Following the drone and missile attacks on Saudi Aramco’s oil facilities in Abqaiq and Khurais in eastern Saudi Arabia, the US announced a new package of sanctions on Tehran as part of Washington’s policy of maximum economic pressure to address Iranian threats.
The attacks emanated from the north or northwest, according to Saudi experts and copious evidence. The economic sanctions imposed by the US mainly target three financial institutions: The Central Bank of Iran (CBI), the National Development Fund of Iran (NDFI) and Etemad Tejarate Pars Co.
The sanctions imposed on the CBI are not the first of their kind. It faced stringent US, European and international sanctions in 2012, which were lifted in 2015 following the signing of the ill-fated nuclear deal. Various US sanctions have been imposed on the CBI over the past two decades, most recently in May 2018.
The sanctions included a ban on the CBI trading in the US dollar.
The new set of sanctions imposed on Sept. 20 this year include the freezing of any assets belonging to the three aforementioned Iranian institutions in the US, and the cessation of any financial transactions between these entities and any American citizen, bank or company.
Even more serious is that any company or financial institution worldwide found to be dealing with these institutions risks facing sanctions that could extend to them being prevented from operating in the US, the largest market and economy in the world.
These sanctions are aimed at curbing the ability of the aforementioned Iranian institutions to finance the activities of the infamous Islamic Revolutionary Guard Corps (IRGC) and its affiliates. This is the first time that the CBI has faced accusations of financing terrorism.
These sanctions are expected to severely impact some of the CBI’s important external roles, such as banking the funds generated from the export of Iranian oil, gas and petrochemicals, or any other products sold by Iranian state-owned firms.
It is also responsible for covering the costs of imports, meeting the Iranian government’s financial requirements, and receiving instalments of foreign loans agreed with any other country or financial institution. The new US sanctions will severely affect Iran’s overseas economic dealings as the CBI acts as Tehran’s intermediary in this regard.
They could impact Iran’s economic relations with Europe in particular. The sanctions will also affect Iran’s relations with China, as the latter is unwilling to exacerbate its current trade war with the US. The sanctions will also affect Iran’s joint investment projects with Chinese and Russian firms, and may make it difficult for the CBI to issue treasury bonds on international stock markets, which it has done in the past to finance Iran’s budget deficit.
It is the first time that US sanctions have been imposed on the NDFI, a sovereign wealth fund established in 2010 that has total holdings of approximately $100 billion. Part of this amount is distributed in international banks worldwide.
Placing the NDFI on the sanctions list obliges these banks to freeze those funds or be subjected to major fines and possibly even a ban on working in the US market — a major blow that all large financial institutions, especially European ones, would rather avoid.
The Iranian regime has withdrawn billions of dollars from the NDFI on several occasions to meets its budget requirements. This in addition to funds from the NDFI being used to develop the defense and armament capabilities of the IRGC and the Quds Force. They have even been used to finance Iran’s nuclear program.
Etemad Tejarate Pars Co. is a state-controlled firm that is believed to be the regime’s arm in purchasing military hardware from Russia.
It is highly improbable that this package of US sanctions will force Iran to change its destructive behavior in the region, cease its subversive operations against maritime navigation and the flow of energy throughout the Arabian Gulf, or abandon its proxy militias. But these sanctions will contribute significantly to weakening Iran’s economic power.
Results will be seen in the medium term so long as there is regional and global monitoring of Tehran’s efforts to circumvent the sanctions, a reconsidering of the exemptions granted to Iraq in its trade with Iran, and pressure on Turkey to curb its financial and economic dealings with Tehran.
These steps, as well as the political pressure faced by Iran over its targeting of Aramco’s oil facilities in Saudi Arabia and hindering the flow of energy, may result in these issues being raised at the UN Security Council to seek a Chapter VII resolution. This could force Tehran to finally reverse its hostile behavior in the region.