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New U.S. Sanctions A ‘Black Hole’ Swallowing Iran

Chairman of the House Foreign Affairs Committee Republican Ed Royce speaks during a news conference following a Republican caucus meeting, on Capitol Hill in Washington, July 25, 2017

The U.S. House of Representatives overwhelmingly passed a bill on July 25 imposing new sanctions against Iran, Russia, and North Korea. If approved by Congress and signed into law by President Donald Trump, the bill will have serious repercussions for Iran, writes Radio Farda's economic analyst, Fereydoun Khavand.

It is like a black hole that swallows everything around it, commented the ultra-conservative Iranian newspaper Keyhan on the day of the bill’s passing. “If the Islamic Revolutionary Guard Corps (IRGC) is designated as a terrorist organization, it will drag major parts of the state, including the government and other branches, into the list of sanctioned entities,” added the newspaper, which is directly controlled by Supreme Leader Ayatollah Ali Khamenei.

In fact, the new bill connects IRGC directly to terrorist activities. “The Iranian Revolutionary Guard Corps–Quds Force (in this section referred to as the ‘IRGC–QF’) is the primary arm of the government of Iran for executing its policy of supporting terrorist and insurgent groups. The IRGC–QF provides material, logistical assistance, training, and financial support to militants and terrorist operatives throughout the Middle East and South Asia and was designated for the imposition of sanctions by the Secretary of the Treasury pursuant to Executive Order 13224,” wrote the U.S. representatives in their resolution.

“The IRGC, not just the IRGC–QF, is responsible for implementing Iran’s international program of destabilizing activities, support for acts of international terrorism, and ballistic missile program,” the resolution continued.

Considering that verbiage of the bill, one can conclude that Keyhan is not wrong about its consequences. Even if the IRGC isn’t officially designated as a terrorist organization, it will more or less have the same effect if the new sanctions bill becomes law.

The IRGC is like an octopus with its arms all over the country’s economy, from oil and gas, the automotive industry, the construction of roads, dams, and buildings, to tourism and the film industry.

Foreign companies that intend to invest in Iran can hardly avoid entities connected to the IRGC.

Iran was already facing difficulties convincing major international companies to invest in the country because they were afraid of possible punishment by the U.S. government. If the IRGC is designated a terrorist organization, Europeans will be much more careful in their business with Iran.

It would be extremely difficult for foreign companies interested in investing in Iran to navigate the domestic banking and business arena, given the IRGC’s entanglement with hundreds of Iranian banks and companies. If a foreign company deals with any domestic Iranian firm with links to the IRGC, a case of sanctions violation might emerge.

Europeans seem already aware of the possible complications. The French media have said big companies such as Citroen, Peugeot, Renault, Airbus, and Total will face problems if the new sanctions are imposed on Iran.

France's Foreign Ministry said on July 26 that the new U.S. sanctions against Iran, Russia, and North Korea appeared at odds with international law due to their extra-territorial reach. The Foreign Ministry said in a statement that French and European laws would need to be adjusted in response and added that discussions would be necessary at the European Union level because of the potential impact on European citizens and firms.

“One of the goals of the United States is to enforce the self-sanction phenomenon inside Iran,” wrote the Keyhan newspaper. Based on its definition, “self-sanction” means that Iranian banks and entities would be forced to stop cooperating with the IRGC and its subsidiaries.

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    Fereydoun Khavand

    Fereydoun Khavand is a French-Iranian economist living in Paris. He has been teaching at various French universities and is a regular contributor to Radio Farda as an economic analyst.