Writes Elias Diakos, Independent Security Analyst
Headline Diplomat eMagazine, LUDCI.eu
Editor:
Dr Vassilia Orfanou, PhD, Post Doc,
Editor in Chief & COO, LUDCI.eu
Summary
The article argues that while the U.S. and Israel apply military and sanctions pressure on Iran, this approach has not meaningfully disrupted Iran’s deeper role as a strategic node in China’s Belt and Road and energy logistics network. Although sanctions and maritime risks in the Persian Gulf have increased costs, they remain manageable, allowing Iran to continue functioning as a tolerated and useful corridor for Chinese trade. Current Western pressure increases friction but fails to reach the institutional and financial systems that sustain Iran’s strategic relevance.
Europe, however, holds underused leverage in the form of financial systems, maritime insurance networks, and infrastructure investment tools such as IMEC. Unlike military pressure, these instruments could raise the cost of using Iran in global trade networks and gradually alter China’s strategic calculations. The article argues that without coordinated European action – particularly in banking compliance, maritime regulation, and credible alternative corridors, Iran’s role as a sanctioned yet functional hub will persist, and the strategic imbalance will remain unchanged.
Introduction
The United States and Israel are applying military pressure on Iran. Sanctions are intensifying. Shipping through the Persian Gulf remains a zone of active confrontation. Iran, however, continues to hold strategic utility for China.
The pressure being applied today operates at the military and coercive level. It does not sufficiently affect the institutional, financial, and infrastructure layer that keeps Iran functional as a node. That is where European leverage lies. And that is precisely where Europe remains at low intensity.
Iran as Node, Not Just Target
Iran remains useful to Beijing because of its position. It sits at the intersection of energy flows, overland corridors, and financial facilitation that cannot easily be replaced.
Figure 1: BRI (https://leidenasiacentre.nl/english-new-map-of-the-belt-and-road-initiative/)
The map of BRI routing makes this visible. This position gives Iran functional value. It is not primarily about political affinity between China and Iran. It is about utility. As long as that utility is maintained, Chinese strategic recalculation remains unlikely.
The real variable is the cost of use. Pressure raises the burden but it has not yet reached the threshold that would force Beijing to revise its strategic calculus.
Why Current Pressure Does Not Produce Recalculation
Current sanctions create friction. They have not yet imposed a turning point.
Of approximately 430 tankers involved in Iranian trade, roughly 62% carry false flags and 87% are under sanctions. Trade continues. Insurance premiums have risen by 15 to 25 percent. That cost is real. It remains manageable.
The supposed Russian alternative does not change the picture. The incompatible gauges between the Russian and Iranian rail networks require transloading at the border. The Caspian remains a bottleneck. The Rasht-Astara link,which would give greater coherence to the corridor- remains incomplete and operationally below initial expectations.
China knows these constraints and continues using Iran. This reveals the core limitation of current Western strategy. Pressure increases the burden without yet shifting the cost calculus sufficiently. The dependency remains tolerable.
That has a consequence. Pressure without a clear inflection point does not dissolve dependency. It normalizes it.
Hormuz, the Saudi Bypass, and the New Risk Environment
Recent developments have made this structure more visible than ever.
On April 12, 2026, Saudi Arabia restored full capacity on the East-West pipeline at 7 million barrels per day. The pipeline carries strategic value because it bypasses the Strait of Hormuz, routing crude to Yanbu on the Red Sea. Its restoration shows that Riyadh has a real partial bypass instrument.
Its value is limited, however. The pipeline does not replace Hormuz. It reduces a portion of the risk. It does not remove Tehran’s ability to affect flows, premiums, and risk perception. Additionally, part of the security burden shifts toward the Red Sea, where threats remain active.
Markets have already begun adjusting to this new framework. South Korea secured 273 million barrels of crude and 2.1 million tons of naphtha through non-Hormuz routes, with Saudi Arabia committing additional volumes through Red Sea ports. This is a significant move. It shows that major importers are not waiting passively. They are building practical security solutions – even at higher cost.
At the same time, the maritime crisis has not ended. U.S. naval pressure on Iranian ports has entered the implementation phase, while negotiations over extending a fragile ceasefire continue. Iran also rejected an IMO proposal for a safe maritime corridor. The choice is deliberate. Tehran is seeking to preserve leverage over a chokepoint that continues to affect global energy trade.
Recent events show three things. Hormuz remains strategically vulnerable. Bypass solutions are useful but partial. The cost of dependence on the strait is already being repriced in the decisions of states and markets.
IMEC and the European Gap
This is where IMEC emerges as the only serious alternative capable of affecting two fronts simultaneously. It can reduce European exposure to unstable routes. It can also raise the cost of using Iran for China.
The financial foundation exists. The EIB has invested 5.6 billion euros in India since 1993, including 3.25 billion in transport since 2016. The Global Gateway strategy targets 100 billion euros in global investment by 2027. The problem is not the absence of instruments. It is the absence of focused political direction and operational commitment.
