The Executive Order signed Sunday activates part of the new sanctions law passed by Congress in December and signed by the president on New Year’s Eve.
But this activation may not have any practical effect at all. The Executive Order decrees that all property in the United States belonging to the government of Iran or to any Iranian financial institution is now frozen. It is not seized; the property continues to belong to Iran or to an Iranian bank, but the Iranian government or bank may not have access to the funds until they are unfrozen.
The only property known to be within the United States and belonging to the Iranian government has already been frozen. The embassy and 10 other real estate properties, for example, have been under the control of the US government since April 1980.
It would be a surprise if any Iranian banks had property in the United States. They have known this order was coming—since the law calling for it passed in December—so they have had time to transfer any funds.
The Islamic Republic brushed the Executive Order aside Monday, calling it no more than “psychological warfare,” a not unreasonable description. Future Executive Orders implementing other sections of the new law in the coming five months are likely to have some impact, however.
The latest Executive Order does make a technical change, officials explained. Previously, US banking institutions were required to reject any Iranian financial transactions that came to them. Now they are required to freeze such funds, not reject them. But if US banks did as they were supposed to do in the past, there wouldn’t be any Iranian funds in the US to freeze.
The meatier part of the law passed in December will cut foreign banks off from the entire US banking system if they do any business with Iran’s Central Bank. The section has not yet been put into effect. But it means that a foreign bank that processes a payment for Iranian oil will be shut out of the United States. The purpose of the sanction is to shut off Iranian oil payments.
The law exempts countries that “significantly” reduce their purchases of Iranian oil—a term not defined in the law and a term the Obama Administration has avoided defining to maximize the squeeze on foreign countries.