Iran Sanctions
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Iran Sanctions Kenneth Katzman Specialist in Middle Eastern Affairs May 7, 2014 Congressional Research Service 7-5700 www.crs.gov RS20871 Iran Sanctions Summary Strict sanctions on Iran—sanctions that primarily target Iran’s key energy sector and its access to the international financial system—harmed Iran’s economy to the point where Iran’s leaders, on November 24, 2013, accepted an interim agreement (“Joint Plan of Action,” JPA). The agreement halts expansion of Iran’s nuclear program in exchange for temporary and modest sanctions relief. The June 14, 2013, election of the relatively moderate Hassan Rouhani as Iran’s president was an indication of the growing public pressure on the regime to achieve an easing of sanctions. • Oil exports fund nearly half of Iran’s government expenditures and, by late 2013, sanctions had reduced Iran’s oil exports to about 1 million barrels per day—far below the 2.5 million barrels per day Iran exported during 2011. The drop was caused by a European Union embargo on purchases of Iranian oil and decisions by other Iranian oil customers to obtain exemptions from U.S. sanctions. • During 2012-2013, the loss of revenues from oil, coupled with the cut-off of Iran from the international banking system, caused a sharp drop in the value of Iran’s currency, the rial; raised inflation to over 50%; and reduced Iran’s accumulation of and access to reserves of foreign exchange. Iran’s economy shrank by about 5% in 2013 and many Iranian firms shut down or reduced operations. Sanctions also attempted to directly slow Iran’s nuclear and missile programs and reduce its military power by hampering its acquisition of foreign technology and weaponry. U.S. assessments indicate mixed success in these efforts. Sanctions on Iran have not halted Iran’s provision of arms to the Assad government in Syria or to pro-Iranian factions in the Middle East, nor have sanctions altered Iran’s repression of dissent or monitoring of the Internet. To some experts, the November 24, 2013, nuclear deal with the international community validated the strategy of increasing sanctions on Iran. The agreement, including the approximately $7 billion in sanctions relief during the interim period, began implementation on January 20, 2014, and provisions of several laws and executive orders were waived or suspended that day. Citing initial improvements in Iran’s economy and renewed international business contacts with Iran, some in Congress believe that economic pressure on Iran needs to increase to shape a final nuclear deal and ensure that the Iran sanctions architecture does not collapse. A comprehensive agreement, under negotiation, would undoubtedly require significant easing of U.S. and third country sanctions on Iran—particularly those sanctions imposed since 2010 and intended primarily to compel Iran to reach a nuclear agreement. The Administration has said that sanctions relief under a comprehensive deal would be implemented stepwise as Iran fulfills the terms of an agreement. The Administration has said it would work with Congress on sanctions relief, in cases where congressional action might be needed to ease sanctions. See also CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth Katzman, and CRS Report R43492, Achievements of and Outlook for Sanctions on Iran, by Kenneth Katzman. Congressional Research Service Iran Sanctions Contents Overview and Objectives ................................................................................................................. 1 Blocked Iranian Property and Assets ............................................................................................... 1 Executive Order 13599 .............................................................................................................. 2 Sanctions Against Iran’s Support for International Terrorism and Regional Activities ................... 3 Sanctions Triggered by Terrorism List Designation: Ban on U.S. Aid, Arms Sales, Dual-Use Exports, and Certain Programs for Iran ................................................................. 3 No Ban on U.S. Humanitarian Aid ...................................................................................... 4 Executive Order 13224: Sanctioning Terrorism Supporting Entities ........................................ 4 Sanctioning Iranian Involvement in the Region ........................................................................ 4 Ban on U.S. Trade and Investment with Iran ................................................................................... 5 Major Provisions: What U.S.-Iran Trade Is Allowed or Prohibited? ......................................... 6 Application to Foreign Subsidiaries of U.S. Firms ............................................................. 8 Energy and Other Sector Sanctions: Iran Sanctions Act (ISA) and Related Laws and Executive Orders .......................................................................................................................... 9 The Iran Sanctions Act, Amendments, and Related Applications ............................................. 9 Key “Triggers” .................................................................................................................. 10 Mandate and Time Frame to Investigate ISA Violations ................................................... 14 Clarification of Responsibilities: Executive Order 13574................................................. 17 Interpretations and Administration of ISA and Related Laws ................................................. 17 Application to Energy Pipelines ........................................................................................ 17 Application to Crude Oil Purchases .................................................................................. 17 Application to Natural Gas Purchases from Iran/Shah Deniz Exception .......................... 17 Application to Liquefied Natural Gas Development ......................................................... 18 Application to Private Financing but Not Official Credit Guarantee Agencies ................ 18 Application to Iranian Energy Institutions/NIOC and NITC ............................................ 18 Sanctions Imposed Under ISA ................................................................................................ 19 Sanctions on Oil and Other Payments to Iran’s Central Bank ................................................. 20 Implementation: Exemptions Issued ................................................................................. 21 Sanctions on Paying Iran with Hard Currency .................................................................. 22 Proliferation-Related Sanctions ..................................................................................................... 23 Iran-Iraq Arms Nonproliferation Act and Iraq Sanctions Act .................................................. 23 Iran-North Korea-Syria Nonproliferation Act ......................................................................... 24 Executive Order 13382 ............................................................................................................ 25 Foreign Aid Restrictions for Suppliers of Iran ........................................................................ 25 Sanctions on “Countries of Diversion Concern” ..................................................................... 25 Financial/Banking Sanctions ......................................................................................................... 26 Early Efforts: Targeted Financial Measures ............................................................................ 27 Sanctioning Foreign Banks That Conduct Transactions with Iran .......................................... 27 Implementation of Section 104: Sanctions Imposed ......................................................... 28 Iran Designated a Money-Laundering Jurisdiction ................................................................. 28 Promoting Divestment ................................................................................................................... 29 Laws Supporting Democratic Change in Iran ................................................................................ 29 Expanding Internet and Communications Freedoms ............................................................... 29 Sanctions on Firms that Sell Censorship Gear to the Regime ........................................... 30 Congressional Research Service Iran Sanctions Sanctions Against Iran’s Internet Censorship .................................................................... 30 Measures to Sanction Human Rights Abuses and Promote the Opposition ............................ 31 Sanctions Against Iranian Human Rights Abusers and Related Equipment ..................... 31 Iranian Broadcasting and Profiteers .................................................................................. 32 Separate Visa Ban .............................................................................................................. 32 U.N. Sanctions ............................................................................................................................... 33 International Implementation and Compliance .............................................................................. 34 Europe ..................................................................................................................................... 35