Economic Sanctions Through the Back Door

Economic Pressure Risks for Spanish Industry

US President Donald Trump publicly berated the governments of the United Kingdom and Spain during a meeting attended by German Chancellor Friedrich Merz, accusing them of denying the United States use of military bases for action against Iran. His remarks singled out Spanish Prime Minister Pedro Sánchez, a frequent target of Trumps criticism over Spains refusal to commit to a NATO goal of raising defence spending to 5 percent. This time, Trump went further: he threatened Madrid with a trade boycott and said he might sever "all relations". European institutions and leadersincluding the European Commission, French President Emmanuel Macron and, by his own account, Chancellor Merzrushed to Sánchezs defence, reminding the US that Spain, as an EU member, is bound by the EUs customs and trade rules.

But the political back-and-forth masks a more consequential risk for businesses: Washington can exert punitive pressure on Spanish economic interests without imposing formal tariffs. The White House has repeatedly shown a willingness to use regulatory, administrative and commercial levers to influence foreign companies and governments. Potential measures that would effectively amount to an economic punishment could include restrictions on energy suppliesparticularly oil and natural gas shipmentsor more targeted interventions in bilateral defence and regulatory cooperation.

Spanish corporations are particularly exposed because many depend on approvals, clearances and market access in the United States. Banco Santander needs US regulatory consent for cross-border deals such as the proposed acquisition of Webster Financial. Iberdrolas large-scale wind and renewables projects hinge on transatlantic financing, equipment supply chains and regulatory cooperation. Repsols plans to expand oil production in Venezuela and to move assets across markets require favourable treatment from US authorities and access to capital and services often routed through US financial systems. A withdrawal of informal cooperation or tougher scrutiny by US regulators could slow deal approvals, raise costs and complicate financing.

Spains main employers federation, the CEOE, has voiced concern about the damage that threats from Washington could inflict on business confidence and international transactions. The danger for European policymakers is that the White House might introduce punitive measures outside the formal sanctioning frameworksactions taken through regulatory pressure, export controls, government procurement decisions or energy supply manipulations. Those moves can be hard to counter because they do not always take the form of explicit sanctions that trigger a coordinated EU response.

What Brussels and European Partners Should Watch

Sánchez, like UK Prime Minister Keir Starmer on related issues, has a defensible position regarding the international legal questions around any military action against Iran. Yet that legal stance does not insulate Spain from economic consequences if the US elects to retaliate informally. For Brussels and national capitals across the EU, the lesson is clear: they must be vigilant to prevent a drift from political rhetoric into covert economic coercion.

Coordination among EU institutions and member states is essential. That includes preparing contingency plans to protect critical imports and supply chainsmost pressingly energy flowssupporting affected companies through diplomatic channels, and, where necessary, considering reciprocal measures that uphold EU trade law and interests. The aim should not be to escalate tensions but to ensure that unilateral pressure does not become an accepted instrument of foreign policy to the detriment of European firms and consumers.

In the short term, the markets most likely to feel immediate effects are energy and sectors dependent on US regulatory approvals. Energy price volatility, particularly for crude oil and natural gas, could feed through to inflation and central-bank calculations in Europe. Financial markets will watch regulatory announcements and any signs that US authorities are applying new friction to cross-border deals.

Ultimately, defending open trade and predictable regulatory treatment is not solely an act of solidarity with a single government. It is a pragmatic defense of European companies and consumers against the economic costs of unpredictable geopolitics. European leaders should therefore make clear that economic coercionsubtle or overtwill be met with coordinated responses that protect both legal norms and market access.