Imposing Sanctions With Respect to the Iron, Steel, Aluminum, and Copper Sectors of Iran

Overview

Introduction to Executive Order 13871

Executive Order 13871, issued on May 8, 2019, by President Donald Trump, aims to impose sanctions on Iran's metals industry—particularly its iron, steel, aluminum, and copper sectors. This EO falls within a broader strategy by the U.S. to apply "maximum pressure" on Iran over its nuclear program, its missile programs, and its influence in the Middle East. By targeting these sectors, the United States seeks to hobble key sources of revenue that Iran could potentially use to support military and hostile activities, including the development of weapons of mass destruction and backing of terrorist networks.

Legal Framework and Powers Invoked

The order is rooted in legal authorities granted under the International Emergency Economic Powers Act (IEEPA), the National Emergencies Act, and section 212(f) of the Immigration and Nationality Act. These laws provide the President with the power to regulate international economic dealings and personal transactions that pose unusual and extraordinary threats to the United States. The invocation of these powers underscores the administration’s stance that Iran’s activities represent such a threat, justifying the severe measures embodied in this order.

Intended Impact on Iran

The sanctions aim to instigate significant economic hardship within Iran, pressuring its government by severely limiting critical export revenues. Iran's metals industry is a substantial part of its economy, and curtailing trade in these materials is intended to exacerbate existing economic challenges. By impeding these sectors, the order seeks to diminish Iran’s capacity to finance actions the United States deems destabilizing or threatening, shifting Iran's policy behavior under economic duress.

Operational Mechanics

Practically, the EO blocks any property or interests in property under U.S. jurisdiction when held by persons operating within Iran's designated sectors. It extends these measures to any financial institution knowingly involved in significant transactions supporting the Iranian metal sectors, imposing stringent conditions or outright prohibitions on maintaining correspondent accounts in the United States. In essence, this EO systematically severs Iran’s metal industry from the global financial network that traverses U.S. channels.

Tools for Enforcement

Enforcement is primarily the responsibility of the Treasury Department, working in tandem with the Department of State. The order empowers these bodies to develop regulations and mechanisms necessary to identify violators and ensure compliance. This includes the authority to adopt rules and employ all powers vested in the Executive by IEEPA, starkly amplifying the U.S. judicial and administrative reach into international economic activities associated with Iran.

Legal and Policy Implications

Constitutional and Statutory Dimensions

Executive Order 13871 has significant constitutional and statutory implications, pivoting around the extensive use of presidential powers under the IEEPA. This law grants the President broad jurisdiction to engage in economic sanction activities when national security and foreign policy interests are deemed at risk. While it operates within the existing legal framework, the EO exemplifies the aggressive use of executive authority, raising potential concerns regarding the balance of powers and oversight in foreign affairs and trade sanctions.

Policy Considerations and International Consequences

Strategically, this EO reflects a pronounced shift in U.S. Middle East policy under the Trump administration—from multilateral agreements like the Joint Comprehensive Plan of Action (JCPOA) to unilateral sanctions imposed by executive fiat. Policy tensions arise from this pivot, notably the challenge of reconciling these actions with allies’ and partners’ economic interactions with Iran, thereby straining international diplomatic and economic relations, especially within the European Union.

Alteration in Trade Relations

Legally, the EO disrupts pre-existing trade agreements and commercial licenses involving Iran's metal industries, notwithstanding their legitimate execution prior to the EO's issuance. This immediate operational impact on previously compliant entities introduces a layer of legal complexity, as affected parties navigate the fragmented landscape of U.S. sanctions law, often questioning the EO’s alignment with international trade law and norms.

Immigration and Exclusion Interests

Another layer of the EO pertains to immigration; it restricts the entry of aliens deemed to meet criteria outlined in the sanctions. This aspect spotlights ongoing regulatory and policy debates regarding immigration controls as punitive tools in foreign policy, with criticism focusing on the potential coercive misuse of immigration policy instruments against foreign nationals linked—directly or indirectly—to targeted governments.

Future Precedents and Policy Development

Looking forward, Executive Order 13871 can be seen as crafting a policy framework for addressing similar geopolitical challenges. It posits a model for future administrations contemplating intense sanctions as tools for influencing state behavior, underscoring the executive branch’s evolving approach toward international sanctions as both a political statement and a defining fixture of U.S. foreign policy.

Who Benefits

U.S. Metal Industries

Indirectly, the EO may benefit the U.S. metal industries by reducing competition in global markets. As Iran’s capacity to export key metals becomes constrained, U.S. producers could fill gaps left in global supply chains. This potential consolidation of markets bolsters certain domestic sectors, complementing broader administration goals of strengthening U.S. manufacturing and industry.

Strategic Allies in the Middle East

Traditional U.S. allies in the Middle East, such as Israel and Saudi Arabia, stand to gain from the sanctions’ destabilizing economic effects on Iran. These nations, perceiving Iran as a significant regional threat, may see an advantage in Iran's reduced regional power and capacity for military expenditure, aligning with their geopolitical goals of containing Iranian influence.

International Financial Institutions

International financial institutions enforcing compliance with U.S. sanctions may gain indirectly from greater influence and business opportunities resulting from disengaging with Iran. By adhering to U.S. policies, these institutions strengthen their relationships and reputations with U.S. regulatory bodies, potentially opening doors for greater business synergies and preferred partnerships within compliant markets.

U.S. Strategic Interests

Broadly, U.S. strategic interests worldwide could accrue benefits through diminished Iranian influence. As measures such as those imposed by Executive Order 13871 destabilize economic foundations that support adversarial institutions, the U.S. may secure a stronger geopolitical position, augmenting its capacity to influence regional stability and align with broader national security objectives.

