Iran Says New U.S. Sanctions Mean Diplomatic Path Closed ‘Forever’

(Bloomberg) — Iran said the path to a diplomatic solution with the U.S. had closed after the Trump administration imposed sanctions against its supreme leader and other top officials, ramping up tensions further in the Middle East.President Donald Trump on Monday put sanctions on Iran’s supreme leader, Ayatollah Ali Khamenei, and eight senior military commanders, that deny him and his office access to financial resources. Treasury Secretary Steven Mnuchin also said financial restrictions would be imposed on Iran’s Foreign Minister Javad Zarif later this week.“The futile sanctions against the Iranian leader and the country’s chief diplomat mean the permanent closure of the diplomatic path with the government of the United States,” foreign ministry spokesman Abbas Mousavi was quoted as saying by semi-official Iranian Students News Agency. “The Trump government is in the process of destroying all the established international mechanisms for the maintaining global peace and security.”Treasury futures pushed higher and most Asian stock markets slipped as increasing tensions rattled investors. Trump last week abruptly canceled planned air strikes against Iran for shooting down a U.S. Navy drone, and the administration also blames Tehran for recent attacks on oil tankers near the Persian Gulf — a strike Iran has denied.“The supreme leader of Iran is the one who ultimately is responsible for the hostile conduct of the regime,” Trump said on Monday.The penalties won’t have a significant impact on a country that’s already in recession and facing heavy sanctions from the U.S. Still, the new restrictions serve as symbolic reprimand for the attacks, according to former Treasury officials.‘Annoy the Iranians’“It will have an effect because it will annoy the Iranians and make negotiations hard to pull off if the supreme leader is sanctioned,” said Brian O’Toole, a senior fellow at the Atlantic Council who previously worked in the U.S. Treasury Department’s sanctions unit.The U.S. already has sanctioned more than 80% of Iran’s economy, according to Secretary of State Michael Pompeo, who visited Saudi Arabia and the United Arab Emirates to rally a front against Iran.Trump has coupled his “maximum pressure” campaign of sanctions with invitations to sit down with Iranian leaders. In an interview that aired Sunday on NBC’s “Meet the Press,” the president said that he thinks Iranian leaders want to negotiate and he’s willing to talk with no preconditions except that the outcome must be Iran acquiring no nuclear weapons.At the United Nations on Monday, Iran’s Ambassador Majid Takht Ravanchi ruled out one-on-one talks with the U.S., urging Secretary-General Antonio Guterres to help organize regional talks instead. “You cannot start dialogue with someone who is threatening you, who is intimidating you,” Ravanchi told reporters.Outside a session of the Security Council called by the U.S. — where Iran wasn’t invited to participate — U.K. Ambassador Karen Pierce told reporters that “there’s a lot of desire to see de-escalation and to look for diplomatic solutions. At the same time, one has to take very seriously the sorts of attacks that have occurred on the tankers, which is dangerous for international shipping, dangerous for regional security.”Reflecting the same ambivalence, French Ambassador François Delattre said “maximum pressure only makes sense with maximum diplomacy.”Khamenei’s WealthKhamenei, who was initially elected president of the nascent republic in 1981, has “possessions” valued at an estimated at $200 billion, according to a Facebook post by the U.S. embassy in Baghdad in April. He’s backed by the Islamic Revolutionary Guard Corps and has survived an assassination attempt and front-line combat.The U.S. Treasury Department said Monday those sanctioned also include eight officials of the Guard Corps who supervised “malicious regional activities,” including its ballistic missile program and “harassment and sabotage” of commercial ships in international waters.Mnuchin said at a news conference in Washington that some of the sanctions had been “in the works” and others were a result of “recent activities.” He said sanctions against the Islamic Republic have been effective in cutting off funds to the military and “locking up” the Iranian economy, and that the new penalties would be effective as well.Skilled DiplomatMnuchin said the U.S. will impose financial restrictions on Zarif “later this week.” Typically, the U.S. doesn’t announce sanctions in advance against individuals so they don’t hide assets before penalties take effect.Zarif, viewed as Iran’s most skilled diplomat, was lead negotiator in the multi-party nuclear accord reached in 2015 under the Obama administration that Trump has since rejected.“A lot of restraint has been shown by us, a lot of restraint,” Trump told reporters Monday. “And that doesn’t mean we are going to show it in the future, but I thought that we want to give this a chance.”Any financial institution that knowingly assists with a financial transaction for those who were sanctioned could be cut off from the U.S. financial system, according to the Treasury.Even before the new penalties were announced, the U.S. had applied sanctions to almost 1,000 Iranian entities, including banks, individuals, ships and aircraft. In May, the Trump administration prohibited the purchase of Iranian iron, steel, aluminum and copper.Nuclear DealTensions have spiked in the Gulf since May, when the Trump administration revoked waivers on the import of Iranian oil, squeezing its economy a year after the U.S. walked away from the landmark 2015 deal meant to prevent the Islamic Republic from developing a nuclear weapon. Since then, a spate of attacks on oil tankers near the Strait of Hormuz shipping choke point have raised the specter of war and pushed up oil prices.On Monday, Trump questioned in comments on Twitter why the U.S. was protecting the shipping route on behalf of other countries.Hours later, a State Department official said the U.S. was seeking allies to join in a “Sentinel” program to deter Iran by equipping ships with cameras to monitor tanker traffic and document any threats. That would stop well short of the “tanker wars” of the 1980s, when the U.S. re-registered Kuwaiti ships under the U.S. flag and gave them armed escorts.(Updates throughout.)To contact the reporter on this story: Golnar Motevalli in Tehran at [email protected] contact the editors responsible for this story: Shaji Mathew at [email protected], Daniel Ten KateFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.