Iran Sanctions Kenneth Katzman Specialist in Middle Eastern Affairs Updated November 15, 2019 Congressional Research Service 7-.... www.crs.gov RS20871 SUMMARY RS20871 Iran Sanctions November 15, 2019 Successive Administrations have used economic sanctions to try to change Iran’s behavior. U.S. sanctions, including “secondary sanctions” on firms that conduct certain Kenneth Katzman transactions with Iran, have adversely affected Iran’s economy but have had little Specialist in Middle observable effect on Iran’s pursuit of core strategic objectives such as its support for Eastern Affairs regional armed factions and its development of ballistic and cruise missiles. [email protected] For a copy of the full report, During 2012-2015, when the global community was relatively united in pressuring Iran, please call 7-.... or visit Iran’s economy shrank as its crude oil exports fell by more than 50%, and Iran had www.crs.gov. limited ability to utilize its $120 billion in assets held abroad. Iran accepted the 2015 multilateral nuclear accord (Joint Comprehensive Plan of Action, JCPOA), which provided Iran broad relief through the waiving of relevant sanctions, revocation of relevant executive orders (E.O.s), and the lifting of U.N. and EU sanctions. Remaining in place were a general ban on U.S. trade with Iran and U.S. sanctions on Iran’s support for regional governments and armed factions, its human rights abuses, its efforts to acquire missile and advanced conventional weapons capabilities, and the Islamic Revolutionary Guard Corps (IRGC). Under U.N. Security Council Resolution 2231, which enshrined the JCPOA, nonbinding U.N. restrictions on Iran’s development of nuclear-capable ballistic missiles and a binding ban on its importation or exportation of arms remain in place for several years. The sanctions relief enabled Iran to increase its oil exports to nearly pre- sanctions levels, regain access to foreign exchange reserve funds and reintegrate into the international financial system, achieve about 7% yearly economic growth (2016-17), attract foreign investment, and buy new passenger aircraft. Sanctions are at the core of Trump Administration policy to apply “maximum pressure” on Iran, with the stated purpose of compelling Iran to negotiate a revised JCPOA that takes into account U.S. concerns beyond Iran’s nuclear program. On May 8, 2018, President Trump announced that the United States would no longer participate in the JCPOA and U.S. secondary sanctions were reimposed as of November 6, 2018. The reinstatement of U.S. sanctions has driven Iran’s economy into recession as major companies have exited the Iranian economy and Iran’s oil exports have decreased dramatically—particularly after the Administration in May 2019 ended sanctions exceptions for the purchase of Iranian oil. The value of Iran’s currency has declined sharply, and there has been some unrest. Since the summer of 2019, the Administration has sanctioned numerous entities that are supporting Iran’s remaining oil trade, added sanctions on Iran’s Central Bank, and sanctioned a number of high-ranking Iranian officials. On May 3, 2019, the Administration ended two waivers for foreign governments to provide technical assistance to some JCPOA-permitted aspects of Iran’s nuclear program, but it extended five other civilian nuclear waivers in August 2019. The European Union and other countries have sought to keep the economic benefits of the JCPOA flowing to Iran in order to persuade Iran to remain in the accord. In January 2019, the European countries created a trading mechanism (Special Purpose Vehicle) that circumvents U.S. secondary sanctions, and the EU countries are contemplating providing Iran with $15 billion in credits, secured by future oil deliveries, to facilitate the use of that mechanism. The economic difficulties and other U.S. pressure measures have prompted Iran to respond by decreasing its compliance with some of the nuclear commitments of the JCPOA, and have contributed to Iranian leaders’ apparent decision to attack and interfere with some commercial shipping in the Persian Gulf. For now, Iran is refusing to begin talks with the United States on a revised JCPOA. See also CRS Report R43333, Iran Nuclear Agreement and U.S. Exit, by Paul K. Kerr and Kenneth Katzman; and CRS Report R43311, Iran: U.S. Economic Sanctions and the Authority to Lift Restrictions, by Dianne E. Rennack. Congressional Research Service Iran Sanctions Contents Overview and Objectives ................................................................................................................ 1 Blocked Iranian Property and Assets ............................................................................................... 1 Executive Order 13599 Impounding Iran-Owned Assets .......................................................... 3 Sanctions for Iran’s Support for Armed Factions and Terrorist Groups .......................................... 4 Sanctions Triggered by Terrorism List Designation .................................................................. 4 Exception for U.S. Humanitarian Aid ................................................................................. 5 Sanctions on States “Not Cooperating” Against Terrorism ...................................................... 6 Executive Order 13224 Sanctioning Terrorism-Supporting Entities ......................................... 6 Use of the Order to Target Iranian Arms Exports ............................................................... 6 Application of CAATSA to the Revolutionary Guard ........................................................ 7 Implementation of E.O. 13224 ............................................................................................ 7 Foreign Terrorist Organization (FTO) Designations ................................................................. 7 Other Sanctions on Iran’s “Malign” Regional Activities .......................................................... 8 Executive Order 13438 on Threats to Iraq’s Stability ........................................................ 8 Executive Order 13572 on Repression of the Syrian People. ............................................. 8 The Hizballah International Financing Prevention Act (P.L. 114-102) and Hizballah International Financing Prevention Amendments Act of 2018 (S. 1595, P.L. 115-272). ......................................................................................................... 8 Ban on U.S. Trade and Investment with Iran .................................................................................. 8 JCPOA-Related Easing and Reversal ................................................................................. 9 What U.S.-Iran Trade Is Allowed or Prohibited? ...................................................................... 9 Application to Foreign Subsidiaries of U.S. Firms ................................................................. 12 Sanctions on Iran’s Energy Sector................................................................................................. 12 The Iran Sanctions Act ............................................................................................................ 13 Key Sanctions “Triggers” Under ISA ............................................................................... 13 Mandate and Time Frame to Investigate ISA Violations .................................................. 16 Interpretations of ISA and Related Laws .......................................................................... 18 Implementation of Energy-Related Iran Sanctions ........................................................... 19 Iran Oil Export Reduction Sanctions: Section 1245 of the FY2012 NDAA Sanctioning Transactions with Iran’s Central Bank ............................................................. 21 Implementation/SREs Issued and Ended .......................................................................... 22 Iran Foreign Account “Restriction” Provision .................................................................. 23 Sanctions on Auto Production and Minerals Sectors..................................................................... 24 Executive Order 13645/13846: Iran’s Automotive Sector, Rial Trading, and Precious Stones ................................................................................................................................... 24 Executive Order 13871 on Iran’s Minerals and Metals Sectors .............................................. 25 Sanctions on Weapons of Mass Destruction, Missiles, and Conventional Arms Transfers ........... 25 Iran-Iraq Arms Nonproliferation Act and Iraq Sanctions Act ................................................. 26 Implementation ................................................................................................................. 26 Banning Aid to Countries that Aid or Arm Terrorism List States: Anti-Terrorism and Effective Death Penalty Act of 1996 .................................................................................... 27 Implementation ................................................................................................................. 27 Proliferation-Related Provision of the Iran Sanctions Act ...................................................... 27 Iran-North Korea-Syria Nonproliferation Act ......................................................................... 27 Implementation ................................................................................................................