New Iranian sanctions will make it difficult for that country to engage in commerce of any kind
Sanctions on Iran's Supreme Leader Go Beyond SymbolismI think Trump probably will focus on the Bonyads and other impacts on the Iranian economy to put more pressure on the leadership. These sanctions could have a long term effect that would hamper Democrats should they come to power in the future and wanted to try to reengage with the Iranian Islamic religious bigots.
An executive order signed by U.S. President Donald Trump freezes all property subject to U.S. jurisdiction that is held by Iran's supreme leader or the supreme leader's office. In addition, the order allows the U.S. Treasury Department to similarly sanction any person or entity the supreme leader, or his office, appoints, such as a state official or the head of an entity such as a company leader. The order also extends that connection a step further, allowing sanctions to be placed on any appointment made by an appointee of the supreme leader, as well. It also threatens sanctions against anyone who provides support for people or entities sanctioned under those designations.
The Treasury Department has yet to designate anyone under those sanctions, although Treasury Secretary Steven Mnuchin said that Iranian Foreign Minister Javad Zarif would be sanctioned later this week. There is no shortage of potential additional targets. After all, Khamenei has made thousands of appointments including key members of the Iranian government and its military and intelligence apparatus. His appointments also cover Iran's so-called bonyads, or religious charities, and other businesses that make up a vast business empire.
The sanctions directly on Khamenei — who does not travel overseas — will probably have a negligible effect, but sanctions on bonyads and companies could further restrict the Iranian economy. But perhaps just as important, the sanctions could hamper any future efforts between Tehran and Washington to make a deal.
Iran's Foreign Ministry said that the new sanctions could lead to a "permanent closure" of diplomacy with the United States. While the statement might be extreme, sanctioning Zarif and Khamenei will make it more difficult to even broach a new set of negotiations — and in the case of Zarif even perhaps inhibit his ability to perform some of his broader diplomatic functions. In April, the White House made another major move potentially affecting Iran's diplomatic abilities when it designated the IRGC as a foreign terrorist organization. But along with the sanctions, exceptions allowing diplomatic activities by current and former IRGC members were created. The United States will likely put similar mechanisms in place in sanctions against Zarif. But if it chooses not to, Iranian diplomatic activities would be severely curtailed as long as Zarif is in place.
Bonyads and other entities connected to the supreme leader play a key role in the Iranian economy. While many of them do not hold substantial overseas assets, the entities account for an estimated one-fifth of Iran's non-oil gross domestic product and operate in a wide number of industries that import and export products. This means the second- and third-order effects of hitting these entities — if done in a broad way by the Treasury Department — could further strain the already fragile Iranian economy and its financial system. It is not clear to what extent Washington is willing to place sanctions on Execution of Imam Khomeini's Order, the Mostazafan Foundation, the Astan Quds Razavi, or any of the other bonyads and entities connected with Khamenei — but it is clear that Iran hawks in the United States will advocate that those businesses be included.