Iran Sanctions - Federation of American Scientists

1 Iran Sanctions Kenneth Katzman Specialist in Middle Eastern Affairs February 21, 2018 Congressional Research Service 7-5700 RS20871 Iran Sanctions Congressional Research Service Summary The multilateral nuclear accord (Joint Comprehensive Plan of Action, or JCPOA) provides Iran broad relief from , , and multilateral Sanctions on Iran s civilian economic sectors, including secondary Sanctions ( Sanctions on foreign firms that do business with Iran). On January 16, 2016, upon the International Atomic Energy Agency (IAEA) certification that Iran had complied with the stipulated nuclear dismantlement commitments, Administration waivers of relevant Sanctions laws took effect, relevant executive orders ( ) were revoked, and corresponding and EU Sanctions were lifted. Under Security Council Resolution 2231, nonbinding 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.

2 Iran was able to develop its nuclear and missile programs and to assist pro-Iranian regional groups and governments even when strict Sanctions were in place. Also remaining in place is a general ban on trade with and investment in Iran, including regulations barring transactions between and Iranian banks, and Sanctions imposed because of Iran s support for terrorism, its human rights abuses, its interference in specified countries in the region, and its missile and advanced conventional weapons programs, as well as Sanctions on the Islamic Revolutionary Guard Corps (IRGC) and designated commanders, subunits, and affiliates. Some additional Sanctions on these entities and activities were made mandatory by the Countering America s Adversaries Through Sanctions Act (CAATSA, 115-44), which also increases Sanctions on Russia and North Korea. As part of a shift to assertively counter Iran s regional activities and strategic weapons programs, the Trump Administration has threatened to cease implementing the JCPOA unless Congress and allies successfully address the agreement s weaknesses.

3 Thus far, including on January 12, 2018, the Administration has continued to implement the agreement by exercising waivers of Sanctions laws suspended in accordance with the JCPOA, while continuing to impose Sanctions on missile- and IRGC-related entities and on Iranian human rights violators. However, the President said on January 12, 2018, that he would not renew any more waivers, the next one being due on May 12, unless his conditions for fixing the JCPOA are met. Because the President has also not certified Iranian compliance with the JCPOA under the Iran Nuclear Agreement Review Act ( 114-17), Congress might act to reimpose Iran Sanctions . The reimposition of secondary Sanctions would undoubtedly harm Iran s economy. Iran s economy shrank by 9% in the two years that ended in March 2014, before stabilizing since 2015 as a result of modest Sanctions relief under an interim nuclear agreement.

4 Sanctions caused Iran s crude oil exports to fall from about million barrels per day (mbd) in 2011 to about mbd by mid-2013, and made inaccessible more than $120 billion in Iranian reserves held in banks abroad. Sanctions relief has enabled Iran s oil exports to return to nearly presanctions levels, allowed Iran to regain access to funds held abroad and reintegrate into the international financial system, and helped Iran achieve about 7% overall economic growth in 2016, with similar growth in 2017. Foreign energy firms have begun making new investments in Iran s energy sector and major aircraft manufacturers have sold Iran s commercial airlines new passenger aircraft. The relief from Sanctions on Iran s most vital sectors helped Iran s President Hassan Rouhani politically, contributing to his victory in the May 19, 2017, presidential election. Yet, perceived economic inequities and grievances constituted a key component of the widespread unrest in December 2017-January 2018.

5 See also CRS Report R43333, Iran Nuclear Agreement, by Kenneth Katzman and Paul K. Kerr; and CRS Report R43311, Iran: Economic Sanctions and the Authority to Lift Restrictions, by Dianne E. Rennack. Iran Sanctions Congressional Research Service 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 Terrorism and Destabilizing Regional Activities .. 3 Sanctions Triggered by Terrorism List Designation .. 4 Exception for Humanitarian Aid .. 4 Sanctions on States Designated as Not Cooperating Against Terrorism .. 5 Executive Order 13224 Sanctioning Terrorism-Supporting Entities .. 5 Application to the Revolutionary Guard by the Countering America s Adversaries through Sanctions Act (CAATSA, 115-44).. 6 Implementation .. 6 Executive Orders Sanctioning Iran s Involvement in Iraq and Syria.

6 6 Ban on Trade and Investment with Iran .. 6 What Trade Is Allowed or Prohibited? .. 7 Application to Foreign Subsidiaries of Firms .. 9 Sanctions on Iran s Energy Sector .. 10 The Iran Sanctions Act (Including Triggers and Applications Added by CISADA, ITRSHRA, IFCA, and Other Laws) .. 11 Key Sanctions Triggers Under ISA .. 11 Mandate and Time Frame to Investigate ISA Violations .. 15 Interpretations and Implementation of ISA and Related Laws .. 17 Oil Export Sanctions : Section 1245 of the FY2012 NDAA Sanctioning Transactions with Iran s Central Bank .. 20 Implementation: Exemptions Issued .. 20 Foreign Exchange Reserves Lock Up Provision of ITRSHRA .. 21 Sanctions on Weapons of Mass Destruction, Missiles, and Conventional Arms Transfers .. 23 Iran-Iraq Arms Nonproliferation Act and Iraq Sanctions Act .. 23 Anti-Terrorism and Effective Death Penalty Act of 1996 .. 24 Proliferation-Related Provision of the Iran Sanctions Act.

