June 7, 2019 / 3:25 PM / 3 months ago

U.S. sanctions target Iran petrochemicals, analysts see modest effect

WASHINGTON (Reuters) - The United States sanctioned Iran’s largest petrochemical holding group on Friday for indirectly supporting the Islamic Revolutionary Guard Corps (IRGC), a step it said aimed to dry up revenues to the Iranian military unit but that analysts called largely symbolic.

FILE PHOTO: A staff member removes the Iranian flag from the stage after a group picture with foreign ministers and representatives of the U.S., Iran, China, Russia, Britain, Germany, France and the European Union during Iran nuclear talks at the Vienna International Center in Vienna, Austria, July 14, 2015. REUTERS/Carlos Barria

Friday’s sanctions targeted the Persian Gulf Petrochemical Industries Company (PGPIC) for providing financial support to the economic arm of the IRGC, a military organisation in charge of Iran’s ballistic missile and nuclear programs.

The U.S. Treasury Department said Iran’s oil ministry last year awarded Khatam al-Anbiya, the IRGC’s economic and engineering arm, 10 projects in the oil and petrochemical industries worth $22 billion, four times the official budget of the IRGC.

The new sanctions come as the Trump administration seeks to increase economic and military pressure against Iran both because of its nuclear and missile programs as well as its support for proxy groups in Syria, Iraq, Lebanon and Yemen.

U.S. President Donald Trump antagonized Iran, and dismayed key U.S. allies, when he last year pulled out of a 2015 agreement between Iran and world powers under which Tehran curbed its nuclear programme in return for easing some sanctions.

U.S.-Iranian tensions have heightened further since April because of Washington’s moves to cut off Iran’s oil exports, its deployment of an aircraft carrier strike group to deter any Iranian attacks on U.S. interests, and recent attacks on Saudi, Norwegian and Emirati tankers that Washington blamed on Tehran.

Iran has denied responsibility for the May 12 attacks on four tankers off the United Arab Emirates coast.

The Treasury said it had also sanctioned the PGPIC holding group’s network of 39 subsidiary petrochemical companies and foreign-based sales agents. PGPIC and its units have 40% of Iran’s petrochemical production capacity and account for 50% of Iran’s petrochemical exports, it said.

“This action is a warning that we will continue to target holding groups and companies in the petrochemical sector and elsewhere that provide financial lifelines to the IRGC,” Treasury Secretary Steven Mnuchin said in a statement.

Senior Trump administration officials, speaking on condition of anonymity, described the sanctions as the latest examples of a broad economic clampdown on Iran’s economy that would help dry up funds for the IRGC, a key part of its military.

“This would continue to have a very chilling effect on the prospects for any future recovery for the Iranian economy,” one official told Reuters, saying the petroleum and petrochemical industries “have been serving for the last 40 years as a kind of institutionalized slush fund for the IRGC.”

U.S. persons are already barred from nearly all dealings with the Iranian economy, so the latest sanctions largely apply only to non-U.S. companies and individuals.

Three analysts and a former Treasury official said the latest sanctions will likely have only a modest effect because non-U.S. companies already shy away from doing business with Iran’s petrochemicals sector because of existing sanctions.

Under sanctions reimposed on Nov. 5 after Trump left the Iran nuclear deal, anyone carrying out a significant transaction in Iranian petrochemical products could already be hit by a menu of sanctions, including being barred from the United States.

Friday’s step makes PGPIC and the 39 affiliates “specially designated nationals,” a status that effectively blocks U.S. persons from dealing with them. Further, anyone who does so themselves risks becoming a “specially designated national.”

Suzanne Maloney of the Brookings Institution think tank described the latest U.S. sanctions as “a natural next step in what I think is a deliberately redundant array of restrictions.”

“The administration is banking on the overlapping authorities and obstacles to compound the pressure on the Iranians and create a sense that the entire economy is off limits,” she added.

The former Treasury official, who asked not to be named, said the new sanctions would have little effect because most multinationals had already ceased dealing with Iran, and described them as “a public relations” move.

“It’s a good way of keeping the political pressure on the front page,” the former official said.

Reporting by Doina Chiacu, Susan Heavey, Arshad Mohammed and Phil Stewart in Washington; Writing by Doina Chiacu and Arshad Mohammed; Editing by Susan Thoams and James Dalgleish

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