Washington’s August 2026 expansion of Executive Order 13902, extending its reach across five key Iranian economic sectors and issuing sharpened compliance directives for third-party entities, did more than widen the operational scope of American economic coercion. It revealed a structural inflection in European foreign-policy behaviour. Confronted with the broadened jurisdictional reach of American financial enforcement, European institutions neither activated meaningful countermeasures nor pursued sustained diplomatic contestation; instead, they adopted an operational posture that effectively aligned with Washington. This alignment was not a product of political concession but of tacit recognition of Europe’s reliance on U.S. financial infrastructure, a reliance that leaves private capital effectively unshielded from extraterritorial coercive instruments. In this configuration, U.S. secondary sanctions have effectively subordinated European sovereign policy space to the compliance architecture of multinational firms, thereby delimiting the practical limits of European geopolitical agency.
This dynamic reflects the cumulative impact of repeated transatlantic disputes which have exposed the profound asymmetry between American enforcement capacity and Europe’s defensive instruments. European blocking statutes, political declarations, and regulatory shields have consistently failed to protect domestic enterprises from the operational realities of dollar-denominated liquidity, correspondent-banking exposure, and board-level fiduciary liability. When forced to choose between compliance with EU directives and survival in American financial markets, European corporations defaulted to Washington’s mandates or withdrew from contested jurisdictions entirely. Private capital has become the decisive actor in Europe’s external posture, narrowing the domain within which governments can plausibly claim strategic autonomy.
The architecture of secondary sanctions explains this structural asymmetry. These measures threaten foreign entities with exclusion from American financial infrastructure for engaging in economic activity with targeted jurisdictions, irrespective of territorial connection. Their coercive power rests on two pillars: the U.S. dollar’s centrality in global settlement systems and the expansive statutory authority of the Office of Foreign Assets Control (OFAC). Under statutory frameworks such as the Comprehensive Iran Sanctions, Accountability, and Divestment Act and Executive Order 13902, jurisdiction is asserted not through physical presence but through transactional architecture. Dollar-denominated payments routed through U.S. correspondent accounts create enforceable jurisdictional hooks. Modern statutes extend authority even further, claiming jurisdiction over non-dollar transactions executed entirely outside American territory when foreign institutions facilitate significant transactions or provide material support to entities on the Specially Designated Nationals list. Under Section 5318A of Title 31 of the United States Code, foreign banks operating through dollar correspondent accounts face outright account termination for non-compliance. The threat of correspondent-banking revocation or catastrophic civil penalties effectively deputises multinational corporations as involuntary executors of American foreign policy.
I. The Mechanics of Chokepoint Power
This enforcement model directly conflicts with established European legal doctrine. Under standard territoriality and nationality principles, sovereign states may not regulate the extraterritorial conduct of foreign nationals unless a direct threat to essential security interests exists. European jurisprudence therefore regards secondary sanctions as an illegitimate intrusion into sovereign economic policy. Yet private firms face an intractable conflict of laws: complying with American mandates violates EU policy, while defying American directives triggers exclusion from primary clearing markets and the loss of dollar-clearing capacity. The result is a persistent double jeopardy embedded within globalised commerce. Secondary sanctions are not episodic irritants but a durable mechanism of power that enables Washington to set the operational parameters of global economic activity.
The conceptual mechanics of this structural subordination become legible through the theoretical frameworks of Daniel W. Drezner, Henry Farrell, and Abraham Newman. As Drezner demonstrates in his formulation of the sanction’s paradox, modern unilateral sanctions rarely coerce targeted states directly; rather, they weaponise private capital’s risk aversion. By embedding strict-liability standards and extraterritorial penalties in executive instruments, Washington shifts coercion from diplomatic confrontation to fiduciary liability. Foreign corporate risk-management committees become enforcement vectors for American statecraft.
This insight aligns with Farrell and Newman’s concept of weaponised interdependence, which illustrates how global financial and digital networks, far from creating a decentralised, interdependent world, consolidate around highly asymmetric, centralised hubs.
