US widens Iran sanctions to automotive and rail sectors

The US Treasury Department threatened Middle Eastern suppliers to Iran’s automotive, rail and metals industries on Thursday, as Washington tries to crack down further on the Islamic Republic’s regional trade and financial linkages.

US forces’ blockade of Iranian tankers through the Strait of Hormuz has impeded Iran’s ability to export oil, and Tehran has resorted to these other sectors to maintain “a veneer of economic solvency” and logistics connectivity, the department said on Thursday.

Entities based in the UAE and Turkey, as well as Germany and Hong Kong, were blacklisted for providing parts and materials to large automotive companies such as Iran Khodro Company, and steel producers in Iran.

Thursday’s action also makes it easier for the US to pursue Iranian and foreign companies operating in Iran’s automotive and rail sectors after similarly targeting Iran’s domestic airlines, as well as financial institutions in the UAE, Egypt and Turkey, under Operation Economic Outcast.

The US Treasury said the automotive industry is “deeply intertwined” with the Islamic Revolutionary Guard Corps’ patronage networks and that the measures will help to choke off Iran’s procurement efforts “by reaching not only Iranian firms but also the foreign suppliers and facilitators that nourish them”.

The rail sector has become a lifeline for Iran’s regional trade in energy and goods as maritime routes are severely limited by the blockade, according to the department.

The blacklisting of a few individual Middle Eastern suppliers is not surprising or significant in and of itself, according to Rachel Ziemba, a macrostrategy advisor in New York.

“The bigger news is adding automotive and rail to sectoral designations, meaning any company involved in that supply chain can be sanctioned,” she said.

That, in turn may lead to increased scrutiny “by a wide variety of companies and banks,” Ziemba added.

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