With the U.S. already sanctioning almost 1,000 Iranian entities, President Donald Trump had limited choices when he opted to impose new penalties to punish Iran’s downing of a U.S. Navy drone in the Persian Gulf last week. In the event, he went big, directly targeting Supreme Leader Ayatollah Ali Khamenei, among other officials. Through his position, Khamenei, 79, oversees extensive holdings in Iran. However, the U.S. measures against him aren’t likely to have much impact beyond the serious stress previous curbs are already putting on Iran’s economy.

1. What do the sanctions against Khamenei do?

They block any assets in the U.S. or within its control that belong to Khamenei or his office, anyone appointed by him or his office, or anyone who’s assisted or acted on behalf of the properties. They also bar any bank that facilitates a significant transaction with those parties from the U.S. financial system.

2. What assets does Khamenei control?

He is said to live a modest lifestyle. But being the highest authority in Iran puts Khamenei in control of charitable trusts that since the 1979 Islamic revolution have accumulated significant holdings and become economic powerhouses with investments in industries from real estate to agriculture to health care. Among these are the Astan Quds Razavi, a charity that controls the important Imam Reza shrine in the city of Mashhad. It’s also a major landowner there and employs thousands of people through affiliates including a cement company, a car parts producer, a textile company, a flour maker and an investment fund for businesses. Then there’s the Headquarters for the Execution of the Imam’s Order, referred to locally as Setad, which grew out of property confiscated from Iranians, including some who fled the country after the revolution. Another organization, the Bonyad Mostazafan, or Foundation for the Oppressed, was established to spread wealth to the poor using assets taken from the toppled royal family.

3. How much are these entities worth?

It’s a challenge to identify the full network of companies under these foundations much less assess their value, as they aren’t run transparently and have typically been tax exempt.In a 2013 report, Reuters estimated that corporate investments and assets under Setad’s control were worth about $95 billion. The Foundation for Defense of Democracies, a Washington-based think tank that’s lobbied for more pressure on Iran, said in a commentary published in the Wall Street Journal last year that it put the value of assets of all three entities at about $200 billion. While some Iran analysts see these figures as vastly overstated, it’s clear the foundations play a significant role in the Iranian economy.

4. What effect will the new sanctions have?

The U.S. had already slapped punitive measures on more than 80% of Iran’s economy, according to U.S. Secretary of State Michael Pompeo. Almost every significant industry -- from energy to aviation to metals production -- has been targeted. Some of the entities under Khamenei’s control, such as Setad, were already under U.S. sanctions. Thus, the new measures, which also target eight senior military commanders, are unlikely to have an immediate impact on a country that’s already in recession and suffering from a drop of about 60% in the value of its currency against the dollar. The latest penalties may also fail to achieve their stated goal of cutting the Iranian leadership’s access to financial resources, according to a report by Henry Rome, an analyst with Eurasia Group. It’s “very unlikely” that any of the targeted individuals have assets in the U.S. and would be “surprising if the supreme leader’s office has not spent years carefully segregating from the international financial system the tens of billions of dollars under his personal control,” he wrote.

5. Do the affiliated companies have foreign partners?

Danish pharmaceutical company Novo Nordisk has a partnership with the Setad-owned Barkat Pharmas to build a factory in Iran to produce insulin pens. Novo Nordisk has been operating in Iran since 2005 and has said it plans to continue doing so, provided sanctions don’t make it impossible. Companies controlled by Setad have reportedly signed agreements with Asian companies in the energy and construction industries. However, the far-reaching sanctions the U.S. has imposed on Iran have caused many foreign companies to reconsider investing there.

The Reference

• Related QuickTakes on the U.S.-Iran conflict and Iran’s economic squeeze, and the use of sanctions.

• The U.S. sanctions on Khamenei.

• A Congressional Research Service report on U.S. sanctions on Iran.

--With assistance from Golnar Motevalli and James Paton.

To contact the reporter on this story: Ladane Nasseri in Dubai at lnasseri@bloomberg.net

To contact the editors responsible for this story: Lin Noueihed at lnoueihed@bloomberg.net, Lisa Beyer, Paul Abelsky

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