Kenneth Katzman
Specialist in Middle Eastern Affairs
The principal objective of international sanctions—to compel Iran to reach an agreement that ensures that its nuclear program can only be used for civilian purposes—has not been achieved to date. However, the progressively strict sanctions on Iran’s key economic sectors have harmed Iran’s economy to the point where key Iran leaders are engaging diplomatically with the international community on the nuclear issue. Among the key causes of Iranian leaders’ growing concern:
- Oil exports provide about 70% of Iran’s government revenues, and Iran’s oil exports have declined to about 1.25 million barrels as of March 2013—a halving from the 2.5 million barrels per day Iran exported during 2011. The causes of the drop have been a European Union embargo on purchases of Iranian crude oil that took full effect on July 1, 2012, and decisions by several other Iranian oil customers to substantially reduce purchases of Iranian oil. To date, 20 of Iran’s oil customers have reduced Iranian oil imports sufficiently to achieve an exemption from U.S. sanctions under the FY2012 National Defense Authorization Act (P.L. 112-81).
- The loss of hard currency revenues from oil, coupled with the cut-off of Iran from the international banking system, has caused a collapse in the value of Iran’s currency, the rial. That collapse prompted street demonstrations in October 2012, and increased inflation to over 50%, according to many experts. There have also been unintended consequences that include a shortage of some advanced Western-made medicines.
- The Iranian government and Iranian citizens, particularly those linked to the government, are finding ways around the sanctions, including creating front companies, using informal banking exchange mechanisms, cornering the market for some imports, investing in hard assets such as real estate and precious metals, and profiting from the drop in the value of Iran’s currency.
Sanctions may be slowing Iran’s nuclear and missile programs by hampering Iran’s ability to obtain some needed technology from foreign sources. However, Department of Defense and other assessments indicate that sanctions have not stopped Iran from developing some new weaponry indigenously. Iran is also judged not complying with U.N. requirements that it halt any weapons shipments outside its borders, particularly by providing arms to the embattled Assad government in Syria. And international sanctions do not appear to have altered Iran’s repression of dissent or its efforts to monitor public use of the Internet.
Despite the imposition of what many now consider to be “crippling” sanctions, some in Congress believe that economic pressure on Iran needs to increase. In the 112th Congress, the Iran Threat Reduction and Syria Human Rights Act of 2012 (P.L. 112-158) made sanctionable the shipping of Iranian crude oil, and it enhanced human rights-related provisions of previous Iran-related laws. A provision of the FY2013 National Defense Authorization Act (P.L. 112-239) sanctions transactions with several key sectors of Iran’s economic infrastructure such as energy and shipbuilding, and punishes sales of many material inputs for manufacturing. A bill in the 113th Congress, H.R. 850, would authorize, but not mandate, U.S. sanctions against nearly all trade with Iran. 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: March 21, 2013
Number of Pages: 85
Order Number: RS20871
Price: $29.95
To Order:
For email and phone orders, provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.
Posts
