The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) is rapidly expanding the reach of US sanctions against Iran. Under Operation Economic Outcast, the treasury campaign that was launched on August 24 to cut off funding to the Iranian government, specifically its missile and cyber programs, and the Islamic Revolutionary Guard Corps (IRGC), OFAC has moved sector by sector to isolate Iran’s economy.
On October 1, OFAC designated targets across Iran’s automotive and rail sectors and their foreign suppliers, widening a campaign that had already grounded the aviation sector weeks earlier. Each successive round has layered new restrictions on top of the last, broadening the universe of prohibited activity.
OPERATION ECONOMIC OUTCAST
In announcing the campaign on August 24, OFAC issued a determination under Section 1(a)(i) of Executive Order (EO) 13902, identifying five sectors of the Iranian economy—aviation, digital asset, gold, shipping, and technology—as subject to sanctions.
That determination creates secondary-sanctions exposure for persons determined to operate in those sectors, even where their dealings have no US nexus, and supplements OFAC’s prior sector determinations covering the construction, mining, manufacturing, textiles, financial, and petroleum/petrochemical sectors of the Iranian economy.
In the same initial round, OFAC designated nearly 60 individuals, entities, and vessels to the Specially Designated Nationals and Blocked Persons List (SDN List), relying on a range of authorities including EO 13902, EO 13382 (WMD proliferation), EO 13694, as amended (malicious cyber-enabled activity), and EO 13224, as amended (counterterrorism).
Since that initial announcement, OFAC has steadily tightened the screws. On September 8, OFAC targeted the aviation sector with 36 designations and the suspension of three aviation-related general licenses and a longstanding favorable licensing policy for aircraft safety reasons.
On September 10, OFAC modified its Iran-related specific licensing policy so that, effective immediately, Iran-related specific license applications are treated with a presumption of denial except as required by law or in exceptional and urgent circumstances, such as risk to life, limb, or environmental safety. The recent automotive and rail designations on October 1 represent the latest escalation.
AUTOMOTIVE AND RAIL SECTOR SANCTIONS
On October 1, OFAC announced sanctions targeting Iran’s automotive and rail sectors and foreign suppliers that support them.
The action designated Iran’s two dominant automakers, Iran Khodro Company (IKCO) and Société Anonyme Iranienne de Production Automobile (SAIPA), which together account for more than 90% of Iran’s domestic auto market, as well as the state-owned Islamic Republic of Iran Railway Company, the Raja Passenger Trains Company, and the Railway Transportation Company (Sherkat-E Rah Ahan-E Khamle-O-Naghle), a leading private freight line.
The measures also reached foreign automotive industry suppliers based in Indonesia, the United Arab Emirates, and Turkey.
OFAC explained that its blockade of Iranian ports has forced Tehran to rely more heavily on road and rail to move petroleum, fertilizer, chemicals, and other goods, and that the October 1 action targets those alternatives.
In a parallel step the same day, OFAC prohibited all transactions with Russia’s A7 payment platform and its subagents, which it labeled “a significant transnational criminal organization” used to disguise payments linked to sanctioned sectors and persons and leveraged by Iran and the IRGC.
AVIATION SECTOR SANCTIONS
The October 1 designations follow and build on OFAC’s September 8 action against the Iranian aviation sector, in which OFAC suspended several Iran-related aviation authorizations, including Iran General License J-1 (GL J-1), and sanctioned 36 targets, including 27 Iranian airlines. OFAC’s aviation action removed several longstanding authorizations for aviation-related transactions involving Iran, including certain temporary sojourns, overflight-related payments, and services provided to non-Iranian carriers transporting passengers or goods to or from Iran.
Specifically, OFAC announced in its Notice of Suspension the indefinite suspension of GL J-1 and three provisions of the Iran Transactions and Sanctions Regulations (ITSR), 31 C.F.R. Part 560. OFAC suspended the following authorizations:
- GL J-1: “Authorizing the Reexportation of Certain Civil Aircraft to Iran on Temporary Sojourn and Related Transactions”;
- 31 C.F.R. § 560.522: Authorized payments to Iran for services rendered by the Government of Iran in connection with an overflight of Iran or an emergency landing in Iran by aircraft owned by a US person or registered in the United States;
- 31 C.F.R. § 560.528: Established a specific licensing policy for the export or reexport to Iran of goods, services, and technology to ensure the safety of civil aviation and safe operation of US-origin commercial passenger aircraft in Iran; and
- 31 C.F.R. § 560.529: Authorized certain goods or services provided in the United States to a non-Iranian carrier transporting passengers or goods to or from Iran, including bunkers, bunkering services, emergency repairs, and certain unanticipated services, subject to limitations.