Because primary settlement systems, dollar-clearing houses, and messaging infrastructures are physically or jurisdictionally anchored in the United States, Washington possesses a unique structural capacity to exercise chokepoint power. This power functions not only as a mechanism of exclusion but also as a transactional panopticon. By commanding the central correspondent-banking nodes through which cross-border dollar clearing must flow, Washington transforms the global financial architecture into an instrument of real-time transactional surveillance, stripping foreign enterprises of any operational obscurity.
This chokepoint power was demonstrated when the United States reactivated secondary sanctions under Executive Order 13846 after withdrawing from the Joint Comprehensive Plan of Action in 2018. This period effectively inaugurated Operation Economic Outcast, the doctrinal blueprint for today’s expanded enforcement posture. For major European conglomerates, including TotalEnergies, Peugeot, Airbus, Siemens, Maersk, and Eni, commercial opportunities in the target state were marginal, whereas access to American capital markets was existential. Compliance was non-negotiable. Uninterrupted access to CHIPS, Fedwire, and correspondent-banking networks underpinned corporate survival. By embedding strict-liability standards, threats of personal criminal exposure for corporate directors, and extraterritorial penalties into executive instruments, Washington shifted coercion from diplomatic confrontation to board-level fiduciary liability.
Rapid internal risk assessments prompted these conglomerates to liquidate foreign direct investments, abandon signed contracts, and write off billions in capital commitments long before statutory wind-down deadlines expired. Faced with the prospect of financial asphyxiation rather than administrative penalties, European multinationals acted rationally. Corporate risk management predictably overrode state-level regulatory directives, showing that normative legal prohibitions cannot neutralise asymmetric network power.
European private capital’s behaviour reflects not passivity but strategic anticipation. Multinational enterprises across Europe actively engage in defensive de-risking, voluntarily over-complying with Washington’s regulatory perimeter to eliminate operational exposure. When forced to navigate conflicting legal regimes, such as the EU Blocking Statute’s prohibition on compliance and OFAC’s threats of secondary exclusion, corporate risk-management committees conduct an asymmetric risk assessment. Since potential penalties under EU directives constitute minor regulatory friction, whereas exclusion from dollar-clearing rails or exposure to U.S. federal courts poses an existential risk of insolvency, corporate directors rationally default to American mandates. In this configuration, over-compliance functions less as coercion’s residue than as a deliberate strategy of institutional self-preservation.
II. Europe’s Defensive Instruments and Their Structural Limits
The European Union’s attempts to establish legal and financial defences against this extraterritorial reach have systematically exposed the limits of statutory sovereignty. Council Regulation (EC) No 2271/96, the Blocking Statute, was updated in 2018 to nullify foreign extraterritorial sanctions, prohibit domestic entities from complying, and allow affected firms to seek damages. In practice, the statute merely formalised a dilemma already embedded in globalised finance: nominal European prohibitions could not outweigh the existential risks posed by American financial infrastructure. Corporate executives therefore continued to prioritise market survival over statutory compliance, underscoring the structural limits of Europe’s defensive instruments.
The Court of Justice of the European Union underscored the Blocking Statute’s structural fragility in Bank Melli Iran v. Telekom Deutschland GmbH (2021). The Grand Chamber held that although the Blocking Statute formally prohibits compliance with foreign extraterritorial sanctions, it does not prevent a European firm from terminating a contract with a sanctioned entity if it frames the decision as a neutral commercial judgment. This doctrinal nuance created a decisive enforcement loophole. As corporations can readily invoke neutral commercial rationales, risk reassessment, portfolio restructuring, and credit exposure, national authorities face an almost insurmountable evidentiary burden in proving unlawful compliance.
State-backed financial innovations fared no better, collapsing under the same structural constraints that undermined Europe’s statutory defences. The E3 states launched the Instrument in Support of Trade Exchanges (INSTEX) in 2019 as a non-dollar, barter-based special-purpose vehicle intended to operate outside American clearing rails and SWIFT. Yet commercial financial institutions refused to process the underlying local transactions, fearing secondary exposure and OFAC retaliation. Even SWIFT, despite its status as a European cooperative headquartered in Belgium, remained structurally constrained by U.S. secondary-sanctions architecture, underscoring that regulatory jurisdiction cannot offset infrastructural dependence. Deprived of banking integration and commercial liquidity, INSTEX remained operationally inert, executing a single transaction before its state shareholders voted to dissolve it in March 2023. The episode demonstrated that statutory declarations and alternative ledger systems cannot substitute for market depth or institutional capital.
