With Operation Economic Outcast against Iran in its third week, the Department of the Treasury's Office of Foreign Assets Control (OFAC) has taken significant action under one of its new sectoral sanctions determinations by targeting Iran's aviation sector. On September 8, 2026, in addition to imposing sanctions on 36 parties, OFAC suspended several general licenses (GLs) relating to flights to/from and over Iran, meaning that U.S. sanctions will make it very challenging, if not impossible, for even non-Iranian carriers to conduct such flights. 

New Sanctions Designations Focused on Aviation Sector: OFAC sanctioned 27 Iranian airlines as well as nine parties in third countries involved in Iranian procurement of commercial aircraft/parts, cargo service providers, and general sale agents that serviced international flights by the sanctioned Mahan Air. Designated for "operating" in Iran's aviation sector, the 27 Iranian airlines were the first designations under OFAC's August 24, 2026 determination imposing sectoral sanctions on Iran's aviation, digital asset, gold, shipping, and technology sectors. Prior designations under Operation Economic Outcast were made pursuant to pre-existing sanctions authorities. 

The parties in third countries (primarily the United Arab Emirates and Türkiye, with a few in the U.K., Malaysia, and Kazakhstan) were sanctioned under a different sanctions authority, Executive Order 13224 (as amended), part of the global counterterrorism sanctions program. These parties were designated for providing "material assistance" to Mahan Air or other sanctioned person(s). 

Suspension of Aviation-Related GLs: OFAC also suspended three Iran-related aviation GLs that allowed payments for overflights (31 CFR 560.522), bunkering goods or services and emergency repairs for non-Iranian carriers traveling to/from Iran (31 CFR 560.529), and non-U.S. airlines to fly to/from Iran on temporary sojourn (Iran GL J-1). OFAC concurrently suspended its policy for case-by-case review of specific licenses for the export of goods or services for civil aviation safety under 31 CFR 560.528. 

Wind-Down GLs: OFAC issued two GLs in connection with these actions: (1) Counterterrorism GL No. 37, authorizing certain wind-down transactions involving three of the newly sanctioned entities (two in Türkiye and one in the United Arab Emirates) through 12:01 a.m. EDT on September 23, 2026; and (2) Iran GL DD, authorizing the wind down of transactions previously authorized under the three suspended GLs through 12:01 a.m. EDT on September 23, 2026.

OFAC's Warning: In the press release, Secretary of the Treasury Scott Bessent described the action as a "warning to anyone doing business with Iran's remaining airlines… You are at risk of being cut off from the global financial system." The announcement further declares that "[a]ny foreign firm or individual enabling sanctioned Iranian airlines — including through aircraft transfers, cargo services, or general sales agent support — will face serious consequences for supporting the world's leading state sponsor of terrorism."

Contemporaneous FinCEN Alert: At the same time, the Financial Crimes Enforcement Network (FinCEN) issued an alert to financial institutions with guidance to assist them in identifying and reporting procurement networks that support Iran's sanctioned aviation sector. 

Takeaways

• Implementation of New Sanctions with Repeated Warnings. This action indicates that while OFAC is starting to implement its new determination against Iranian targets, it is allowing parties in third countries a limited opportunity to withdraw from any business with the Iranian aviation sector before it imposes "material assistance" sanctions under the new authority. To that point, Secretary Bessent's September 8, 2026 warning to foreign firms and individuals echoed similar warnings made in the announcement of Operation Economic Outcast. It is also clear that OFAC continues to be focused on the aviation sector, with this action building on aviation-related designations announced in April and July. However, the earlier designations generally required some kind of connection to terrorism or parties sanctioned under the global counter terrorism sanctions (e.g., Mahan Air), while the new determination gives OFAC a lower threshold, enabling it to sanction targets for merely "operating" in the aviation sector of Iran. The determination also expands OFAC's authority to impose related derivative or secondary sanctions relating to Iran's aviation sector.
• Cutting Off Iran Flights. Perhaps more significantly, this action makes flights to/from and over Iran extremely risky, if not impossible, from a U.S. sanctions perspective: 
  • According to OFAC, all Iranian airlines are now sanctioned, meaning that doing business with them will implicate potential derivative or secondary sanctions risk for parties in third countries. As a result, Iranian airlines will likely face significant challenges in operating international flights, as many countries, financial institutions, and even support service providers may be reluctant to incur such risks in the face of OFAC's repeated warnings.
  • Non-U.S. carriers outside of Iran no longer have an OFAC GL to fly to/from Iran on temporary sojourn, as it was suspended in this action. Even the OFAC GL that previously allowed payments for overflights of Iranian airspace has been suspended. As a result, carriers could risk violating U.S. sanctions and/or export controls by flying to/from or over Iran since the U.S. has jurisdiction over the majority of civilian aircraft worldwide. In addition to OFAC enforcement actions, it is possible the U.S. government could take export-focused enforcement actions in such cases, as it did in the past in light of similar restrictions on aircraft flying to/from Russia. 
  • Even if it were possible to operate outside the scope of U.S. jurisdiction in conducting these kinds of operations, non-U.S. parties will now face higher sanctions risk and significant logistical challenges, such as in banking and supplier transactions, due to the heightened risk of derivative and secondary sanctions. 
• New Guidance for Risk Relating to Iran's Aviation Sector. While it is directed towards financial institutions, the FinCEN alert includes a list of red flags that may be useful to others in the aviation or freight forwarding/logistics industries who may need to watch for potential diversion of aircraft or parts to Iran. 

For more information, please contact:

Timothy P. O'Toole, totoole@milchev.com, 202-626-5552

Leah Moushey, lmoushey@milchev.com, 202-626-5896

Melissa Burgess, mburgess@milchev.com, 202-626-5914

Collmann Griffin, cgriffin@milchev.com, 202-626-5836

Caroline J. Watson, cwatson@milchev.com, 202-626-6083

Arooshe P. Giroti, agiroti@milchev.com, 202-626-6060

Peter Kentz, pkentz@milchev.com, 202-626-5891

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