Iran’s religious foundations in Washington’s crosshairs

While enforcement of the executive order is discretionary, its scope goes beyond the foundations.
Saturday 29/06/2019
Iranian Supreme Leader Ayatollah Ali Khamenei delivers a speech during a gathering of the judiciary in Tehran, June 26. (AFP)
Deep implications. Iranian Supreme Leader Ayatollah Ali Khamenei delivers a speech during a gathering of the judiciary in Tehran, June 26. (AFP)

Some dismissed new United States sanctions against Iran, announced June 24 by US President Donald Trump, as tokenish. Christopher Hill, former US ambassador to Iraq, told Bloomberg that measures centred on Iran’s supreme leader, Ayatollah Ali Khamenei, amounted to “cancelling his credit cards” and “wouldn’t make a hoot of a difference.”

Others disagree. The executive order held up for the cameras by Trump in the Oval Office refers not just to Khamenei but to his office and to “any person or entity appointed by the leader or the leader’s office.” The order threatens sanctions against anyone or any entity worldwide breaking this prohibition.

The order covers Iran’s many quasi-religious foundations, including those administering shrines in Mashhad, Shiraz and Ray. In 2013, Reuters estimated the holdings of Setad Ejraiye Farmane Hazrate Emam, headquarters of the Execution of Imam’s Orders, at $95 billion. The Mostazafan Foundation has nearly $1 billion in annual exports, according to a recent report from Doublethink, and may be the second biggest commercial enterprise after the National Iranian Oil Company.

“These foundations have land; they’re active in agriculture, banking, manufacturing, medicines, automobiles, insurance and many other sectors,” said Saeid Golkar, assistant professor at the University of Tennessee at Chattanooga. “If you put Ayatollah Khamenei’s office under sanctions, you’re in effect sanctioning perhaps 20-30% of the Iranian economy, although there are even higher estimates. Even if a specific company is not sanctioned, where a small percentage is controlled, say, by Setad Ejraiye, no-one internationally is going to trade with it. The company is now poison.”

While enforcement of the executive order is discretionary, its scope goes beyond the foundations. Khamenei appoints Iran’s leading Friday prayer leaders, clerical members of the watchdog Guardian Council, the chief justice, the head of state broadcasting, senior military commanders and the head of Iran’s Red Crescent. Khamenei has representatives dotted around the world, including the head of the Islamic Centre in London’s Maida Vale.

US Treasury Secretary Steven Mnuchin also designated eight commanders of the Islamic Revolutionary Guard Corps (IRGC) for their role in its “malicious regional activities, including its provocative ballistic missile programme, harassment and sabotage of commercial vessels in international waters and its destabilising presence in Syria.”

Foreign Minister Mohammad Javad Zarif is next in line for designation, Mnuchin added.

Tightening US pressure follows the sanctioning in April of the IRGC and the withdrawal in May of waivers that had allowed some Asian countries to buy Iranian oil. Crude sales have plummeted from 2.6 million barrels a day (bpd) in 2018 when the United States left the 2015 nuclear deal. The London-based Economist Intelligence Unit now puts Iran’s seaborne exports at around 500,000 bpd. Even before the new sanctions were announced, the EIU projected negative growth of 6.5% and 53% consumer price inflation in 2019.

The Iranian population feels the squeeze. The oil waivers required payments into Escrow accounts ring-fenced for humanitarian purposes – but even then Iran struggled to import medicines. European companies complain the United States has issued no guidelines on selling non-sanctioned goods. Instex, the European special purpose vehicle to safeguard trade with Iran, remains dormant, given the fears of European companies and banks.

Trump’s reported last-minute cancellation of military strikes on June 21 after Iran shot down a US drone have sparked hopes of diplomacy. Trump has said he wants to talk. But there is a huge gap between what Iran might accept and the 12 demands outlined last year by US Secretary of State Mike Pompeo.

Mehrzad Boroujerdi, professor of political science at Syracuse University, argues shooting down the drone was a message that Tehran too wants negotiations.

“I think Iran wants to talk due to economic pain but sanctioning the supreme leader and the foreign minister will not serve as an incentive,” he said. “Pompeo’s 12 demands were a maximalist list, which was a non-starter. It seems that Trump is saying he wants to negotiate without first meeting any preconditions. So the 12 points or at least some of them will become what you negotiate over in a game of give and take.”

Trump may believe his 2020 re-election campaign would benefit from avoiding war while still looking tough with Iran. Trump’s political base may not care that tight sanctions elsewhere have not led to meaningful talks but to 10 million North Koreans facing food shortages and 4 million Venezuelans fleeing the country with Nicolas Maduro still in power.

Golkar sees little prospect of US-Iran engagement.  “I don’t think Ayatollah Khamenei wants to talk with Trump,” he said. “The leader believes Trump will go in 2020, and by resisting until then he’ll be a hero of the Islamic world and will show to the downtrodden people that resistance works. In the meantime, people in Iran are nervous, complaining about hardship and inflation, dissatisfied, seeing no future, waiting for something without knowing what it is.”