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Sunday, March 14, 2010

Iran Sanctions

Kenneth Katzman
Specialist in Middle Eastern Affairs

Iran is subject to a wide range of U.S. sanctions, restricting trade with, investment, and U.S. foreign aid to Iran, and requiring the United States to vote against international lending to Iran. Several laws and executive orders authorize the imposition of U.S. penalties against foreign companies that do business with Iran, as part of an effort to persuade foreign firms to choose between the Iranian market and the much larger U.S. market. Most notable among these sanctions is a ban, imposed in 1995, on U.S. trade with and investment in Iran. That ban has been modified slightly to allow for some bilateral trade, mainly in luxury and humanitarian-related goods. Foreign subsidiaries of U.S. firms remain generally exempt from the trade ban since they are under the laws of the countries where they are incorporated. Since 1995, several U.S. laws and regulations that seek to pressure Iran's economy, curb Iran's support for militant groups, and curtail supplies to Iran of advanced technology have been enacted. Since 2006, the United Nations Security Council has imposed some sanctions primarily attempting to curtail supply to Iran of weapons-related technology but also sanctioning some Iranian banks.

This paper is not a comprehensive assessment of the effectiveness of U.S. and international sanctions on Iran, in part because of the difficulty in determining how significant a factor sanctions are in Iran's economic and political difficulties, or in Iran's domestic or foreign policy decisions. U.S. officials have identified Iran's energy sector as a key Iranian economic vulnerability because Iran's government revenues are approximately 80% dependent on oil revenues and in need of substantial foreign investment. A U.S. effort to curb international energy investment in Iran began in 1996 with the Iran Sanctions Act (ISA), but no firms have been sanctioned under it. Still, ISA, when coupled with broader factors, may have influenced some international firms' decisions whether to invest in Iran. Iran has been unable to expand oil production beyond 4.1 million barrels per day, although it does now have a gas export sector that it did not have before Iran opened its fields to foreign investment in 1996.

In an attempt to strengthen U.S. leverage with its allies to back such international sanctions, several major bills in the 111th Congress would add U.S. sanctions on Iran. For example, H.R. 2194 (which passed the House on December 15, 2009), H.R. 1985, H.R. 1208, and S. 908 would include as ISA violations selling refined gasoline to Iran; providing shipping insurance or other services to deliver gasoline to Iran; or supplying equipment to or performing the construction of oil refineries in Iran. Several of these bills would also expand the menu of available sanctions against violators. A bill passed by the Senate on January 28, 2010 (S. 2799), contains these sanctions as well as a broad range of other measures against Iran. Observers in Congress say that there will be an attempt to reconcile H.R. 2194 and S. 2799.

While the oil and gas sector has been a focus of U.S. sanctions since the 1990s, the Obama Administration appears to be shifting to targeting Iran's Islamic Revolutionary Guard Corps for sanctions. This shift is intended to weaken the Guard as a proliferation-supporting organization, as well as to expose its role in trying to crush the democratic opposition in Iran. This emphasis on the Guard is carrying over into international debate on further sanctions on Iran for its nuclear program. Supporting the opposition is a growing trend in Congress; numerous bills that would support the opposition, sanction Iranian human rights abusers, and facilitate the democracy movement's access to information are in various stages of consideration.  


For more on Iran, see CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth Katzman. 


Date of Report: March 4, 2010
Number of Pages: 32
Order Number: RS20871
Price: $29.95