-existing sanctions and the complex global financial landscape.