In the aftermath of Iran’s unprecedented October 1 ballistic missile attack against Israel, Washington made it clear that Iran would face consequences for its actions. To that end, the U.S. Government announced new actions on October 11 to further disrupt the flow of revenue the Iranian regime generates to fund its nuclear program and missile development, support terrorist proxies and partners, and perpetuate conflict throughout the Middle East.
The U.S. has had some sanctions in place against Iran since the mid-1990s primarily focused on slowing its nuclear program (those were briefly lifted under President Obama as part of the suspended 2015 nuclear deal) and penalizing Iranian support for regional terrorism, but an arms embargo even pre-dates that, dating from the 1984 Iran-Iraq war.
Will these sanctions make an impact?
It is unclear if these new sanctions were directly negotiated with Israel in recent high-level discussions concerning potential targets for Israel’s expected retaliation, but it is a safe bet the general parameters were raised since the impact of Israeli military strikes on Iranian petrochemical facilities is undoubtedly a global economic concern. Some time will be needed to assess whether western oil purchases from Iran will be reduced by these sanctions and whether or not the petroleum trade has simply found new markets through diversion, as is often the case. In any event, in recent years China has become Iran’s major buyer, purchasing the vast majority of Iranian production.
Mandated by Congress, the U.S. Energy Information Administration (EIA) issued its annual report on Iranian petroleum and petroleum product exports, noting that Iran made between $53 billion to $54 billion in 2022 and 2023 – significant increases over $37 billion generated in 2021 and $16 billion made in 2020. This data was quickly added to political campaign statements in view of the upcoming U.S. elections, with Trump supporters making the argument that previous Biden administration sanctions and sanctions waivers are ineffective.
It also remains to be seen if these new U.S. sanctions are viewed as tough enough by the Israeli government to deter any future attacks on Iranian energy facilities; that calculation is probably linked to the success of these sanctions in reducing Tehran’s overall oil export revenues.
Expanded sanctions authority
The Department of State imposed sanctions on six entities engaged in Iranian petroleum trade and identified six vessels as blocked property. Concurrently, the Department of the Treasury, coordinating with the Department of State, has issued a determination that will lead to the imposition of sanctions against any person determined to operate in the petroleum or petrochemical sectors of the Iranian economy. Pursuant to this determination, the Treasury Department’s Office of Foreign Assets Control (OFAC) now has the authority to impose sanctions on “any person determined to operate in the petroleum and petrochemical sectors of the Iranian economy,” as well as other key sectors of the Iranian economy that Washington believes could generate significant financial resources which Tehran is currently employing to undermine regional stability.
Additionally, the Treasury Department is sanctioning ten entities and identifying 17 vessels as blocked property for their involvement in shipments of Iranian petroleum and petrochemical products in support of previously U.S.-designated entities National Iranian Oil Company or Triliance Petrochemical Co. Limited.
Focus on Iran’s “ghost fleet”
For now, the new Treasury sanctions target the so-called Iranian “ghost fleet” moving Iranian oil despite existing sanctions being applied to the Iranian oil producing firms themselves. The 17 designated vessels are primarily based in the UAE, Liberia, Hong Kong, Marshall Islands, Panama, Malaysia and the PRC. The “ghost fleet” is primarily involved in moving Iranian oil to the PRC. The new U.S. sanctions will allow for U.S. enforcement actions against the operators, but will not compel foreign countries to seize the vessels.
The State Department’s media release on Iran October 11 made the U.S. bottom line clear: “The United States is committed to curtailing Iran’s sources of revenue for its malign activities. As long as Iran devotes its energy revenues to funding attacks on U.S. allies, supporting terrorism around the world, and pursuing other destabilizing actions, we will continue to use all the tools at our disposal to hold it accountable. These measures will be reinforced by ongoing close coordination with partners and allies to address and counter Iran’s actions.”
The October 11 sanctions are being taken pursuant to E.O. 13902, which provides authority to determine sectors of Iran’s economy and authorizes the imposition of sanctions on persons operating in those sectors, and E.O. 13846, which authorizes and reimposes certain sanctions with respect to Iran.
Iran condemned on October 13 what it termed an “illegal and unjustified” expansion of the U.S. sanctions targeting its oil industry.