The obstacles are known. There is a financing gap. There is a need for functional normalization among key regional actors. There is coordination friction between India, UAE, Saudi Arabia, and Israel. And there is Turkish competition through BTK, already operational and offering an existing route.
The current crisis changes the weight of this inertia. When states and markets are paying more for bypass solutions, the absence of a credible alternative is not mere delay. It is strategic cost.
IMEC’s value does not depend only on full completion. It depends on early credibility. If Europe delivers measurable progress, clear milestones, and committed financing in critical segments, market risk calculations begin to shift before the entire network is complete.
Specifically: completion of the Haifa port by Q3 2026, UAE port digitalization, rail connection to Jordan. Without these, IMEC remains a slide presentation.
Who Cannot Function as Reliable Intermediaries
The discussion of European leverage must reject two easy but incorrect assumptions.
The first concerns Turkey. Ankara derives substantial benefit from its position as an energy and transit hub and supports that role through, among other things, the BTK – with a capacity of 5 million tons per year. It maintains access to both the West and the Iran-Russia system. It can reduce friction when this suits its interests. It cannot function as a stable channel of Western pressure.
The second concerns Pakistan. In Gwadar, COPHC receives 91 percent of port revenues. Karachi is a critical regional trade hub. This structural dependency significantly constrains Islamabad’s room for maneuver. Pressure on the Iranian network cannot rely on Pakistani territory as a reliable intermediary.
European strategy must therefore move outside this logic – not through states that are balancing, but through institutional mechanisms that steadily and cumulatively raise the cost.
The Three Levers Europe Already Holds
The first lever is maritime friction
The International Group of P&I Clubs covers approximately 90 percent of global shipping. European institutions and actors hold a critical position in this network. Stricter due diligence, more systematic inspections, and extended verification protocols for vessels linked to Iranian networks can produce cumulative cost without dramatic moves and without immediate market shock.
The second lever is banking friction
European correspondent banks were for years a key node of flows linked to or adjacent to the Iranian system. Commerzbank absorbed a total penalty package exceeding 1.45 billion dollars. Deutsche Bank paid 258 million dollars. These cases created strong compliance frameworks and technical expertise. FinCEN estimated 9 billion dollars in shadow banking flows through Iraq and UAE corridors. The field is not theoretical. It is ready for targeted friction.
The third lever is IMEC credibility
Europe does not need to wait for the corridor to be fully complete. It needs to make progress convincing. Visible financing, clear milestones, technical advancement in critical segments, and political coordination with key partners are sufficient to begin shifting market calculations. That is what is missing today.
Escalation Control and European Function
These levers operate below the threshold of direct confrontation. That is an advantage, not a weakness.
Europe does not need to replicate American military power. It needs to use its own institutional power to shift the cost calculus. This requires clear transition thresholds. Multiple verified attacks on commercial shipping, extended transit disruption, serious damage to critical infrastructure, or direct proxy escalation with clear attribution should trigger a different response phase.
The current crisis makes this logic urgent. Iran is seeking to preserve leverage at maritime pressure points. Asian importers are already building practical bypass solutions. Markets are repricing supply security costs.
The Political Problem
The available mechanisms are technically sufficient. The political dimension remains harder.
Berlin has already rejected three explicit proposals linking financing to Iranian behavior in 2023-2024. Its silence on IMEC carries its own meaning. France may support a harder line in principle, but follow-through has often been the difficulty rather than the declaration. Eastern European member states may accept financial measures while being more cautious on schemes requiring visible political investment in IMEC.
The realistic response lies in a core coalition of willing states. With the EIB as institutional anchor, targeted maritime and banking instruments, and early credibility investment in IMEC, Europe can move without waiting for perfect consensus.
Conclusion
The central strategic issue is no longer whether Iran can be pressured in isolation, but whether its role as a functional node in global trade architecture can be gradually devalued without resorting to escalation that risks systemic instability. Military pressure, sanctions, and maritime disruption have succeeded in increasing operational costs, but they have not yet altered the deeper structural reality: Iran remains embedded within overlapping energy routes, overland corridors, and financial adaptation mechanisms that allow it to remain useful despite isolation.
This persistence exposes a critical asymmetry in Western strategy. Hard security tools operate at the surface level of disruption, while the systems that sustain Iran’s strategic relevance – insurance markets, correspondent banking networks, infrastructure financing, and corridor interoperability remain only partially engaged. As a result, pressure is absorbed rather than transformative.
Europe occupies a unique position in this gap. Unlike other actors, it does not primarily project military force in the region, but it does exert structural influence through regulation, finance, and infrastructure investment. This creates a distinct form of leverage: one that can alter cost structures without triggering immediate escalation dynamics. However, this leverage remains fragmented, under-coordinated, and politically hesitant.
At the same time, market behaviour is already evolving faster than policy. Energy importers are diversifying away from chokepoints like Hormuz, insurers are repricing maritime exposure, and regional actors are investing in partial bypass systems. These developments signal an emerging reality: the cost of dependence is being actively recalculated, but not yet strategically shaped.