The Federal Register Notice indicates that the suspensions were intended to align the ITSR more closely with US foreign policy toward Iran.
Simultaneously, OFAC issued Iran General License DD (GL DD), which provided a 15-day wind-down period for transactions prohibited by the ITSR that were ordinarily incident and necessary to wind down transactions previously authorized by (1) GL J-1, (2) 31 C.F.R. § 560.522, or (3) 31 C.F.R. § 560.529.
OFAC concurrently issued Counter Terrorism General License 37 (GL 37), authorizing the wind-down of transactions involving certain persons blocked on September 8, 2026. Both GL DD and GL 37 expired at 12:01 am Eastern Time on September 23, 2026.
With the expiration of GL DD, parties may no longer rely on the general license to engage in wind-down transactions previously authorized under GL J-1, 31 C.F.R. § 560.522, or 31 C.F.R. § 560.529. OFAC has indicated that it will consider requests for specific licenses for activities previously covered by 31 C.F.R. § 560.528 on a case-by-case basis, though such applications will apparently be subject to the new licensing policy noted above.
CONSIDERATIONS
Persons with Iran-related exposure should consider the following:
- In roughly six weeks, OFAC has imposed sector-specific sanctions on five sectors, designated well over 100 targets, grounded the aviation sector, imposed a presumption of denial on specific license applications, and extended designations to the automotive and rail sectors. Persons with any Iran exposure should assume the perimeter of prohibited activity will continue to broaden and build that assumption into their compliance posture.
- Manufacturers, suppliers, distributors, logistics and freight providers, financiers, and service providers should determine whether their counterparties, cargo, routes, or transactions touch IKCO, SAIPA, the designated Iranian rail entities, the A7 network, or any other newly designated persons, and should re-run sanctions screening against the current SDN List.
- Airlines, aircraft operators, lessors, owners, and financiers should identify routes and transactions that previously relied on GL J-1, 31 C.F.R. § 560.522, or 31 C.F.R. § 560.529; assess the sanctions implications of operations to, from, or through Iran now that the GL DD and GL 37 wind-down periods have expired; and consider whether existing sanctions provisions, routing restrictions, notification requirements, and other contractual protections adequately address operations involving Iran. Lessors and owners, in particular, may wish to seek additional assurances from operators regarding aircraft operations involving Iran.
- The expiration of GL DD and GL 37 eliminated the temporary wind-down authorizations for the covered transactions, and OFAC’s September 10 presumption of denial means that parties can no longer assume specific authorization will be available. Parties contemplating transactions previously covered by the suspended authorities should carefully assess whether specific authorization from OFAC is required and realistically obtainable before proceeding.
- OFAC’s EO 13902 sector determinations extend secondary-sanctions exposure to persons determined to operate in the aviation, digital asset, gold, shipping, and technology sectors, now alongside the automotive and rail targets reached on October 1, regardless of whether the activity touches the United States. Non-US carriers, manufacturers, suppliers, maintenance repair and operations, lessors, service providers, and financial institutions should assess whether Iran-related operations involve designated persons or otherwise create exposure, bearing in mind Secretary Bessent’s warning that those providing financial lifelines to the Iranian regime risk being cut off from the global financial system. OFAC reinforced that warning on October 5, issuing an alert directed to foreign financial institutions that continue to do business with Iran or its financial sector. The alert also emphasized sanctions risks associated with providing financial services to Iranian banks or their subsidiaries or branches in third countries.
- Companies should also consider whether their activities could be viewed as operating in a sanctioned sector even where they operate downstream rather than as direct participants in the sanctioned sector. As the DC Circuit’s recent decision in Diegelmann v. Bessent illustrates in the context of Russia sanctions, purchasing goods associated with a sanctioned sector may alone be sufficient to create designation risk, and transactions conducted outside the sanctioned country may remain exposed where the goods, counterparties, ownership, or transaction structure have a sufficient nexus to the targeted sector. Accordingly, sanctions diligence may need to extend beyond screening immediate counterparties and toward assessing the origin, processing history, supply chain, and other relevant connections of goods and transactions.
