Iran oil - AP - Archive
Iranian oil technician Majid Afshari making his way to the oil separator facilities in Iran's Azadegan oil field southwest of Tehran, April 15, 2008. Photo by AP
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The U.S. government officially linked Iran's state oil company to the country's Islamic Revolutionary Guard Corps on Monday, a determination that enables Washington to apply new sanctions on foreign banks dealing with the company.

The Treasury Department determined that the National Iranian Oil Company, one of the world's largest oil exporters, is "an agent or affiliate" of the IRGC, which the United States has long put under sanctions for terrorism and human rights abuses.

The U.S. Congress directed Treasury to determine whether Iran's oil and tanker companies were linked to the IRGC as part of a new package of sanctions signed into law in August.

Adam Szubin, the head of Treasury's Office of Foreign Assets Control, told Congress in a letter that the IRGC's influence has grown in the oil company, a petroleum and natural gas producer based in Tehran, and throughout Iran's energy sector.

Iran's elite guard force has recently been coordinating a campaign to sell Iranian oil in an effort to evade Western sanctions, specifically the EU's Iranian oil embargo that went into force in July, the Treasury Department said.

But Szubin said there was not enough information at this time to conclude that the National Iranian Tanker Company was also linked to the IRGC.

Senator Robert Menendez, a Democrat who helped craft the sanctions law, urged the Obama administration to continue investigating whether Iran's elite guards are linked to the oil tanker company.

U.S. backers of sanctions applauded the ruling, part of Washington's wider net of oil-related sanctions aimed at choking funding to Iran's nuclear program. The West says Iran is developing weapons, but Tehran says its nuclear program is purely for civilian purposes.

"Oil transactions with NIOC directly support the IRGC's role in Iran's nuclear-weapons program and its support for terrorism," Representative Howard Berman, the top Democrat on the House Foreign Affairs Committee, said in a statement.

Not worth the downside

While U.S. companies already are prohibited from buying Iranian oil, the new determination means the United States can impose further sanctions on any foreign bank that facilitates transactions with NIOC, according to the sanctions law.

But the new penalties will not apply to countries that have been granted "exceptions," or waivers, to the sanctions because they have significantly cut their purchases of Iranian oil.

The United States this year issued 180-day waivers for all of Iran's major crude buyers. This month it renewed waivers for Japan and 10 EU countries, while exceptions for China and India are due to be reviewed in coming months.

A sanctions lawyer said the determination could make foreign banks skittish about taking on business that while technically allowed, could hurt ties with the U.S. government or U.S. banks.

"To me, the more significant impact is the stigmatization of NIOC," said Behn Dayanim, a lawyer with Axinn, Veltrop & Harkrider LLP in Washington who advises clients on U.S. sanctions law.