U.S. Ties Iranian Oil to Terrorism

| Intel Brief
The Soufan Center

 

Bottom Line Up Front

  • The Trump administration is using all available tools to try to prevent Iran from exporting oil.
  • The administration is leveraging terrorism-related laws and programs against Iran, even though such tools were not designed to apply to foreign governments and their economies.
  • The basis of the U.S. effort is to assert that Iran’s oil exports are linked to the IRGC and its support for regional armed factions.
  • Countries in Europe and Asia are reluctant to cooperate with U.S. sanctions as they seek to keep the 2015 multilateral nuclear deal intact.

The Trump administration is using every possible tool in its arsenal, short of a naval blockade, to try to shut down Iran’s exportation of oil. Washington’s goal is to apply ‘maximum pressure’ on Iran’s economy to compel the Iranian leadership to capitulate to an extensive set of demands for a revised nuclear deal. In May, the cessation of sanctions exemptions for the purchase of Iranian oil had driven Iran’s oil exports to a new low of 300,000 barrels per day. Iran’s baseline oil export volumes, achieved during 2016-2018 when no sanctions were applied, is approximately 2.5 million barrels per day.

Since July, in the context of heightened U.S.-Iran tensions in the Persian Gulf, the Trump administration has taken more aggressive steps to deny Iran the ability to export oil. A new feature of such efforts has been assertions that Iranian oil shipments are organized by, and the proceeds are for the benefit of, the Islamic Revolutionary Guard Corps (IRGC). In April, the administration designated the IRGC as a Foreign Terrorist Organization (FTO), representing the first time the United States has applied that designation to an armed force of a foreign government. The law that created the FTO designation intended the designation to apply to groups, not to organizations of foreign governments. The administration justified the designation on the grounds that the IRGC’s Qods Force (IRGC-QF) is the instrument through which Iran supports regional armed factions, such as Lebanese Hezbollah and Hamas, that are designated FTOs. The IRGC-QF also organized Iran’s broad support for the Assad regime in Syria against its armed rebellion, and Syria, like Iran, is designated by the United States as a state sponsor of terrorism.

As was intended, the IRGC’s designation as an FTO opened up new avenues in the administration’s campaign against Iran. In August, the U.S. Justice Department asked a court in Gibraltar, a British Overseas Territory, to continue holding an Iranian ship (Grace I, renamed as the Adrian Darya 1) that Gibraltar had seized for allegedly violating European Union sanctions on Syria. The Justice Department alleged that the IRGC had organized the oil shipment and that releasing the ship would therefore support Iranian terrorism. The Gibraltar court denied the U.S. request, arguing that the EU does not consider the IRGC to be a terrorist organization. After being rebuffed by Gibraltar, the administration subsequently threatened to impose sanctions on any European port operator that facilitated the ongoing journey of the ship. And, the U.S. reportedly offered the captain of the ship a $15 million reward if he would steer the ship to a port where it would be impounded. With no response to that offer, on August 30, the administration sanctioned the ship and its captain, a national of India. The monetary offer made use of the ‘Rewards for Justice’ program – a longstanding U.S. program designed to prevent acts of global terrorism. At a September 4 press briefing, the top State Department official on Iran, Ambassador Brian Hook, boasted that ‘It’s the first time that the United States has offered a reward for information that disrupts a government entity’s financial operations.’ It is possible to argue, however, that, in the interests of trying to crush Iran’s economy, the administration has made use of the rewards program for a purpose other than was intended.

Also on September 4, the United States sanctioned, as terrorism-supporting entities, 16 small Middle Eastern companies and 10 individuals linked to Iran’s oil exportation to Syria and to the Adrian Darya I ship itself. The Treasury Department simultaneously issued guidance threatening U.S. sanctions against any port operation that facilitates Iranian oil shipments. Despite all the U.S. actions, Tehran announced on September 9 that the Adrian Darya 1 had completed its original plan to deliver the oil to Syria. The delivery contradicted Iran’s pledge to the United Kingdom that Iran would find another buyer for that oil. The U.S. effort to disrupt Iranian oil shipments has not derailed EU efforts to salvage the Iran nuclear deal, which has been brought nearly to collapse as a result of the Trump administration’s abrogation of the accord. No European government has directed its port operators to systematically impound or interfere with any Iranian shipping, and none has echoed the Trump administration’s tying of Iranian oil sales to support for terrorism. The EU is instead moving forward with a plan – which clearly contradicts the U.S. pressure campaign – to provide Iran with $15 billion in credits to buy European goods in exchange for Iran’s returning to full compliance with the nuclear deal.

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