Iran Sanctions. Congressional Research Service (USA)

11 Sep 2019

Iran Sanctions

Congressional Research Service (USA); RS20871

By Kenneth Katzman; Specialist in Middle Eastern Affairs

 

SUMMARY

Successive Administrations have used sanctions extensively against Iran to try to change Iran’s behavior. Sanctions have had a substantial effect on Iran’s economy but little observable effect on Iran’s pursuit of core strategic objectives. Iran has provided support for regional armed factions, developed ballistic missiles, and expanded its conventional weapons development programs during periods when international sanctions were in force, when they were suspended, and after U.S. sanctions were reimposed in late 2018.

During 2012-2015, when the global community was relatively united in pressuring Iran, Iran’s economy shrank as its crude oil exports fell by more than 50%, and Iran had limited ability to utilize its $120 billion in assets held abroad. Iran accepted the 2015 multilateral nuclear accord (Joint Comprehensive Plan of Action, JCPOA), which provided Iran broad relief through the waiving of relevant sanctions, revocation of relevant executive orders (E.O.s), and the lifting of U.N. and EU sanctions. Remaining in place were a general ban on U.S. trade with Iran and U.S. sanctions on Iran’s support for regional governments and armed factions, its human rights abuses, its efforts to acquire missile and advanced conventional weapons capabilities, and the Islamic Revolutionary Guard Corps (IRGC). Under U.N. Security Council Resolution 2231, which enshrined the JCPOA, nonbinding U.N. 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.

JCPOAsanctions relief enabled Iran to increase its oil exports to nearly pre-sanctions levels, regain access to foreign exchange reserve funds and reintegrate into the international financial system, achieve about 7% yearly economic growth (2016-17), attract foreign investment, and buy new passenger aircraft. The sanctions relief contributed to Iranian President Hassan Rouhani’s reelection in the May 19, 2017, vote.

Sanctions are at the core of Trump Administration policy to apply “maximum pressure” on Iran, with the stated purpose of compelling Iran to negotiate a revised JCPOA that takes into account U.S. concerns beyond Iran’s nuclear program. On May 8, 2018, President Trump announced that the United States would no longer participate in the JCPOA and U.S. secondary sanctions werereimposed by November 6, 2018. The reinstatement of U.S. sanctions has driven Iran’s economy into recession as major companies exit the Iranian economy rather than risk being penalized by the United States. Iran’s oil exports have decreased dramatically, particularly after the Administration in May 2019 ended sanctions excerptions for the purchase of Iranian oil. In the summer of 2019, the Administration has sanctioned numerous entities that are supporting Iran’s remaining oil trade.The value of Iran’s currency has declined sharply, and there has been some unrest.

The European Union and other countries are trying to keep the economic benefits of the JCPOA flowing to Iran in order to persuade Iran to remain in the accord. In January 2019,the European countries created a trading mechanism (Special Purpose Vehicle) that presumably can increase trade with Iran by circumventing U.S. secondary sanctions, and the EU countries are contemplating providing Iran with $15 billion in credits, secured by future oil deliveries, to fuel that trading mechanism. On May 3, 2019, the Administration ended some waivers for foreign governments to provide technical assistance to some JCPOA-permitted aspects of Iran’s nuclear program, but it extended other waivers in August 2019. The economic difficulties and other U.S. pressure measures have prompted Iranto cease performing some of the nuclear commitments of the JCPOA, and contributed to Iranian leaders’ apparent decision to attack and interfere with some commercial shipping in the Persian Gulf. But, at least for now, Iran is refusing to begin talks with the United States on a revised JCPOA.

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Read more: https://fas.org/sgp/crs/mideast/RS20871.pdf