Smeltdown
First sanctions reprieve for oil. Next: tariff relief for aluminum?
Over the weekend, peace talks in Islamabad between the United States and Iran collapsed, and President Trump announced a naval blockade of Iranian ports and coastal areas in the Strait of Hormuz. Traffic through the Strait had already plummeted from ~135 ships a day pre-war to just a handful of brave or connected souls. You probably know where this piece is going. Reverberations through global commodities etc. etc. but also! economic statecraft: OFAC licenses and potential new economic tools.
Crisis license
When a non-sanctioned supply of a commodity gets shut down, a gap opens that a sanctioned supply could fill. As has been well documented, the Strait of Hormuz previously moved 20% of the world’s oil supply. With the oil exports of Iran and Russia, two of the world’s largest suppliers, under sanctions, the U.S. Department of the Treasury has issued temporary reprieves via licenses on subsets of these sanctions to close the commodity gap and bring global oil prices back down. In the weeks since the start of the war, Treasury’s Office of Foreign Assets Control (OFAC) has issued some pretty surprising General Licenses to permit oil from Iran and Russia to flow into global markets:
GL 133 (March 5): Permits Russian crude oil to India specifically, for vessels loaded on or before March 5 — a country-specific carve-out signaling sensitivity to allied nations feeling the energy shock. This license expired April 4th.
GL 134 / 134A (March 12–19): Broadened GL 133 to all buyers — Russian crude oil already on the water gets a pass through April 11; explicitly covers blocked and sanctioned vessels
Iran GL-U (March 20): Same logic as above applied to Iranian-origin crude oil and petroleum products loaded on or before March 20, expires April 19.
Separately, OFAC has also provided sanctions relief to Belarusian potash, which is a key ingredient in fertilizer. In December, OFAC issued GL 13 in response to the Belarusian government’s release of 123 political prisoners. A few months later in March, however, OFAC fully removed the major Belarusian potash producers from the sanctions (SDN) list. This delisting was likely in response to another prisoner release but also served to reduce pressure in the global fertilizer market. According to a new paper from the Kiel Institute, Qatar and Iran are among the world’s largest exporters of urea, the most widely used nitrogen fertilizer globally. While relief for potash cannot replace the flow of urea that has been disrupted by the closure of the Strait of Hormuz, easier access to Belarusian potash may still help reduce some of the pressure in the overall fertilizer market.
Smeltdown
Which commodities might we see sent into a tailspin next? We should definitely be talking about aluminum, also known as aluminium if you drink Earl Grey. Again, per the Kiel Institute, the Gulf supplies 23.5% of global aluminum alloys and 9.8% of unwrought aluminum, and that share has grown substantially over the past three decades as Gulf states invested heavily in energy-intensive smelting operations to take advantage of cheap local gas. Bahrain’s Alba and the UAE’s Emirates Global Aluminium rank among the world’s largest single-site aluminum smelters. The aluminum they produce goes into car body panels, aircraft fuselage sheets, electrical grid cables, and beer cans — an unglamorous industrial input that holds modern economies together.
And now the Gulf’s smelters are under attack. Last week, Emirates Global Aluminium (EGA), the Middle East’s top producer of aluminum, invoked force majeure clauses to suspend some deliveries after a facility was knocked offline by an Iranian drone attack. Bahrain’s Alba plant was struck by Iran in March, and even before the attacks, Alba had shut down three production lines (19% of its capacity) due to shipping disruptions in the Strait of Hormuz. Iran has justified the strikes by claiming that both Alba and EGA have ties to U.S. military firms.
An OFAC license could theoretically help here. In April 2024, Treasury banned the importation of Russian origin aluminum. Additionally, the London Metal Exchange and the Chicago Mercantile Exchange— the two largest global marketplaces where aluminum is bought and sold — are prohibited from accepting any Russian aluminum produced after April 2024, effectively locking it out of the world's major Western trading venues. However, even if a license were issued to permit Russian aluminum imports, there remains another barrier. Tariffs! In 2023, under President Biden, the United States imposed a 200% tariff on all aluminum and aluminum products from Russia — or any products containing even a small amount of aluminum smelted or cast in Russia. This 200% duty remains fully in place.
In early April, President Trump issued a new proclamation updating the broader aluminum tariff framework. A 50% tariff on all aluminum flowing into the U.S. had been in place since June 2025, but this new framework changed how the tax is calculated. Unless you are a tariff nerd and want to know the nitty-gritty (and it is both nitty and gritty), the tl;dr is that aluminum and goods made out of aluminum now face a tariff applied to their full customs value of either 50% or 25% depending on their levels of processing. Either way, it’s expensive.
Commerce to the rescue?
To reduce aluminum prices, President Trump could issue or further amend a presidential proclamation under Section 232 of the Trade Expansion Act of 1962. Section 232 gives the president authority to impose or adjust tariffs or quotas on imports if the Secretary of Commerce determines, after an investigation, that certain imports are entering the United States in such numbers or ways as to “threaten to impair” national security. And while the OFAC general licenses for Russian and Iranian crude oil were no small feat of interagency coordination, they still operated within an existing legal framework for pausing sanctions in exactly this kind of targeted, time-bounded relief. A Section 232 tariff modification has no such pausing mechanism. There is no “general license” equivalent for the Department of Commerce.
But maybe there should be! If the U.S. is using tariffs as the new sanctions, we need a release valve equivalent to OFAC’s general licenses to give the administration more flexibility in statecraft. Yes, even though the President continues to announce tariff actions over Truth Social, the Supreme Court’s recent decision actually limited the President’s ability to impose tariffs under the International Emergency Economic Powers Act and the legal framework for these is still evolving. To better refine the tool, one option would be a temporary tariff suspension authority tied explicitly to supply shocks, triggered when critical imports fall below a defined threshold, coordinated with key allies, and automatically expiring after a fixed period (unless renewed). That would preserve the strategic intent of tariffs while allowing the administration to stabilize markets in moments of acute disruption.
If the Trump administration does move to cut tariffs on foreign aluminum, who gets the waiver? Canada by far supplies the most aluminum to the United States, and is historically the dominant source of U.S. aluminum imports. Tariff relief, potentially in exchange for support of the U.S. blockade of Iran, could slot neatly into the ongoing trade agreement renegotiation. Any similar agreement with other aluminum exporters like India or Australia would be doable but still likely require bilateral negotiation.
Much more complicated would be tariff relief on aluminum from China and Russia. We have heavily taxed aluminum from our adversaries for geopolitical reasons: Chinese aluminum carries stacked Section 232 and Section 301 duties — the former on national security grounds, the latter as a penalty for unfair trade practices like IP theft — and Russian aluminum (which, don’t forget, is still mostly banned) carries that aforementioned 200% rate imposed as a response to the invasion of Ukraine and other national security concerns. So we’re much more likely to cut deals with our allies first.
All of which is to say that we should expect the unexpected. You never know when someone (even you!) might start a war, so if we’re going to start experimenting or freestyling tools of economic statecraft, à la tariffs as sanctions, we should design them such that we can give ourselves an out if the circumstances call for it. The circumstances, in this case, being missile attacks on aluminum smelters. What a time to be alive.1