The outcome will therefore not be determined by whether pressure exists, but by who defines its economic consequences. If Europe remains passive, Iran’s utility will persist under higher costs but unchanged structure. If Europe acts decisively, it can contribute to a gradual contraction of that utility, without direct confrontation, but through systemic recalibration of risk, finance, and infrastructure connectivity.
Call to action
Europe must move from passive exposure to active structuring of global trade risk. The current moment is not about escalation, but about definition – who sets the cost of strategic corridors, and under what conditions.
This requires immediate coordination between financial institutions, maritime regulators, and infrastructure financing bodies to ensure that Europe is not merely reacting to shifting trade routes but actively shaping them. The window is narrow: markets are already adjusting in real time, and institutional hesitation is effectively allowing external actors to define the emerging system by default.
The priority is not maximal intervention, but coherent alignment of existing tools into a single strategic posture.
Recommendations
If Europe is to translate its latent structural advantages into meaningful geopolitical influence, it must begin by treating its existing instruments not as separate policy domains, but as components of a single strategic system. At present, maritime regulation, financial compliance, and infrastructure investment operate in parallel, each with technical sophistication but without unified direction. The first requirement, therefore, is conceptual: Europe needs to recognize that these tools already constitute a form of geopolitical leverage when coordinated, even if none of them individually resembles traditional power projection.
A logical starting point lies in the maritime domain, where Europe already holds an outsized but underutilized role through its influence over global insurance structures and classification regimes. Rather than introducing abrupt or politicized interventions, the emphasis should be on tightening and standardizing risk governance for vessels operating within or adjacent to sanctioned supply chains. Over time, incremental adjustments in inspection protocols, verification standards, and risk categorization can raise the operational cost of specific trade routes without triggering market shock or overt confrontation. In effect, this turns maritime governance into a slow-acting pricing mechanism for geopolitical risk.
This logic extends naturally into the financial system, where Europe’s regulatory experience following previous sanction regimes has already produced a highly sophisticated compliance architecture. The opportunity now is to refine that system toward greater precision rather than broader restriction. Instead of focusing on blanket exclusions, the emphasis should shift toward mapping and constraining indirect facilitation channels, particularly correspondent banking relationships and shadow liquidity flows that connect sanctioned actors to legitimate trade ecosystems. In practice, this requires closer integration between European compliance institutions and international financial intelligence mechanisms, allowing for more targeted disruption of high-risk nodes without destabilizing broader financial flows.
However, financial and maritime instruments alone cannot fully reshape expectations unless they are paired with a credible alternative architecture. This is where infrastructure strategy becomes decisive. The India–Middle East–Europe Corridor cannot remain a declaratory project; its value depends on whether it begins to generate measurable confidence in partial functionality. Europe’s role should therefore concentrate on accelerating a limited number of high-impact components that can serve as proof points for the broader system. Priority should be given to the operational expansion of key port infrastructure, the digital integration of logistics hubs in the Gulf, and the development of reliable rail connectivity in the Eastern Mediterranean corridor. Even partial execution of these elements would be sufficient to begin shifting private-sector risk assessments and insurance pricing models, which in turn influence long-term trade behaviour more effectively than political declarations.
At the same time, Europe must avoid structural dependency on intermediary states whose strategic incentives are inherently fluid. Transit countries such as Turkey or Pakistan may play episodic roles within regional logistics, but their multi-vector foreign policy orientation limits their reliability as consistent enforcement or transmission channels for Western-aligned strategic objectives. A durable European approach must therefore be built on mechanisms it can directly influence—financial regulation, insurance standards, and infrastructure financing, rather than relying on external actors whose alignment will necessarily shift with regional pressures.
To ensure coherence across these domains, Europe also needs to define clearer thresholds for when systemic responses are triggered. Maritime disruptions, repeated proxy escalation, or sustained interference with critical infrastructure should not be treated as isolated incidents but as cumulative signals that activate pre-defined financial and regulatory responses. Establishing such thresholds would reduce ambiguity, increase predictability for market actors, and reinforce the credibility of European instruments without requiring militarization or direct confrontation.
Finally, and perhaps most importantly, Europe must reframe the way it deploys development finance. Institutions, such as the European Investment Bank already possess the capacity to shape infrastructure outcomes at scale, but their allocation logic remains primarily developmental rather than strategic. A gradual but deliberate reorientation toward corridor-relevant investments would allow Europe to convert financial capacity into structural influence. The objective is not to replace existing global systems, but to ensure that emerging trade architectures incorporate European-defined standards of risk, connectivity, and transparency from the outset.
Taken together, these adjustments do not require new instruments so much as a new level of coordination and intent. The underlying capabilities already exist. What is missing is the integration that would allow them to function as a coherent system of influence. If achieved, Europe would not be reacting to the reconfiguration of global trade routes but actively shaping the cost structure within which those routes are formed.
Biography
Elias Diakos is an independent security analyst based in Greece, focusing on deterrence, gray-zone dynamics, and Eastern Mediterranean strategy. He has published analysis since 2014. His work has appeared in Small Wars Journal and the Headline Diplomat eMagazine, LUDCI.eu.
LinkedIn
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