Imposing Sanctions With Respect to Iran

Overview

Purpose and Scope

Executive Order 13876, issued by President Donald Trump on June 24, 2019, represents a critical execution of U.S. foreign policy, aiming to exert maximum economic pressure on Iran's leadership. Specifically, the Executive Order targets the Supreme Leader of Iran and the Supreme Leader's Office, extending to individuals and entities linked to this office. This action underscores the U.S. strategy to counter Iranian influences in destabilizing the Middle East, promoting international terrorism, and advancing a ballistic missile program. By freezing assets and imposing prohibitions on transactions with affected Iranian individuals and entities, the Executive Order seeks to hinder Iran's global economic involvement and complicate its financial operations.

Statutory Basis

This Executive Order leverages authority granted by the International Emergency Economic Powers Act (IEEPA) and the National Emergencies Act, emphasizing the administration's stance that Iran remains an escalating threat to national and international security. The order acts as a response to what are deemed provocative acts by Iran, reinforcing earlier measures to undermine the regime's financial infrastructural capacities. This strategic legal application aims to sever financial pathways that could potentially support destabilizing activities, revealing a targeted approach to international diplomacy.

Mechanisms of Enforcement

The order authorizes the Secretary of the Treasury, with the State Department's consultation, to enforce and expand sanctions. This includes sanctioning foreign financial institutions that engage in significant financial transactions for sanctioned Iranian entities. The intent is to create substantial deterrence among international financial institutions regarding Iranian transactions. Additionally, the order restricts travel for individuals meeting specific criteria, extending the impact from financial sectors to include diplomatic and personal domains.

Legal and Policy Implications

Expansion of Executive Power

Through Executive Order 13876, the President wields broad discretionary power to regulate international economic transactions involving Iran, underlining a significant expansion of executive capability. Such authority, manifested through IEEPA, raises questions about the separation of powers and the executive's reach, particularly concerning imposing international economic sanctions unilaterally. Furthermore, the broad definitions within the order, such as "materially assisting," grant executive agencies significant interpretive powers that could foster inconsistent enforcement and challenge the clarity of the order's execution.

Impact on International Relations

The Executive Order has a nuanced influence on U.S. relations with foreign allies, particularly those in Europe and Asia. These countries have engaged in diplomatic and economic efforts with Iran, such as commitments under the Joint Comprehensive Plan of Action (JCPOA). The order, by targeting foreign financial institutions and individuals, intersects with these frameworks, potentially forcing allied nations to navigate between U.S.-imposed restrictions and their interests, creating diplomatic tension and necessitating sensitive negotiations on policy alignments.

Implications for Humanitarian Contexts

There are significant legal implications for humanitarian organizations operating within Iran due to the order's implicit reach. Although theoretically exempt, humanitarian aid could face operational challenges due to vague definitions of entities and activities that might be considered supportive of blocked individuals. This complex legal landscape requires careful navigation to prevent inadvertent sanctions violations, with implications for the delivery of essential goods and services, and necessitates refined regulatory guidance to safeguard humanitarian efforts without undermining security objectives.

Who Benefits

U.S. Defense and Security Sector

The defense and security sectors in the United States are among the indirect beneficiaries of Executive Order 13876. Strengthening economic sanctions against Iran aligns with U.S. national security objectives to counter perceived threats, such as terrorism and ballistic missile proliferation. The order consolidates defense strategy, potentially attracting increased appropriations and strategic focus on maintaining and enhancing military readiness and intelligence operations related to Iranian activities.

U.S. Financial Institutions

U.S. financial institutions may find themselves in an advantageous position as the execution of these sanctions fosters a perception of adherence to stringent legal compliance standards. As foreign entities face potential sanctions and increased scrutiny under the EO, transactions may shift towards U.S.-based banks perceived as compliant and secure. This shift can enhance the reliability and reputation of U.S. financial institutions in the global market, attracting more clients who seek to mitigate risks associated with Iranian dealings.

