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Iran Sanctions Iran Sanctions Kenneth Katzman Specialist in Middle Eastern Affairs June 22, 2011 Congressional Research Service 7-5700 www.crs.gov RS20871 CRS Report for Congress Prepared for Members and Committees of Congress Iran Sanctions Summary There is broad international support for imposing progressively strict economic sanctions on Iran to try to compel it to verifiably confine its nuclear program to purely peaceful uses. However, there is not a consensus on how effective the sanctions are on core Western goals. In January 2011, Secretary of State Clinton claimed that sanctions have accomplished a core objective of slowing Iran’s nuclear program. But, nuclear talks in December 2010 and in January 2011 made virtually no progress, suggesting that Iran’s leaders do not feel sufficiently pressured by sanctions to offer major concessions to obtain a nuclear deal. Because so many major economic powers have imposed sanctions on Iran, the sanctions are, by all accounts, harming key sectors of Iran’s economy by reinforcing the effects of Iran’s economic mismanagement. Among other indicators, there have been a stream of announcements by major international firms since early 2010 that they are exiting the Iranian market. Iran’s oil production has fallen slightly to about 3.9 million barrels per day, from over 4.1 million barrels per day several years ago, although Iran now has small natural gas exports that it did not have before Iran opened its fields to foreign investment in 1996. In addition, Iran’s overall ability to limit the effects of sanctions has been aided by relatively high oil prices in mid-2011. The United States and its allies appear to agree that sanctions should continue to target Iran’s energy sector and should try to isolate Iran from the international financial system. The energy sector provides about 80% of government revenues. Iran’s large trading community depends on financing to buy goods from the West and sell them inside Iran. Using the authorities of U.N. Security Council Resolution 1929, adopted June 9, 2010, measures adopted since mid-2010 by the United Nations Security Council, the European Union, and several other countries target those sectors. These national measures complement the numerous U.S. laws and regulations that have long sought to try to pressure Iran, particularly the Iran Sanctions Act (ISA)—a 1996 U.S. law that mandated U.S. penalties against foreign companies that invest in Iran’s energy sector. In the 111th Congress, the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA, P.L. 111-195) expanded ISA to sanction Iran’s ability to obtain or make gasoline, for which Iran depends heavily on imports. Sales to Iran of gasoline have fallen dramatically since. CISADA also contained a broad range of other measures further restricting the already limited amount of U.S. trade with Iran. It also contained provisions to promote the cause of the domestic opposition in Iran by sanctioning Iranian officials who are human rights abusers and facilitating the democracy movement’s access to information technology—a trend that is increasingly taking hold in the Obama Administration and in partner countries. The increasing emphasis on human rights-related laws and sanctions reflect a growing belief that there are few new economic sanctions that can be successfully agreed on or imposed. In the 112th Congress, legislation has been introduced to enhance both the economic sanctions and human rights-related provisions of CISADA and other laws. For a broader analysis of policy on Iran, see CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth Katzman. Congressional Research Service Iran Sanctions Contents Overview ....................................................................................................................................6 Sanctions Targeting Iran’s Energy Sector: The Iran Sanctions Act (ISA) and CISADA Amendments............................................................................................................................6 Legislative History and Provisions ........................................................................................6 Key ”Triggers”................................................................................................................7 Requirement and Time Frame to Investigate Violations ...................................................9 Available Sanctions Under ISA .....................................................................................10 Waivers, Exemptions, and Termination Authority.......................................................... 11 ISA Sunset ....................................................................................................................12 Interpretations and Implementation .....................................................................................12 ISA Sanctions Determinations: September 2010 to the Present ......................................13 Non-Application to Crude Oil or Natural Gas Purchases from Iran or to Sales of Most Energy Equipment or Services...........................................................................15 Application to Energy Pipelines ....................................................................................17 Application to Iranian Firms or the Revolutionary Guard ..............................................18 Application to Liquefied Natural Gas............................................................................19 Ban on U.S. Trade and Investment With Iran.............................................................................33 Application to Foreign Subsidiaries of U.S. Firms...............................................................35 Subsidiaries Exiting Iran ...............................................................................................36 Banking and Finance: Treasury Department Financial Measures and CISADA..........................37 Banking Provisions of CISADA..........................................................................................38 Terrorism List Designation-Related Sanctions ...........................................................................39 Executive Order 13224 .......................................................................................................40 Proliferation-Related U.S. Sanctions .........................................................................................40 Iran-Iraq Arms Nonproliferation Act ...................................................................................40 Iran-Syria-North Korea Nonproliferation Act ......................................................................40 Executive Order 13382 .......................................................................................................41 Foreign Aid Restrictions for Suppliers of Iran......................................................................41 U.S. Efforts to Promote Divestment ..........................................................................................41 U.S. Sanctions Intended to Support Democratic Change in Iran.................................................42 Expanding Internet and Communications Freedoms ............................................................42 Measures to Sanction Human Rights Abuses and Promote the Opposition ...........................43 Blocked Iranian Property and Assets .........................................................................................43 U.N. Sanctions..........................................................................................................................44 International Implementation and Compliance...........................................................................46 European Union and Other Western States.....................................................................46 Japan and South Korea..................................................................................................46 India/Asian Clearing Union...........................................................................................46 China, Russia, and Others .............................................................................................47 Contrast With Previous Periods .....................................................................................48 World Bank Loans ........................................................................................................48 Effects of Sanctions on Iran.......................................................................................................52 Effect on Nuclear Negotiations............................................................................................53 Congressional Research Service Iran Sanctions Counter-Proliferation Effects...............................................................................................53 General Political Effects......................................................................................................53 Economic Effects................................................................................................................54 Foreign Companies Exiting the Iran Market ..................................................................55 Foreign Firms Remaining in the Iran Market .................................................................55 Subsidy Phase-Out Issue ...............................................................................................56 Effect on
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