In response to these compound failures, the European Union has sought to shift from defensive legalism to assertive geoeconomic deterrence. Yet this turn towards assertive countermeasures exposes a foundational friction within the European project. Regulation (EU) 2023/2675, the Anti-Coercion Instrument, empowers the European Commission with a broad suite of countermeasures, including trade restrictions, limits on foreign direct investment, and exclusion from public procurement. By shifting towards institutional counter-coercion, Brussels seeks to alter the strategic calculus of foreign states contemplating economic pressure. Yet the Anti-Coercion Instrument remains untested, and its deterrent value against American secondary sanctions is inherently constrained by Europe’s structural reliance on the transatlantic security alliance for territorial defence.
The European Union’s internal market architecture is fundamentally misaligned with the logic of geoeconomic coercion. Constructing insulated trade corridors or deploying countermeasures requires centralised political authority and a tolerance for economic risk, conditions fundamentally at odds with the Union’s institutional DNA. The Single Market’s legal and ideological foundations, open-market norms, strict state-aid rules, and rules-based multilateralism sit uneasily alongside the demands of defensive economic statecraft. This turn toward coercive instruments also accelerates the broader fragmentation of the international monetary system. As non-Western actors expand alternative settlement networks such as China’s Cross-Border Interbank Payment System (CIPS) and bilateral currency-swap arrangements, Europe finds itself uniquely stranded: tethered to American clearing rails yet constrained, ideologically and geopolitically, from integrating into emerging non-Western trade architectures.
Europe’s industrial and competitiveness agenda is equally constrained by the same infrastructure dependencies that limit its geoeconomic autonomy. The launch of the Rhine Group, conceived as the private-sector vehicle for Mario Draghi’s competitiveness agenda, illustrates how initiatives intended to foster European renewal remain captive to foreign infrastructure. Co-founded by Stripe Chief Executive Patrick Collison, the Rhine Group aims to revitalise European enterprise, yet its operational architecture remains anchored in Silicon Valley technology stacks, American venture capital, and dollar-denominated clearing rails. Efforts to build sovereign European capacity without decoupling from American capital pools do not reduce dependency; they formalise it. Market actors continue to realign with American regulatory norms because operational viability depends on staying within the American financial and technological perimeter.
III. The Geoeconomic Trap and the Conditions for Autonomie Stratégique
Europe’s geoeconomic predicament cannot be resolved within the existing architecture of defensive legalism or entrenched infrastructural dependence. So long as the continent’s financial lifelines run through American clearing rails, its foreign‑policy autonomy will remain structurally contingent on the risk calculations of private corporations and the enforcement priorities of the U.S. Treasury. The limits of Europe’s current posture are not conceptual but infrastructural: sovereignty cannot be asserted through legal instruments when the operational foundations of economic statecraft lie outside European jurisdiction.
If Europe continues its present trajectory, reaffirming political autonomy while outsourcing financial viability, it will enter a decade in which its strategic choices are not simply constrained but effectively predetermined. In a world where Washington’s chokepoint power intensifies, and non-Western financial architectures expand, Europe risks becoming the only major actor unable to convert economic scale into geopolitical agency. The continent will find itself navigating a global order shaped by enforcement logics it cannot control and network infrastructures it cannot replace.
The path to genuine autonomie stratégique is clear but politically formidable. A fully integrated Capital Markets Union, a jointly backed Eurozone safe asset capable of rivalling U.S. Treasuries, and regulatory mechanisms that insulate corporate risk appetite from extraterritorial coercion are not optional reforms; they are the minimum structural conditions for sovereignty. Europe knows what autonomy requires; the unresolved question is whether it is willing to bear the fiscal, ideological, and political costs of constructing it.
The greater danger is not dependency itself but the persistent misdiagnosis of its origins. Europe continues to treat autonomy as a diplomatic project, even though its constraints are fundamentally infrastructural. Until the continent confronts the architecture of its dependence, it will keep mistaking legal sovereignty for operational control and political declarations for power. In the emerging geoeconomic order, power belongs to those who control the rails. Europe must decide whether it intends to build its own rails or reconcile itself to a world in which it exercises sovereignty elsewhere.
