Iran Sanctions
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Iran Sanctions Kenneth Katzman Specialist in Middle Eastern Affairs January 28, 2015 Congressional Research Service 7-5700 www.crs.gov RS20871 Iran Sanctions Summary International sanctions on Iran’s key energy and financial sectors harmed Iran’s economy and arguably contributed to Iran’s acceptance of restrictions on expanding its nuclear program in exchange for modest sanctions relief. The interim nuclear “standstill” agreement (Joint Plan of Action, JPA) has been in effect since January 20, 2014, and extended twice (now until July 6, 2015) to allow time to translate it into a comprehensive nuclear agreement. The economic pressure of sanctions included the following: • Iran’s crude oil exports are about 1.1 million barrels per day (mbd) at the end of 2013—far below the 2.5 million barrels per day Iran exported during 2011. • Iran’s economy shrank by about 5% in 2013 as Iran’s private sector reduced operations and many of its loans became delinquent, and has rebounded only modestly since the JPA sanctions relief went into effect. Sanctions have constricted Iran’s ability to procure equipment for its nuclear and missile programs and to import advanced conventional weaponry. However, the sanctions have not halted Iran’s provision of arms to the Assad government in Syria, the Iraqi government and related Shiite militias, Houthi rebels in Yemen, or other pro-Iranian factions in the Middle East. Nor have sanctions altered Iran’s repression of dissent or monitoring of the Internet. Under the JPA, the United States has provided Iran with some sanctions relief through presidential waivers of several U.S. sanctions laws and authority under several executive orders. The core of the sanctions relief is $700 million per month in access to hard currency from oil sales, plus about $65 million per month in additional hard currency provided to educational institutions for Iranians studying abroad. The JPA caps Iran’s oil exports at about 1mbd but does not cap exports to its crude oil customers of oil products such as condensates, and Iran appears to be increasing exports of condensates to partly compensate for the limitations on crude oil sales. The JPA suspends sanctions on Iran’s auto manufacturing sector and on its sales of petrochemicals, although available data indicate activity in these sectors does not appear to be producing nearly as much revenue as was estimated. And, the fall in oil prices since June 2014 has introduced additional uncertainty to Iran’s economy, to the point where many experts assess that Iranian leaders urgently need a comprehensive nuclear deal to achieve the economic improvement demanded by the population. By all accounts, a comprehensive nuclear agreement, if reached, will entail significant easing of U.S. and third country sanctions on Iran—particularly those sanctions that reduced Iran’s oil exports and limit its access to the international financial system. The Administration has said that substantial sanctions relief under a comprehensive deal would be provided, but would be implemented stepwise as Iran fulfills the terms of an agreement. The Administration has asserted that, in the event of an agreement, it will act on its own authority to suspend most sanctions on Iran and, after testing Iran’s compliance over a period of time, work with Congress on long-term sanctions relief. Some in Congress are proposing additional sanctions if diplomacy fails, but the Administration strongly opposes enacting additional sanctions while talks are ongoing. The Administration asserts that doing so will fracture the coalition negotiating with Iran and cause Iran to walk away from the talks. See also CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth Katzman; CRS Report R43311, Iran: U.S. Economic Sanctions and the Authority to Lift Restrictions, by Dianne E. Rennack; and CRS Report R43492, Achievements of and Outlook for Sanctions on Iran, by Kenneth Katzman. Congressional Research Service Iran Sanctions Congressional Research Service Iran Sanctions Contents Overview and Objectives ................................................................................................................. 1 Blocked Iranian Property and Assets ............................................................................................... 1 Executive Order 13599 Impounding Iran-Owned Assets .......................................................... 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 Codification of the Ban and U.S.-Iran Trade Figures ................................................................ 5 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 .......................................................................................................................... 8 The Iran Sanctions Act, Amendments, and Related Applications ............................................. 9 Key “Triggers” .................................................................................................................... 9 Mandate and Time Frame to Investigate ISA Violations ................................................... 13 Executive Order 13574 Clarifying the Division of Responsibilities Between the State and Treasury Departments ..................................................................................... 17 Interpretations and Administration of ISA and Related Laws ........................................... 17 Sanctions Imposed or Waived Under ISA ......................................................................... 19 Sanctions on Transactions with Iran’s Central Bank for Oil or Other Goods: Section 1245 of the FY2012 NDAA ................................................................................................. 21 Implementation: Exemptions Issued ................................................................................. 22 Sanctions on Paying Iran with Hard Currency .................................................................. 22 Proliferation-Related Sanctions ..................................................................................................... 23 Iran-Iraq Arms Nonproliferation Act and Iraq Sanctions Act .................................................. 24 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 ......................................................................................................... 27 Early Efforts: Targeted Financial Measures ............................................................................ 27 CISADA: Sanctioning Foreign Banks That Conduct Transactions with Sanctioned Iranian Banks ........................................................................................................................ 27 Implementation of Section 104: Sanctions Imposed ......................................................... 28 Iran Designated a Money-Laundering Jurisdiction ................................................................. 28 Laws that Promote Divestment ...................................................................................................... 29 Sanctions and Sanctions Exemptions to Support Democratic Change/Civil Society in Iran ........ 29 Expanding Internet and Communications Freedoms ............................................................... 30 Sanctions and Actions to Counter Iranian Censorship of the Internet ............................... 30 Laws and Administration Actions to Promote Internet Communications by Iranians ........................................................................................................................... 31 Congressional Research Service Iran Sanctions Measures to Sanction Human Rights Abuses and Promote the Opposition ............................ 31 U.N. Sanctions ............................................................................................................................... 33 International Implementation and Compliance .............................................................................. 34 Europe ....................................................................................................................................