The US sanctioned Iran's automotive and rail sectors, blacklisting carmakers Iran Khodro (TEDPIX:KHODRO) and SAIPA (TEDPIX:KHSAPA) and the state railway, the US Treasury said on October 1.

The move widens Washington's Operation Economic Outcast, launched on August 24, from oil and shipping to the land economy. With a US naval blockade choking crude exports through the Strait of Hormuz, Tehran has leant on road and rail to move fuel, fertiliser and chemicals.

Iran Khodro and SAIPA control more than 90% of the domestic passenger car market, an industry that has relied on Russian and Chinese partners since Western carmakers left in 2018. Two determinations under Executive Order 13902 now expose any company operating in either sector, and any foreign bank handling its payments, to US penalties.

"The Iranian regime's ability to fund its war machine and inflict terror on the world has been severely diminished thanks to Operation Economic Outcast," Treasury Secretary Scott Bessent said.

The Office of Foreign Assets Control (OFAC) added 28 Iran-linked entities and two individuals to its Specially Designated Nationals list. They include Iran Khodro Diesel, Pars Khodro and Zamyad, and motorcycle maker Niroo Motor Shiraz, which Treasury said supplied more than 6,000 motorcycles to plainclothes security agents.

Parts suppliers in the UAE, Turkey, Indonesia and Hong Kong were also designated. On the rail side, OFAC listed the Islamic Republic of Iran Railways, operator Raja Passenger Trains and freight carrier Railway Transportation Company.

Treasury also targeted Heavy Equipment Production Company (HEPCO), a maker of bulldozers and excavators it said were used by the Islamic Revolutionary Guard Corps (IRGC) Quds Force to build underground facilities. A steel network run by Hong Kong-based businessman Ramin Keshvardoust, and five Hong Kong shell companies that Treasury said took in tens of millions of dollars and euros from Iran's shadow banking system, were added.

In a separate action, OFAC designated A7, a Russia-linked payments network tied to the ruble stablecoin A7A5, as a transnational criminal organisation. Treasury said A7 handled RUB7.5 trillion ($91.5bn) in transactions, including payments for Iranian oil sales and weapons procurement.

Iran Khodro, founded in 1962 and based on the Tehran-Karaj road, is Iran's largest carmaker. SAIPA, established in 1966, is its closest rival and owns Pars Khodro and Zamyad.