US sanctions on Iran take full effect

The full re-imposition of US sanctions on Iran will put an unprecedented level of pressure on its theocratic establishment. When US President Donald Trump withdrew from the Joint Comprehensive Plan of Action (JCPOA), commonly known as the Iran nuclear deal, a period of time went into effect in order to re-impose two sets of sanctions that were lifted by the Obama administration to appease Tehran and reach the deal.

The sanctions were divided into primary and secondary. The US Treasury Department had a 90-day and 180-day period respectively to re-impose all economic sanctions on Iran. These windows were designed to give adequate time and warning to foreign companies to leave Iranian markets and halt their dealings with the country. 

The first set of sanctions took effect on Aug. 6, 2018. It was leveled against Iran’s automotive industry, its precious-metals industry, major transactions in its currency, the buying or selling of dollars by its government, any direct or indirect purchases, trade, transfers or selling of major construction materials, and any action associated with the regime’s sovereign debt.

Although the primary sanctions put pressure on Tehran, today’s sanctions are much more vital. To begin with, they are targeting Iran’s oil industry. Any oil-related transactions with the regime — including affiliated institutions such as the National Iranian Oil Co., the Naftiran Intertrade Co. and the National Iranian Tanker Co. — are illicit. Some 80 percent of Iran’s total exports are linked to its oil exports, and revenues from its petroleum industry account for roughly 30 percent of the country’s total budget and revenues.

Sanctions are also hitting another major part of Iran’s energy sector: The gas industry. Iran holds the world’s fourth-largest and second-largest proven crude oil and natural gas reserves, respectively. Tehran was hoping to become a major provider of gas to Europe. 

When the nuclear deal was reached, Total — one of the seven “supermajor” oil companies in the world — signed a deal worth an estimated $5 billion to develop Iran’s South Pars, which was going to be the world’s largest natural gas field after completion. But Total, like many other foreign companies, quit its project recently and took immediate action to back out of Iran’s market thanks to the US sanctions.

Iran’s oil revenues have already begun sinking, and will likely continue to do so. In fact, its oil revenues and exports have been steadily falling since the US withdrew from the JCPOA. In the first week of October, Iran’s oil exports dropped to approximately 1.1 million barrels per day (bpd). In April, before the US pulled out of the nuclear deal, Iran was exporting more than 2.5 million bpd. That represents a decline of more than 50 percent.

Today’s sanctions are also significant because they will cut off the flow of funds to the regime and significantly impact its efforts to fund and sponsor terrorist and militia groups across the region. Furthermore, sanctions against some Iranian individuals that were lifted by the Obama administration in January 2016 will be re-imposed. 

Despite Tehran’s efforts to dismiss US sanctions, Iranian leaders are very concerned and apprehensive as they have already witnessed the financial repercussions of the previous sanctions. 

Tehran will likely frame them as solely affecting US citizens, but the sanctions are also applied to non-US citizens and entities. As the Treasury Department previously stipulated: “Non-US, non-Iranian persons are advised to use these time periods to wind down their activities with or involving Iran that will become sanctionable at the end of the applicable wind-down period.”

Although the US may not try to bring foreign entities to court for violating the sanctions, non-American persons and companies run the risk of losing their business with the US and being sanctioned. As such, large corporations and foreign firms ought to be extremely cautious in conducting any business with Iran.