New Iran Sanctions Target Revolutionary Guards

Washington hopes that adding a massive Revolutionary Guards-owned construction conglomerate to the list of untouchable companies will give teeth to an Iran-sanctions resolution that was undermined by Brazil and Turkey

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From left: Jason Reed / Reuters; Seth Wenig / AP

U.S. President Barack Obama, left, and Iranian President Mahmoud Ahmadinejad

The Obama Administration scored a last-minute win in its pursuit of global sanctions against Iran when Russia agreed to add a massive construction conglomerate owned by Iran's powerful Revolutionary Guards Corps (IRGC) to the list of 41 companies whose assets must be frozen. The list is part of broader sanctions that were passed 12-2 by the U.N. Security Council on Wednesday in New York City, with Lebanon abstaining and Brazil and Turkey voting against them.

The Khatam al-Anbiya Construction Headquarters (KAA) conglomerate is the parent of more than 812 subsidiary companies that are responsible for multibillion-dollar contracts for everything from the previously secret nuclear facility at Qum to crucial oil and gas fields in the country and throughout the Persian Gulf. "To the extent the IRGC is becoming the major economic force in Iran, it's largely through Khatam al-Anbiya and its subsidiaries," says a senior Administration official.

The KAA was included on the list on Monday after multiple meetings and phone conversations between Secretary of State Hillary Clinton and diplomats from Russia and China, both of which have companies that do big business with the KAA. The U.S. also distributed to the Security Council members sensitive intelligence on the activities of the KAA in an effort to convince any fence sitters.

In announcing the sanctions, President Obama admitted that they are unlikely to result in a change of course by the Iranians anytime soon. "We know that the Iranian government will not change its behavior overnight," Obama said on Wednesday, "but today's vote demonstrates the growing costs that will come with Iranian intransigence."

There are real-dollar costs for the Revolutionary Guards on restrictions for the KAA. In 2006 alone, the KAA secured $7 billion worth of deals in the oil, gas and transportation sectors, according to the U.S. Treasury Department. Western intelligence services estimate that the KAA has some 40,000 employees, and it has reportedly been granted some 1,700 government contracts, including in recent years a $1.3 billion contract to build a natural gas pipeline and a $2.5 billion contract to work on the South Pars oil field, according to Britain's Guardian newspaper.

The U.S. and its Western allies intend to use the U.N. resolution as a trigger for further unilateral sanctions that they plan to adopt in the coming weeks. Major European countries including France, Britain and Germany are hoping to pass extra, European Union–wide measures against Iran when the E.U. meets on June 13. Australia is also preparing its own sanctions, while the U.S. Congress is expected to pass a bill expanding sanctions later this month, which the President is expected to sign.

The Administration's success in getting the KAA on the list was more than tempered, however, by its failure to convince Turkey and Brazil to support the sanctions. Those two countries were angry at the U.S. and its partners for ignoring the eleventh-hour fuel-swap deal they negotiated with Iran as a confidence-building mechanism. And their "no" vote weakens the effort to present Tehran with an international consensus on its nuclear defiance.

There are also questions about the extent to which the pro-sanctions countries will enforce the new measures. Wednesday's resolution establishes a body to monitor implementation, a step that has improved the effectiveness of previous sanctions against other countries, but companies like the KAA have a history of evading penalties by setting up multiple subsidiaries to avoid detection. "They'll try to evade and come up with shell companies," says a senior Administration official. "But we can put a really big crimp in their ability to do business."