The U.S. Department of Treasury’s Office of Foreign Assets Control on Oct. 16 took action against a vast network of Iranian entities for providing financial support to the Basij Resistance Force, a paramilitary force subordinate to Iran’s Islamic Revolutionary Guard Corps (IRGC) that deploys child soldiers. (Photo by BasijPress.ir)

In a press release, OFAC said that the IRGC’s Basij militia recruits, trains, and deploys children to fight in IRGC-fueled conflicts across the region. “This Iran-based network is known as Bonyad Taavon Basij, which is translated as Basij Cooperative Foundation and is comprised of at least 20 companies and financial institutions,” OFAC said.

The Bonyad Taavon Basij employs shell companies and other measures to mask Basij ownership and control over a variety of multibillion-dollar business interests in Iran’s automotive, mining, metals, and banking industries, many of which have significant international dealings across the Middle East and with Europe. Several of these entities have known business ties with companies around the globe, OFAC said.

“International companies from Asia to Europe that partner with companies associated with the Basij are conducting business that could contribute to the ongoing human rights abuses and terrorism the Basij exports to the region,” OFAC said. “Treasury urges international companies to ensure they are conducting the necessary due diligence to avoid engaging in sanctionable activity with entities that support the Iranian regime’s malign activity.” 

The entities that OFAC has designated as Specially Designated Global Terrorists (SDGTs) pursuant to Executive Order 13224, which targets terrorists and those providing support to terrorists or acts of terrorism, include:

Iran Tractor Manufacturing Company, the largest tractor manufacturer in the Middle East and North Africa;

Esfehan’s Mobarakeh Steel Company, the largest steel maker in the Middle East and North Africa region; and

Iran’s Zinc Mines Development Company, Iran’s preeminent multibillion-dollar zinc and lead mining and processing holding company.

While these were expected to be subject to certain secondary sanctions targeting Iran’s automotive and metals sectors, the Secondary Designated Nationals (SDNs) are “significantly more serious than what was expected,” says Anthony Rapa, a partner in Kirkland’s international trade and national security practice.

Consequently, these entities and any entities that are at least 50 percent-owned by these sanctioned entities are “blocked,” meaning that U.S. persons must freeze their assets and are prohibited from engaging with them. Moreover, non-U.S. persons can be subject to sanctions to the extent they provide material support to the newly designated SDNs.

Rapa says the sanctions designations are notable for three main reasons. First, “they target major Iranian commercial enterprises that had not been targeted by sanctions to date and had not been anticipated to be directly within the scope of the ‘nuclear sanctions’ that the United States is re-imposing pursuant to its withdrawal from the Iran nuclear agreement.”

Secondly, Rapa says, certain of the entities designated were widely expected to be added to the SDN List on Nov. 5, when the Trump Administration re-imposes the second (and final) tranche of “nuclear” sanctions targeting Iran, so today’s sanctions designations are three weeks earlier than expected.  These entities include Bank Mellat, Sina Bank, and Parsian Bank.

Lastly, the effect of these designations for non-U.S. companies is “especially significant, as they now will be subject to designation on the SDN List (or, for financial institutions, loss of U.S. correspondent accounts) to the extent they provide material support to the newly designated entities,” Rapa says. “OFAC likely will interpret this broadly, meaning the restrictions will apply both to supplying the targeted entities with goods or services, and purchasing goods or services from them.”

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