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With sanctions on Iran’s supreme leader, Trump targets both a religious authority and an economic empire

The latest round of U.S. sanctions on Iran are unlikely to have a major financial impact, but that may not be the point

Supreme Leader Ayatollah Ali Khamenei in Tehran. (Office of the Iranian Supreme Leader/AP)

President Trump has taken aim at what he has described as the real power in Iran, imposing fresh sanctions Monday on Ayatollah Ali Khamenei. The unprecedented move has fixed a gaze on Iran’s supreme leader, who not only serves as the ultimate decision-maker in the country but is also believed to control an economic empire estimated to be worth as high as $200 billion.

Iranian President Hassan Rouhani called the targeting of Khamenei “outrageous and idiotic” and said the White House had “become mentally crippled."

But experts are divided on the actual financial impact of imposing sanctions on Khamenei directly.

“The people advocating this may not care much that there’s no practical effect because that may not be what the real objective is,” said Richard Nephew, program director at the Center on Global Energy Policy at Columbia University.

Both a religious and political leader

Since the Iranian revolution in 1979, Iran’s supreme leader has held more political power in the country than the nation’s elected president, currently Rouhani.

Iran’s Islamic system is based on a contested Shiite doctrine known as wilayat al-faqih, or “guardianship of the jurist.” Iran’s supreme leader acts as head of state of Iran and commander in chief of Iran’s armed forces and is supposed to be the highest religious authority for Shiite Muslims around the world.

Khamenei is only the second of Iran’s supreme leaders, having succeeded the first, Ruhollah Khomeini, in 1989. During his announcement of the sanctions on Monday, Trump mistakenly said Khomeini’s name in place of Khamenei’s.

Previous administrations have generally avoided targeting Khamenei directly, with some officials saying they worried it would play into a narrative that the United States is seeking regime change in Iran. However, other nations’ leaders have been targeted in the past, including North Korea’s Kim Jong Un and Syria’s Bashar al-Assad.

Nephew, who was lead sanctions expert for the Obama administration’s Iran negotiating team, said the decision not to sanction Khamenei during the previous administration was not influenced by his religious position.

“People have talked about him being the equivalent of a [Shiite] pope. That’s not remotely true,” Nephew said. “We didn’t see how personal sanctions against these people would motivate them to negotiate with us.”

Khamenei’s empire

While he is a political and religious leader, Khamenei is also a mighty economic force in Iran. Mark Dubowitz, chief executive of the Foundation for Defense of Democracies, a Washington-based think tank that has advocated harsher U.S. policies on Iran, said in an email that Khamenei’s empire was worth $200 billion.

Dubowitz suggested the wealth was a reflection of the corrupt nature of modern Iran. “These entities acquired a considerable share of their assets from the systematic confiscation of private property that followed the Islamic Revolution and the expropriation of Iranian private property, since then,” Dubowitz said.

Many of the entities controlled by Khamenei’s office are already under sanctions. The United States imposed sanctions in June 2013 on the enormous property empire controlled by the supreme leader — “Setad Ejraiye Farmane Hazrate Emam,” or the Headquarters for Executing the Order of the Imam — along with other companies the group controls.

That year, a Reuters investigation found the group was worth about $95 billion. That economic heft had been built up over decades claiming abandoned properties following the 1979 revolution, before moving into other spheres of business, according to Reuters.

The sanctions imposed on Khamenei on Monday, as well as the previous ones placed on organizations linked to him, are what are known as secondary sanctions — designed to deter American individuals or organizations from conducting business with him by threatening penalties. Given that Khamenei himself rarely travels outside of Iran and is unlikely to hold U.S. assets personally, the impact on him is likely to be minimal.

Nephew, who helped coordinate the Obama administration’s 2013 designation of organizations linked to Khamenei, said the impact of new sanctions would ultimately come down to whether the U.S. government names new entities and individuals as being linked to Khamenei.

Otherwise, “it’s pretty unlikely there’s be much of an impact,” Nephew said.

Others could be hit worse

The Trump administration has indicated it will impose sanctions on Iranian Foreign Minister Mohammad Javad Zarif later this week — a move that probably will have a considerable economic impact on Zarif and is laden with symbolism.

As Iran’s top diplomat since 2013, Zarif has been at the center of Iran’s nuclear diplomacy for almost half a decade. He has traveled to New York City frequently to visit the United Nations, where he was also Iran’s ambassador from 2002 until 2007.

With Zarif as the face of Iranian diplomacy, the punitive measures would send a message about how the United States views negotiations. But it may also cause complicated economic problems for the Iranian foreign minister, who spent 20 years in San Francisco, New York and Denver and whose two children were born in the United States.

Hesameddin Ashena, an adviser to Rouhani, tweeted on Monday that punishing Zarif would turn him into “Iran’s Mandela.”

Nephew said that though sanctions on Zarif would unlikely stop him from visiting the United Nations, they could create problems for organizations that hosted him for the public diplomacy events in New York that he attended on his visits.

“They can’t block him from speaking at the United Nations, but he can’t just go around town,” Nephew said, noting that many of these appearances at think tanks and other institutions were used by Zarif to criticize the Trump administration.