7 24 Iran-North Korea-Syria Nonproliferation Act .. 24 Executive Order 13382 on Proliferation-Supporting Entities .. 25 Arms Transfer and Missile Sanctions in the Countering America s Adversaries through Sanctions Act (CAATSA, 115-44).. 25 Foreign Aid Restrictions for Named Suppliers of 27 Sanctions on Countries of Diversion Concern .. 28 Financial/Banking Sanctions .. 28 Targeted Financial Measures .. 28 Ban on Iranian Access to the Financial System .. 29 CISADA: Sanctioning Foreign Banks That Conduct Transactions with Sanctioned Iranian Entities .. 30 Implementation of Section 104: Sanctions Imposed .. 31 Iran Designated a Money-Laundering Jurisdiction/FATF .. 31 Cross-Cutting Secondary Sanctions : The Iran Freedom and Counter-Proliferation Act (IFCA) .. 32 Post-JCPOA Status: Sections Listed Below Waived .. 32 Iran Sanctions Congressional Research Service Implementation .. 33 Sanctions on Iran s Cyber and Transnational Criminal Activities.

8 33 Executive Order 13694 (April 1, 2015) .. 33 Executive Order 13581 (July 25, 2011) .. 33 Implementation .. 33 Divestment/State-Level Sanctions .. 33 Sanctions and Sanctions Exemptions to Support Democratic Change/Civil Society in Iran .. 34 Expanding Internet and Communications Freedoms .. 34 Countering Censorship of the Internet: CISADA, 13606, and 13628 .. 34 Laws and Actions to Promote Internet Communications by Iranians .. 35 Measures to Sanction Human Rights Abuses and Promote the Opposition .. 36 Sanctions and Sanctions Eased .. 37 Sanctions Relief under Nuclear Deals since 2014 .. 39 Sanctions Eased by the JPA .. 39 Sanctions Eased Under the JCPOA .. 40 Sanctions that Remain in Place .. 42 International Implementation and Compliance .. 43 European Union (EU) and EU Sanctions Eased .. 43 China and Russia .. 45 Russia .. 45 China .. 45 Japan/Korean Peninsula .. 46 North Korea.

9 46 South Asia: India, Pakistan, and Afghanistan .. 47 India .. 47 Pakistan .. 47 Turkey/South Caucasus .. 47 Turkey .. 48 Caucasus: Azerbaijan, Armenia, and Georgia .. 48 Persian Gulf States and Iraq .. 49 Iraq .. 49 Syria and Lebanon .. 50 Africa and Latin America .. 50 World Bank Loans/WTO Accession Talks .. 50 WTO Accession .. 51 Effects of Sanctions and Sanctions Relief .. 54 Effect on Iran s Nuclear Program and Strategic Capabilities .. 54 Effects on Iran s Regional Influence .. 55 Political Effects .. 55 Human Rights-Related Effects .. 56 Economic Effects .. 56 Iran s Economic Coping Strategies .. 59 Effect on Energy Sector Long-Term Development .. 60 Effect on Gasoline Availability and 65 Humanitarian Effects/Passenger Aircraft Safety .. 67 Aircraft Sales .. 67 Post-JCPOA Sanctions Legislation .. 68 Legislation in the 114th Congress .. 68 Iran Sanctions Congressional Research Service Iran Nuclear Agreement Review Act ( 114-17).

10 68 Visa Restriction .. 69 Iran Sanctions Act Extension .. 69 Reporting Requirement on Iran Missile Launches .. 69 The Trump Administration and Iran Sanctions Legislation .. 72 The Countering America s Adversaries through Sanctions Act of 2017 (CAATSA, 115-44) .. 72 Selected Additional Pending Legislation .. 72 Other Possible and International Sanctions .. 73 Tables Table 1. Top Oil Buyers From Iran and Reductions .. 22 Table 2. Summary of Provisions of Resolutions on Iran Nuclear Program (1737, 1747, 1803, 1929, and 2231) .. 38 Table 3. Comparison Between , , and EU and Allied Country Sanctions (Prior to Implementation Day) .. 51 Table 4. Post-1999 Major Investments in Iran s Energy Sector .. 61 Table 5. Firms That Sold Gasoline to Iran .. 66 Table 6. Entities Sanctioned Under Resolutions and Laws and Executive Orders .. 74 Contacts Author Contact Information .. 87 Acknowledgments.