Iran Sanctions Kenneth Katzman Specialist in Middle Eastern Affairs January 12, 2016 Congressional Research Service 7-5700 www.crs.gov RS20871 Iran Sanctions Summary Broad international sanctions imposed on Iran during 2010-2013 harmed Iran’s economy and contributed to Iran’s acceptance of agreements that exchange constraints on its nuclear program for sanctions relief. The sanctions and related diplomatic pressure, at least in part, caused or contributed to: Iran’s crude oil exports to fall from about 2.5 million barrels per day (mbd) in 2011 to about 1.1 mbd by mid-2013. The effect of that export volume reduction has been further compounded by a fall in oil prices since mid-2014. Iran’s economy to shrink by about 10% in the two years that ended in March 2014. The economy stabilized in 2014-15 as a result of modest sanctions relief under an interim nuclear agreement that went into effect on January 20, 2014. That accord allows Iran to access $700 million per month of hard currency from oil and other product sales, and caps Iran’s crude oil exports at the 1.1 mbd level. constriction of Iran’s ability to procure equipment for its nuclear and missile programs and to import advanced conventional weaponry. However, these effects have not prevented Iran from continuing to develop its missile programs or from militarily assisting pro-Iranian movements and governments in the region. the June 2013 election as president of Hassan Rouhani, who articulated a priority of obtaining relief from international sanctions and isolation. The comprehensive nuclear accord (Joint Comprehensive Plan of Action, or JCPOA), finalized on July 14, 2015, entails far broader sanctions relief. U.S., U.N., and multilateral sanctions on Iran’s energy, financial, shipping, automotive, and other sectors are to be suspended or lifted once Iran complies with key nuclear commitments under the agreement (“Implementation Day”) – a milestone that might be reached in mid-late January 2016. The relief will allow Iran to freely export crude oil and to access a net amount of nearly $60 billion in foreign exchange reserves. On October 18 (“Adoption Day” of the JCPOA), the Administration issued provisional waivers of relevant sanctions laws, to take effect on Implementation Day. The JCPOA requires the President to, eight years from the JCPOA’s taking effect, request that Congress terminate the stipulated sanctions that are imposed by statute. Most sanctions that apply to U.S. companies remain in place, as will those secondary sanctions (sanctions on foreign firms) that have been imposed because of Iran’s support for terrorism, for human rights abuses, and to curb Iran’s missile and advanced conventional weapons programs. Under the JCPOA and U.N. Security Council Resolution 2231 of July 20, 2015, U.N. sanctions will terminate as of Implementation Day. Under Resolution 2231, U.N. sanctions on Iran’s development of nuclear-capable ballistic missiles and its importation or exportation of arms will remain in place for limited periods of time. Experts disagree on whether Iran will use sanctions relief primarily to resurrect its economy or to empower additional expansion of Iran’s influence. See also CRS Report RL32048, Iran, Gulf Security, and U.S. Policy, 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 Contents Overview and Objectives ................................................................................................................ 1 Blocked Iranian Property and Assets ............................................................................................... 1 Executive Order 13599 Impounding Iran-Owned Assets .......................................................... 2 Sanctions for Iran’s Support for Terrorism and Destabilizing 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 Exception for U.S. Humanitarian Aid ................................................................................. 4 Executive Order 13224 Sanctioning Terrorism-Supporting Entities ......................................... 4 Executive Orders Sanctioning Iran’s Involvement in Iraq and Syria ........................................ 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 Sanctions on Iran’s Energy Sector ................................................................................................... 8 The Iran Sanctions Act, Amendments, and Its Applications ..................................................... 9 Key Sanctions “Triggers” Under ISA ................................................................................. 9 Mandate and Timeframe to Investigate ISA Violations .................................................... 14 Interpretations and Administration of ISA and Related Laws .......................................... 16 Oil Export Sanctions: Section 1245 of the FY2012 NDAA Sanctioning Transactions with Iran’s Central Bank ...................................................................................................... 20 Implementation: Exemptions Issued ................................................................................. 21 Foreign Exchange Reserves “Lock Up” Provision of ITRSHRA ..................................... 21 Weapons of Mass Destruction, Missile, and Conventional Arms Sanctions ................................. 22 Iran-Iraq Arms Nonproliferation Act and Iraq Sanctions Act ................................................. 22 Anti-Terrorism and Effective Death Penalty Act of 1996 ....................................................... 23 Provision of the Iran Sanctions Act ......................................................................................... 23 Iran-North Korea-Syria Nonproliferation Act ......................................................................... 23 Executive Order 13382 on Proliferation-Supporting Entities ................................................. 24 Foreign Aid Restrictions for Suppliers of Iran ........................................................................ 25 Sanctions on “Countries of Diversion Concern” ..................................................................... 26 Financial/Banking Sanctions ......................................................................................................... 26 Targeted Financial Measures ................................................................................................... 26 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 .............................................................. 29 Sanctions and Actions to Counter Iranian Censorship of the Internet: CISADA, E.O. 13606 and E.O. 13628 ........................................................................................... 30 Laws and Administration Actions to Promote Internet Communications by Iranians ..................................................................................................................... 30 Measures to Sanction Human Rights Abuses and Promote the Opposition ............................ 31 Congressional Research Service Iran Sanctions U.N. Sanctions ............................................................................................................................... 32 International Implementation and Compliance ............................................................................. 33 Europe ..................................................................................................................................... 34 China and Russia ..................................................................................................................... 36 Japan/Korean Peninsula/Other East Asia ................................................................................ 36 South Asia: India, Pakistan, and Afghanistan ......................................................................... 37 India .................................................................................................................................. 37 Pakistan ............................................................................................................................