The administration imposed sanctions yesterday that apply to any individual or company doing business in or with Iran’s iron, steel, aluminum, and copper sectors. This designation significantly increases pressure on Iran’s economy by targeting industries from which Iran derives significant income. It also enhances the administration’s targeting of materials necessary to support Iran’s nuclear and ballistic missile programs, and provides for the first significant expansion of sectoral sanctions since 2013.
The industrial metal sector generates a substantial percentage of Iran’s non-oil exports. According to the data published by the Iran Customs Organization, in the Persian year of 1397 (March 2018–March 2019), Iran exported $5.85 billion of industrial metal products, out of a total of $44 billion non-oil exports. The number for industrial metals does not include the value of Iran’s precious metals exports, on which the Trump administration re-imposed sanctions in August 2018 after withdrawing from the Joint Comprehensive Plan of Action nuclear deal.
The industrial metal sectors now subject to U.S. sanctions – iron and steel, aluminum, and copper – generated $5.5 billion of exports, or 94 percent of the total for industrial metals (see table below). Since these metals comprise vital inputs for other key industries in Iran, such as the construction and automotive sectors, which generate nearly 10 percent of Iran’s GDP, the sanctions-related disruption of trade will have a far-reaching effect on other parts of Iran’s economy.
The lion’s share of industrial metal exports came from the steel and iron industry, with almost 79 percent of the total exports by value. Second in line is copper, with 12 percent. Iran also exported $207 million of aluminum, comprising 3.5 percent of the total export value.
|Product||Value (USD)||Share (Percentage)|
|Steel and Iron||$4,604,886,298||78.6%|
The industrial metals sector is also a supplier of raw and processed materials for military uses, including as part of Iran’s ballistic missile and nuclear program; the sector is heavily penetrated by the Islamic Revolutionary Guard Corps. Iran has large reserves of copper – the second largest in the world by some estimates – which is used for reduced‐visibility treatments in missiles to protect them from detection and interception. Aluminum products contribute to the missile program by increasing the performance of solid- and liquid-rocket propellant. Iran’s largest aluminum producer – the Iran Aluminum Company, or IRALCO – also had a crucial role in the country’s nuclear program by supplying aluminum alloys to manufacture centrifuges.
However, the justification for sectoral sanctions on industrial metals was not solely related to Iran’s nuclear and missile program, but predicated on denying the regime the ability to fund the “proliferation of weapons of mass destruction, terrorist groups and networks, campaigns of regional aggression, and military expansion.”
Finally, yesterday marks the first time since June 2013 that the United States has expanded sectoral sanctions against Iran. Previously, the Trump administration had only restored the sectoral sanctions waived by the Obama administration as part of the nuclear deal. Now, any individual or entity doing business in Iran must ensure that they are not doing business in the newly proscribed sectors, further limiting businesses from investing in Iran.
Nonetheless, sanctions on the industrial metals sector are only a first step. To reinforce this effort, the administration should also consider designating the mining, construction, and engineering sectors of the Iranian economy.
Saeed Ghasseminejad is a senior Iran and financial economics advisor at the Foundation for Defense of Democracies (FDD), where Matthew Zweig is a senior fellow. Both contribute to FDD’s Center on Economic and Financial Power (CEFP). Follow Saeed on Twitter @SGhasseminejad. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.