A new stalemate is facing Iran's fragile economy, after the United States announced on Friday, June 7th, that it will sanction Iran’s largest petrochemical holding group for indirectly supporting the Islamic Revolutionary Guard Corps (IRGC).
The US announcement came as a new measure aimed at drying up revenues to the Iranian military unit, and also amid claims by an Iranian official that the country has managed to export its oil after getting around the US sanctions.
The reason behind the decision by the Treasury Department’s Office of Foreign Assets Control to target Iran Petrochemical Industries Company was its indirect funding of the economic arm of the IRGC, a military organisation in charge of Iran’s ballistic missile and nuclear programs.
Previously, US sanctions targeted a number of Iranian petrochemical companies. But this is the first time the US Treasury has directly added the Iranian petrochemical industry, the Islamic Republic’s largest source of non-petroleum revenues, to its anti-terrorism sanctions list
Iran’s oil ministry last year awarded Khatam al-Anbiya, the IRGC’s economic and engineering arm, 10 projects in the oil and petrochemical industries worth $22 billion, four times the official budget of the IRGC, according to the US Treasury Department.
On April 8th, US President Donald Trump designated Iran’s Islamic Revolutionary Guard Corps (IRGC), including its Qods Force, as a Foreign Terrorist Organization (FTO).
In an official statement, Treasury Secretary Steven Mnuchin said, “This action is a warning that we will continue to target holding groups and companies in the petrochemical sector and elsewhere that provide financial lifelines to the IRGC”.
The Petrochemical Industries Company represents 40 percent of the country’s petrochemical production capacity and 50 percent of its petrochemical exports. With the heavy US sanctions against oil, Iran’s regime relies on revenues from exporting petrochemical products to maintain its expenditures, according to a report by IranWire.
Moreover, the new sanction comes after less than a month of sanctions that targeted Iran’s iron, steel, aluminium, and copper sectors. The sector accounts for 10 percent of Iran’s non-petroleum exports.
The report said that, before the US sanctions on oil and gas exports, Tehran was exporting 2.5 million barrels of oil per day; within six months of the sanctions taking effect, this fell to less than a million barrels a day.
In the case of the petrochemical industry, exports will undoubtedly be affected in the same way as oil exports and government revenue will receive a below. This will raise the question about Iran’s ability to meet basic obligations such as the punctual payment of public sector salaries, IranWire has reported.
The report said that sanctions targeting the IRGC, by extension, means that the entire economy is being affected because of one military institution that controls a vast share of several Iranian industrial sectors
The Trump administration is increasing economic and military pressure on Iran both because of its nuclear and missile programs as well as for its support for proxy groups in Syria, Iraq, Lebanon, and Yemen.
US President Donald Trump last year pulled out of a 2015 multilateral agreement between Iran and world powers.
US-Iranian tensions have heightened further since April because of Washington’s moves to cut off Iran’s oil exports, its deployment of an aircraft carrier strike group to deter any Iranian attacks on US interests in the gulf area, and recent attacks on Saudi, Norwegian and Emirati tankers that Washington blamed on Tehran.