Energy Market Dynamics

The implementation of the EO may yield competitive benefits for the U.S. oil and gas industries. By restricting Iranian oil's access to international markets, U.S. energy sectors could capitalize on reduced foreign supply, potentially increasing market shares and influencing global oil prices. This scenario could enhance U.S. energy independence and fuel national ambitions for dominance in global energy markets, aligning with domestic policies promoting resource self-reliance.

Who Suffers

Iranian Economy and Civil Society

Executive Order 13876 delivers a profound blow to Iran's economy and its civil population, exacerbating Iran's isolation from international economic systems. Sanctioning the nation's leadership and affiliated entities disrupts financial flows into the country, deterring foreign investment and compromising Iran's capacity for global trade. These economic strains ripple through to the populace, elevating inflation rates and diminishing access to goods and basic services, potentially deepening societal hardships and unrest within Iran.

Global Diplomatic Tensions

For nations engaged with Iran under trade or diplomatic agreements, the EO presents new complications. Nations party to the JCPOA, particularly in Europe, must balance strategic interests against the demands of U.S. sanctions. This balancing act may introduce diplomatic tensions and necessitate a recalibration of alliances and commitments, influencing cooperation on broader global initiatives such as security collaborations and environmental policy agreements.

Foreign Financial Institutions

Foreign financial institutions face substantial risks under the sanctions if found facilitating significant transactions for Iranian entities. Non-compliance could lead to exclusion from U.S. markets, posing severe financial penalties. These risks necessitate heightened diligence and compliance burdens, prompting financial institutions to apply more restrictive measures that could narrow permissible engagements and potentially restrict legitimate, non-sanctioned economic activities

Historical Context

Iran Sanctions as a Policy Tool

The Executive Order follows a historical trajectory of economic sanctions as a preferred instrument in U.S. policy towards Iran. Since the Iranian Revolution, sanctions have been consistently employed to influence Iran's political and military actions, particularly regarding its nuclear ambitions and alleged support for terrorism. This longstanding approach evidences a deeply rooted skepticism towards Iran's geopolitical intentions and stability, with successive administrations resorting to economic levers as both punitive and persuasive measures.

Trump Administration's Foreign Policy Doctrine

The issuance of Executive Order 13876 aligns closely with the broader foreign policy tenets of the Trump administration, reflecting a departure from multilateral diplomacy towards assertive unilateralism. Emphasizing "America First" principles, the administration favored imposing its policy preferences, often at the expense of traditional alliances and diplomatic consensus. This EO exemplifies the administration's inclination for direct action and economic and military strength to address foreign challenges.

Precedents and Influence

The order continues the administration's previous efforts to unwind the JCPOA and replace it with a strategy of maximum pressure, reflecting a significant pivot from prior diplomatic engagements. This policy redirection sought to galvanize U.S. foreign policy into a more aggressive posture, anticipating enhanced leverage over both Iran and geopolitical dynamics in the Middle East, despite potential repercussions for traditional alliances and regional stability.

Potential Controversies or Challenges

Legal Challenges and Interpretation

The sweeping powers granted under Executive Order 13876 are susceptible to legal challenges, particularly due to the broad criteria for designating sanctioned entities. The discretionary authority afforded to the Treasury and State Departments in identifying targets invites scrutiny over potential inconsistency and overreach, with the possibility of legal interpretations being contested in judicial settings. Ensuring checks on executive authority becomes a critical concern as these issues unfold through legal and political channels.

Congressional Pushback

Within the U.S., the Executive Order may draw opposition from congressional figures advocating for renewed diplomatic engagements with Iran. Concerns about the order's effectiveness and potential humanitarian consequences might spur debates and legislative initiatives aimed at curtailing executive reach in foreign policy. Congressional pushback could shape future policy discussions, particularly those emphasizing a more conciliatory or multilateral approach in contrast to singular executive determinations.

International Resistance

Resonating dissatisfaction from international partners, particularly those involved in the JCPOA framework, may transform into organized resistance against unilateral U.S. sanctions. Multilateral bodies such as the United Nations or the European Union could serve as platforms for debating the order's ramifications, potentially escalating geopolitical tensions and leading to friction with longstanding allies. This broader resistance could challenge the sustainability and efficacy of the EO in its intent to globally isolate Iran.