The US is determined to choke off external funding to Iran because we want to prevent it from financing missile development, fomenting regional conflicts and funding terrorist networks.
Much of Iran’s money comes from metal exports, including $4.2bn from the sale of steel — a 53 per cent increase from 2017 — and a further $917m from copper and its downstream products. The country is on schedule to become a net exporter of aluminium by the end of the year.
That is why US President Donald Trump signed a tough new executive order last week, extending existing sanctions to include Iranian aluminium, copper, iron and steel. Without such sanctions, Iran’s steel export revenues will increase significantly.
As part of its ambitious 2025 Vision Plan, Iran seeks to become the world’s sixth-largest steelmaker as capacity is projected to almost double, from 31m metric tonnes in 2017 to 55m by 2025.
Iran also has three greenfield primary aluminium smelters either under construction or recently completed. The Salco smelter in Asaluyeh is the largest. It is due to come online this year and will add nearly 300,000 tonnes of production. The project includes a deepwater port located near the facility in southern Iran — an indication that the smelter will export the majority of the aluminium it produces.
Most, if not all, of Iran’s export revenues from the metals trade flow right into government coffers. The country’s top three steel producers are all state-owned and account for more than 50 per cent of production. An emerging aluminium industry is entirely state-owned, growing rapidly and was projected to be a net exporter this year.
Iran’s top steel export markets currently include Indonesia, Thailand, Iraq, Turkey, Oman, the United Arab Emirates, Taiwan and Egypt. The new sanctions should turn the flow of Iranian metals to these markets into a trickle as America’s partners and allies respond to the higher risks of sourcing materials from Iran and seek out more reliable, alternative sources of supply that do not fund terror with the proceeds.
The proposed sanctions should curtail any attempts by Iran to “trans-ship” steel and other metals into the US through third-party countries — a scheme that undermines the pre-existing steel and aluminium tariffs the president has imposed for national security reasons.
These new sanctions will also send a clear signal that China may pay a heavy price if it continues to support rogue regimes, including Iran. Historically, China has provided Iranian steel producers with much of the investment, equipment and strategic advice necessary to expand its industry.
To take just one recent example, the state-owned Chinese Metallurgical Group Corporation intends to finance a significant share of Iran’s steel capacity expansion.
A similar situation exists with aluminium. The aforementioned $1.2bn Salco-Asalouyeh smelting facility was funded by the state-managed Chinese Nonferrous Metal Industry’s Foreign Engineering and Construction Company. The country is also in talks to build a 2m-tonne alumina refinery to support the sector’s expansion.
Here’s the bottom line: the Trump administration’s latest sanctions on Iran’s metals exports will help to further constrict the ability of Iran to develop missiles, spread radical Islam and mayhem in the region and support terrorist networks.
The countries and companies that are currently helping to finance Iran’s rogue behaviour through the metals trade have been put on notice that the price of such trade has just become a lot steeper. As buyers, they should beware that there will be zero tolerance for violations of Iranian sanctions in future.
The writer is assistant to the US president for trade and manufacturing policy