In an unprecedented move, on Monday June 25, the United States imposed financial sanctions on the Supreme Leader Ayatollah Khamenei and his office, which oversees and manages the affairs of the country. President Donald Trump signed the executive order that brought the sanctions into effect.
In addition to targeting the person who holds the most power in the Islamic Republic, and who has done for the last 30 years, the executive order gives vast powers to the American government to intensify sanctions against Iran and the institution that runs it.
In a statement, the US Department of Treasury, which oversees sanctions, announced that the new designations by the department “reinforce the President’s…Executive Order imposing sanctions on the Supreme Leader of the Islamic Republic of Iran as well as the Supreme Leader’s Office. The President’s order will deny Iran’s leadership access to financial resources and authorizes the targeting of persons appointed to certain official or other positions by the Supreme Leader or the Supreme Leader’s Office. Moreover, any foreign financial institution that knowingly facilitates a significant financial transaction for entities designated under this Executive Order could be cut off from the US financial system.”
Over the Islamic Republic’s 40-year history, this is the first time that the Supreme Leader and his office have specifically been targeted by US sanctions. Previously, the US had imposed sanctions on certain institutions under the command of Ayatollah Khamenei, including the Headquarters of the Execution of Imam’s Orders, a vast economic empire. In April 2019, the US also designated the Revolutionary Guards as a terrorist organization — also a dramatic move.
Long-term Economic Consequences
Under the presidency of Barack Obama, the US Treasury put sanctions on the Headquarters of the Execution of Imam’s Orders, but when asked why Ayatollah Khamenei as an individual had not been subjected to sanctions, the Treasury answered that the United States was not willing to give weight to the point of contention between the Iranian and US governments, which was the assumption that the US was pushing for regime change.
But now the US has crossed this threshold and imposed sanctions on the finances of the most powerful person in Iran and his headquarters — sanctions that will have long-term economic consequences.
Despite the extraordinarily heavy sanctions the United States has currently imposed on Iran, there are still vast sectors of the Iranian economy that are shielded from direct hits by sanctions, mainly because of what the government and Iranian officials learned during previous times of sanctions. These Iranian sectors have been able to bypass sanctions through the creation of shell companies and entities, and by posing as private enterprises.
People close to, and trusted by, Ayatollah Khamenei and his office manage a large share of these companies. These trusted individuals are active on the board of directors of various businesses. As the statement by the US Treasury makes clear, the executive order gives its Office of Foreign Assets Control (OFAC) the authority to impose sanctions on associates of the Iranian Supreme Leader as well. If these individuals are added to the list of sanctions, companies that pretend to be owned or managed by the private sector will be affected too.
In 2012, the US Treasury estimated that the Headquarters of the Execution of Imam’s Orders owned properties and assets worth around $100 billion. And Ayatollah Khamenei oversees many other wealthy entities active in Iran, including companies and financial institutions active in a large range of sectors, from oil and banking to the manufacturing of consumer items. For the moment, they remain off the sanctions list.
The wealthiest of these entities include the charitable organization the Mostazafan Foundation of the Islamic Revolution, the Imam Khomeini Relief Foundation, the 15 Khordad Foundation, the Housing Foundation of the Islamic Revolution, the Islamic Revolution Martyrs Foundation, the Guardianship of Astan Quds Razavi — the biggest religious endowment in the Islamic world, which owns numerous companies, from food businesses to hotels and tourism — the Guardianship of Shah Cheragh Shrine, the Guardianship of Jamkaran Mosque, the Guardianship of Fatima Masoumeh Shrine and the Guardianship of Shah Abdol-Azim Shrine, which owns numerous commercial and financial companies and, among other things, is active in importing luxury cars.
Ayatollah Khamenei also controls other financial powerhouses too, including the Ahl Al-Bayt World Assembly, the World Forum for Proximity of Islamic Schools of Thought, Keyhan newspaper, Ettela’at newspaper, the Islamic Development Organization, and the Imam Sadegh Society, which owns Imam Sadegh University. Now, with Trump’s new executive order, they will be exposed to American sanctions.
Khamenei's Representatives Around the World
In addition to the entities that comprise this empire of wealth, those who are appointed by Khamenei to various important positions such as the clergy members of the Guardian Council, the head of the Islamic Republic of Iran Broadcasting (IRIB), military commanders and members of the Expediency Council also face possible sanctions. Outside Iran, one group is especially vulnerable to these new American sanctions. Khamenei, as the Supreme Leader, has representatives in other countries who are directly appointed by him and work independently of Iranian embassies. They include the supervisor of Hajj pilgrims in Saudi Arabia, his representative in Britain, who is the president of London’s Islamic Center, and his representatives in Syria, Lebanon, Pakistan, Afghanistan, Iraq, the Republic of Azerbaijan, Russia, India, Germany, France and Austria.
The new sanctions can disrupt financial transactions for these representatives and they might even affect their visa status because these individuals are not part of any diplomatic mission and, under international conventions, governments are not obliged to tolerate their activities.
Therefore, the sanctions against Ayatollah Khamenei and his office are not merely symbolic. Groups and individuals with expertise in bypassing sanctions helped areas of the Iranian economy once be almost immune to sanctions, or certainly less affected by them. But this extensive group of institutions and businesses may now be added to the US sanctions list.
Sanctions do not tend to have immediate impact and sections of the economy will not be paralyzed in a short period of time. But the sanctions do make it more costly for these entities to continue their activities. In fact, this is the goal of the sanctions regime: a sustained and extensive targeting that makes it increasingly expensive and difficult for these entities to operate.
Aside from these tangible consequences, the sanctions impact on the prestige and reputations of the targeted individuals and entities. And the new sanctions once again highlight the fact that, among approximately 200 countries in the world, Iran and its leadership stand out as unique, and there is perhaps no other country quite like it. The Islamic Republic and its regime are truly an anomaly in the international community, and for the moment, it is being punished for being the odd man out.
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Decoding Iran’s Politics: The JCPOA Ultimatum, May 16, 2019
How did Countries Deal with Iran During Previous Sanctions?, August 7, 2018
Decoding Iran’s Politics: The 12-Point US Ultimatum, July 6, 2018
Can Iran Legally Close the Strait of Hormuz?, July 5, 2018
The Nuclear Deal: Will Khamenei Get What he Wants?, May 29, 2018
Khamenei’s Eight Conditions for Talks with Europe, May 25, 2018
The 12 Demands of Pompeo's New Iran Strategy, May 21, 2018