President Jimmy Carter signs the Executive Order freezing Iranian assets as (from left) White House Counsel Lloyd Cutler, Treasury Secretary Bill Miller, and Attorney General Benjamin Civiletti look on, November 14, 1979. Photo Credit: AFP/Getty Images
By David Kurlander
Two weeks ago, President Trump issued an Executive Order expressing his intent to ban the popular Chinese-owned apps TikTok and WeChat. Part of Trump’s legal authority derives from the International Emergency Economic Powers Act (IEEPA), a broad-based tool of executive sanction that was first utilized by President Jimmy Carter during the 1979 Iranian hostage crisis. Carter’s pioneering usage of IEEPA—in sharp contrast to Trump—offered a narrow vision of the law that only applied to the freezing of public Iranian assets in the U.S. While IEEPA has taken on myriad and expansive forms since, Trump’s attempts to strike at a company with such widespread American presence has led legal pundits to question how far the law can go. A glimpse back at why Carter limited his own use can illuminate the potential dangers ahead…
At 5:45 AM on November 14, 1979, 11 days after a group of Iranian students loyal to the revolutionary Ayatollah Khomeini had taken 66 Americans hostage at the U.S. Embassy in Tehran, Secretary of the Treasury Bill Miller called President Carter to tell him that Iran had ordered withdrawal of all of its U.S. assets—around $6 billion. Carter had to decide whether to instruct American banks to refuse the handover, which would keep the Iranians from using the resources against the United States.
Freezing assets was a familiar tool. In the preceding decades, the U.S. had frozen the assets of China, Cuba, North Korea, and Vietnam under the 1917 Trading with the Enemy Act (TWEA), which the Wilson administration had initially used to prosecute Americans who did business with Germany during World War I. The famed Church Committee—which examined excesses of presidential authority following Watergate—crafted IEEPA as a replacement for the old law primarily to get the stale freezes and other antiquated states of economic emergency off the books (the U.S. had technically been in a state of perpetual national emergency since 1933) and to bring Congress into the equation.
Carter’s decision to move forward with an Executive Order authorizing the freeze, then, was neither unprecedented nor particularly seismic in dollar terms. In his memoirs, however, Carter recalls feeling symbolic weight around the decision: “I hesitated only because such action was likely to reflect adversely on us as a reliable trading partner and might frighten other major depositors and investors into a massive transfer of their funds to other countries.” To address these fears, Carter instructed his Press Secretary, the young Jody Powell, to issue a statement making clear the limited nature of the decree: “The order does not affect accounts of persons other than the Government of Iran, the Central Bank of Iran and other controlled entities. The precise amounts involved cannot be ascertained at this time, but there is no reason for disturbance in the foreign exchange or other markets.”
Carter had many reasons to be afraid of deploying IEEPA beyond disturbing foreign markets. Firstly, there was Shah Mohammad Reza Pahlavi. After he fled Iran amid increasingly violent protests against his excesses in early 1979, the Shah jetted to palatial Bahamian and Mexican estates. He ended up spending much of his time, however, consulting with American doctors about a swollen neck gland and series of lingering illnesses that turned out to be grave lymphoma. As his country slipped into the hands of the fundamentalist Ayatollah, the Shah was also confronting his own mortality. In October, he reached out to former Secretary of State Henry Kissinger and Chase Manhattan Bank Chairman David Rockefeller for help, and was resultantly granted admittance into the U.S. for experimental treatment at Sloan Kettering Cancer Center. When the Ayatollah’s hostage-takers acted two weeks later, they claimed—even if only as a convenient excuse—that it was the Shah’s presence in New York that spurred them into holding the Americans.
The Shah had a ton of money. Some was parked in massive development projects in New Orleans. Some was used to support Milwaukee-based banks. As much as $20 billion was in a highly questionable family charity, the Pahlavi Foundation. And a significant amount was in Chase Manhattan, which even before Carter’s Executive Order had led to a glut of conspiracy (and not-so-conspiracy) theories suggesting that Rockefeller wanted some kind of controlled crisis to help the Shah. Journalist William Shawcross lays out the entanglements in his massively entertaining The Shah’s Last Ride: The Fate of an Ally, and offers a poetic vision of the imbroglio: “There is an almost surreal quality about the Shah’s cancer. In a sense the disease, his reaction to it, the way in which it was treated, and its eventual impact on his own country, the United States, and his other allies, create a metaphor for his rule.”
Even just with the Shah, Carter had ample incentive to stick to public monies. Add that to the 50,000 Iranian students and thousands of Iranian businesses in the U.S., and a more expansive IEEPA order begins to look like a recipe for both cultural antagonisms and far greater stock market shockwaves. And this isn’t even getting into oil…
Carter was faced with the tabula rasa of a brand-new law. He had a chance to contrast the secrecy and back-door intrigue of prior administrations, and he decided to focus his antagonism on the Ayatollah, rather than private citizens. Republican Senator Charles Mathias, a co-sponsor of IEEPA, wrote an op-ed in the Baltimore Sun a month after Carter’s Executive Order that highlighted how this new restraint could help heal the country, even in the midst of the hostage crisis: “The American people will be a party to the events before the fact and as they occur—not after the fact, with decisions having been made behind closed doors. It will be a true test of our maturity to see how each of these interested parties performs during this period.”
Carter’s choice to hold back on IEEPA clearly did not end the hostage crisis, and Carter issued—with varying degrees of success—further Executive Orders during the crisis in attempts to target private Iranian corruption (and America’s role in it). But as Trump tries at the get-go to take the Act to its maximum application against TikTok and WeChat, he risks unleashing the same scandal, economic warfare, and conspiratorial thinking that Carter aimed to dodge…
As U.S. Attorney, Preet used IEEPA in the prosecution of Turkish-Iranian gold trader Reza Zarrab and the even-more-relevant seizure of 650 Fifth Avenue—the onetime headquarters of the aforementioned Pahlavi Foundation—for its links to Iranian-funded terrorism. Learn more about that case here.
Catch up on the Time Machine’s deep dives into history, which offer context to understand our present challenges, including these recent pieces: