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Wednesday, September 22, 2010

Iran Sanctions

Kenneth Katzman
Specialist in Middle Eastern Affairs

There appears to be a growing international consensus to adopt progressively strict economic sanctions against Iran to try to compel it to compromise on its further nuclear development. Measures adopted in 2010 by the United Nations Security Council, the European Union, and several other countries complement the numerous U.S. laws and regulations that have long sought to try to slow Iran’s weapons of mass destruction (WMD) programs and curb its support for militant groups. The U.S. view—increasingly shared by major allies—is that sanctions should target Iran’s energy sector that provides about 80% of government revenues. U.S. efforts to curb international energy investment in Iran’s energy sector began in 1996 with the Iran Sanctions Act (ISA), a U.S. law that authorized the imposition of U.S. penalties against foreign companies that invest in Iran’s energy sector. ISA represented a U.S. effort, which is now broadening, to persuade foreign firms to choose between the Iranian market and the much larger U.S. market.

ISA has been expanded significantly in 2010 to sanction firms that help Iran meet its needs for importation and additional production of gasoline. In the 111
th Congress, the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (H.R. 2194, P.L. 111-195) adds 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. The new law also adds a broad range of other measures further restricting the already limited amount of U.S. trade with Iran and restricting some trade with countries that allow WMDuseful technology to reach Iran. The enactment of this law followed the June 9, 2010, adoption of U.N. Security Council Resolution 1929, which imposes a ban on sales of heavy weapons to Iran and sanctions many additional Iranian entities affiliated with its Revolutionary Guard, but does not mandate sanctions on Iran’s energy or broad financial sector. European Union sanctions, imposed July 27, 2010, align the EU with the U.S. position, to a large extent, by prohibiting EU involvement in Iran’s energy sector and restricting trade financing and banking relationships with Iran, among other measures. National measures announced by Japan and South Korea in early September 2010—both are large buyers of Iranian energy—impose restrictions similar to those of the EU.

The effectiveness of U.S. and international sanctions, by most accounts, has been unclear. There is a consensus that U.S. and U.N. sanctions have not, to date, caused a demonstrable shift in Iran’s commitment to its nuclear program—the key strategic objective of the sanctions. However, a growing number of experts assess that the cumulative effect of U.S., U.N., and other country sanctions is harming Iran’s economy to the point where domestic pressure could build on Iranian leaders to accept a nuclear compromise. There has been a stream of announcements by major international firms during 2010 that they are exiting the Iranian market. Iran’s oil production has fallen slightly to about 3.9 million barrels per day, from over 4.1 million barrels per day several years ago, although Iran now has small natural gas exports that it did not have before Iran opened its fields to foreign investment in 1996. Possibly in an effort to accomplish the separate objective of promoting the cause of the domestic opposition in Iran, the Obama Administration and Congress are increasingly emphasizing measures that would sanction Iranian officials who are human rights abusers, facilitate the democracy movement’s access to information, and express outright U.S. support for the opposition. For a broader analysis of policy on Iran, see CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth Katzman

Date of Report: September 9, 2010
Number of Pages: 58
Order Number: RS20871
Price: $29.95

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