November 27, 2024 | Middle East Forum

U.S. Should Expand Its Sanctions Against Tehran’s Industrial Metals Industry

Trump’s Maximum Pressure 2.0 Should Designate All Significant Iranian Firms, Including Senior Leaders and Board Members
November 27, 2024 | Middle East Forum

U.S. Should Expand Its Sanctions Against Tehran’s Industrial Metals Industry

Trump’s Maximum Pressure 2.0 Should Designate All Significant Iranian Firms, Including Senior Leaders and Board Members

President Donald Trump designed his first term “Maximum Pressure” campaign to constrain both Tehran’s nuclear ambitions and its regional destabilization efforts. It worked. Enrichment remained frozen even after Trump exited the 2015 nuclear deal, and Iranian proxies struggled to pay salaries. The Biden administration then snatched defeat from the jaws of victory. Its failure to enforce sanctions enabled Iran to export more than $400 billion in oil and other goods. The Islamic Republic used this capital influx not only to enhance its nuclear and missile capabilities and support terrorism and domestic repression, but also to expand its indigenous dual-use industries.

As Trump prepares to return to the White House, a resumption of “Maximum Pressure” seems inevitable. As he shapes the new sanctions regime, he should not ignore Iran’s industrial metals sector.

The Maximum Pressure campaign did not limit itself to Iran’s oil trade. In May 2019, Trump imposed sanctions targeting individuals and entities engaged in transactions involving Iran’s iron, steel, aluminum, and copper industries. Today, the industrial metals sector generates 20 percent of Iran’s non-oil exports and contributes to other sectors, such as construction and automobile manufacturing. The industrial metals sector also supplies materials for military programs such as Iran’s ballistic missile and nuclear programs.

Iran’s iron and steel exports reached $6.1 billion in 2023, a nearly 25 percent increase since 2018. Its $1.6 billion copper and $900 million aluminum exports represent, respectively, a near doubling and a four-fold increase over the same period. Exports from Iran’s unsanctioned zinc industry used in aircraft, missiles, and infrared detection systems more than doubled to $547 million between 2018 and 2023. In 2023, China, Iraq, Turkey, the United Arab Emirates (UAE), Oman, and Indonesia were the top destinations of Iran’s industrial metals.

The small increase in industrial metals trade during the first Trump administration and its huge growth under President Joe Biden show that both sanctions loopholes and non-enforcement empowered the sector’s boom. Enforcing sanctions on industrial metals can be complex because it is easier to repackage metals to evade their origin. Nor is the problem only in Tehran. China, the UAE, Turkey, Iraq, Hong Kong, and Oman played key roles to help Iran build its industrial metals trade network.

A second-term Maximum Pressure strategy toward Iranian industrial metals must plug the gaps that emerged during Trump’s first term. To achieve this, the United States should designate all significant Iranian firms in the metals sector, including their senior leadership and board members. Such a hostile operational environment will undermine business and hinder Iran’s capacity to function within the global market.

To strengthen its analytical capabilities, the United States must augment the workforce within the Department of the Treasury to monitor Iranian enterprises and their non-Iranian affiliates. Although economic warfare becomes the primary instrument of coercive diplomacy employed by the United States, the Treasury Department lacks adequate personnel to meet the escalating demands upon it.

Third, the United States should proactively and systematically use its cyber capabilities to access information about these firms and their non-Iranian partners. Iran’s cyber defense is porous and vulnerable, should U.S. policymakers choose to act more decisively.

Fourth, given the Islamic Revolutionary Guard Corps’ (IRGC) penetration of the industrial metals sector, the United States should designate IRGC-associated firms for terrorism. Just as in the fight to counter the Islamic State and Al Qaeda, this includes using covert means to neutralize key players in illicit trade.

Fifth, the United States should expand its sanctions beyond the four designated metals and include other metals such as zinc, nickel, and lithium.

The United States has the opportunity to reduce Iran’s revenue from industrial metals exports. The incoming administration should define success as reducing Tehran’s export revenue to a quarter of its current levels by December 2025.

Maximum Pressure 1.0 worked, but the Biden years’ cash infusion mandates an even more rigorous Maximum Pressure 2.0. Industrial metals appear to be a good place to start.

Saeed Ghasseminejad is a senior advisor on Iran at the Foundation for Defense of Democracies specializing in Iran’s economy and financial markets, sanctions, and illicit finance.

Issues:

Issues:

Iran Iran Missiles Iran Nuclear Iran Sanctions Sanctions and Illicit Finance

Topics:

Topics:

al-Qaeda China Donald Trump Hong Kong Iran Iraq Islamic republic Islamic Revolutionary Guard Corps Islamic State of Iraq and the Levant Joe Biden Oman Saeed Ghasseminejad Tehran Turkey United Arab Emirates United States United States Department of the Treasury