European Alternative Suppliers

Similarly, European and other global suppliers not under U.S. jurisdiction—and hence free to increase export shares within markets impacted by Iran’s withdrawal—could realize commercial benefits. This generates economic opportunities for non-U.S. stakeholders to restructure Iranian-dependent trade networks, fostering new internal industry capabilities and partnerships.

Who Suffers

Iran's Economy

The primary entity adversely affected by Executive Order 13871 is undoubtedly Iran's own economy. The sectors targeted are among the most lucrative for the nation, pivotal not only for revenue generation but also for employment. Constricting this revenue stream tightens economic straits within Iran, potentially leading to greater domestic discontent and socio-economic instability.

Iranian Labor Force

The Iranian labor force directly employed within these industries may suffer job losses and economic hardship. As companies connected to the metal sectors face sanctions and transactional barriers, their ability to maintain operations becomes increasingly uncertain. This destabilizes local economies, contributing to heightened unemployment rates and exacerbating poverty concerns.

Global Companies Doing Business with Iran

Internationally, companies engaged in lawful trade with Iran’s metal industries face sudden operational upheavals, with contracts rendered void or financially untenable due to U.S. sanctions. This disrupts supply chains, incurs enforcement and compliance costs, and may result in lost business, particularly for companies without alternative markets.

U.S. Diplomatic Relations

The enforcement of the EO potentially strains diplomatic relations with U.S. allies economically engaged with Iran. Countries party to the JCPOA or holding divergent policy views on Iran could perceive these sanctions as unilateral overreach, complicating bilateral relations and multilateral negotiations, and leading to friction within diplomatic frameworks.

Humanitarian Concerns

While the EO contains provisions exempting humanitarian trade, its broader economic impact hints at secondary effects hampering humanitarian efforts. As Iran's economic plight deepens, so could public health challenges and educational disruptions, stymying socio-economic progress and complicating international efforts to afford relief and development assistance.

Historical Context

Legacy of U.S.-Iran Relations

Executive Order 13871 is part of a long history of strained U.S.-Iran relations, apparent ever since the 1979 revolution in Iran that severed diplomatic ties. The EO continues a line of intermittent sanctions intensifications over decades, following long-standing accusations against Iran concerning nuclear ambitions and state-sponsored terrorism.

Strategic Continuity and Breaks

Diverging from the Obama administration’s foreign policy—most notably the JCPOA, aimed at nuclear containment through multilateral diplomacy—this order showcases a return to hardline postures favoring economic coercion to achieve similar ends. President Trump’s focus reflects the administration’s skepticism toward Iran’s compliance and broader foreign policy skepticism toward negotiated agreements as a mechanism for international security and cooperation.

Regional Power Dynamics and Sanctions

This approach signals broader regional geopolitical strategies aimed at reasserting influence and realigning power dynamics in the Middle East. Within this framework, sanctions such as these serve to pressure realignment and coercive compliance through economic isolation and resolve political standoff with Iran through non-military avenues.

Sanctions as Foreign Policy Instruments

The invocation of economic sanctions by Trump contrasts historical cycles of engagement alongside confrontation. Sanctions employed here not only serve immediate objectives but also illustrate an iterative approach where sanctions facilitate strategic patience until collaborative compliance emerges—be it through direct policy adjustments or broader realignment with international norms and actions.

Legacy and Precedents

In analyzing the legacy of Executive Order 13871, it becomes essential to view it as part of a continuum of presidential prerogatives asserting sanctions as foundational tools of foreign policy. Such acts affirmatively reshaped U.S. standings and attitudes toward regimes it deems contrary, spurring global conversations concerning the legality, ethics, and efficacy of sanctions as prolonged policy solutions.

Potential Controversies or Challenges

Legal Disputes and Compliance Challenges

Executive Order 13871 may face legal challenges on the grounds of its extensive use of executive power. Some argue that the EO goes beyond established statutory authorities, sparking discussions about overreach and unconstitutional encroachment into legislative powers, particularly concerning Congress's power to regulate foreign commerce.

International Backlash and Legal Ramifications

International legal challenges arise from potential conflicts with world trade agreements and the prerogatives of sovereign nations to engage with Iran. The unilateral imposition of sanctions by one nation against another often provokes retaliation or disputes, underscoring tensions between national security imperatives and global economic rules. The EO might lead to cases in international arbitration forums or under international trade law.

Congressional Pushback and Legislative Oversight

Domestically, Congress might question the scope of these executive actions, particularly the administration's interpretations of the IEEPA's applicability. Some legislators favoring diplomacy over coercion may counter the EO’s enactments, focusing on efforts to resume multilateral negotiations and restore the JCPOA’s lapsed frameworks.

Impact on Enforcement and Regulatory Mechanisms

Enforcement presents logistical and regulatory challenges, as U.S. agencies must parse complex global transactions to enforce compliance. Institutions may find it difficult to interpret the scope of affected transactions, leading to inadvertent contraventions and potential inequities. Efforts to navigate ambiguities may result in protracted legal battles or calls for legislative clarity.

Humanitarian and Civil Society Concerns

Civil society advocates often critique sanctions for exacerbating civilian suffering rather than directly impacting sanctioned regimes. The EO might amplify scrutiny over humanitarian impacts, with critiques aiming at nuanced exemptions hardly mitigating wide-reaching collateral damage. Legal disputes may arise concerning the chilling effect on trade impacting essential goods critical to human security and rights.