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Report to Congress on Iran Sanctions

The following is the Sept. 26, 2018 Congressional Research Service report, Iran Sanctions.

From the report

During 2012-2015, when the global community was relatively united in pressuring Iran, Iran’s economy shrank by 9% per year, crude oil exports fell from about 2.5 million barrels per day (mbd) to about 1.1 mbd, and Iran was unable to repatriate more than $120 billion in Iranian reserves held in banks abroad. The 2015 multilateral nuclear accord (Joint Comprehensive Plan of Action, or JCPOA) provided Iran broad relief from the international and U.S. secondary sanctions (sanctions on foreign firms that do business with Iran) that were driving Iran’s economy into significant recession. Upon the January 16, 2016, implementation of the JCPOA, U.S. Administration waivers of relevant sanctions laws took effect, relevant executive orders (E.O.s) were revoked, and corresponding U.N. and EU sanctions were lifted. Remaining in place were a general ban on U.S. trade with Iran and U.S. secondary sanctions imposed 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). Some additional sanctions on these entities and activities were made mandatory by the Countering America’s Adversaries through Sanctions Act (CAATSA, P.L. 115-44), which also increases sanctions on Russia and North Korea.

Under U.N. Security Council Resolution 2231, 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. However, Iran has continued to support regional armed factions and to develop ballistic missiles despite the U.N. restrictions, and did so even when strict international economic sanctions were in place during 2010-2015.

JCPOA sanctions 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, attract foreign investments in key sectors, and buy new passenger aircraft. The sanctions relief contributed to Iranian President Hassan Rouhani’s reelection in the May 19, 2017, vote. Yet, perceived economic grievances still sparked protests in December 2017-January 2018.

On May 8, 2018, President Trump announced that the United States would no longer participate in the JCPOA and that all U.S. secondary sanctions suspended to implement the JCPOA would be reimposed after a “wind-down period” of 180 days (ending November 4, 2018). Some of the sanctions, but not on energy or banking transactions, went back into effect after a 90-day wind-down period (August 6). The Administration has indicated it will not support requests by foreign governments or companies for exemptions to allow them to avoid penalties for continuing to do business with Iran after that time. U.S. licenses for the sale by Airbus and Boeing of commercial aircraft to Iran Air and other Iranian airlines have been revoked, causing cancellations of sales.

The reimposition of U.S. sanctions has begun to harm Iran’s economy because numerous major companies have announced decisions to exit the Iranian economy rather than risk being penalized by the United States. Iran’s oil exports are decreasing and difficulties paying Iran for oil with hard currency are evident. The value of Iran’s currency has sharply declined and economic-based unrest has flared since early 2018, although not nearly to the point where the regime’s grip on power is threatened. But it remains uncertain whether Iran’s economy will be damaged to the extent it was during 2012-2015, because the European Union and other countries—which opposed the U.S. exit from the JCPOA—are trying to keep the economic benefits of the JCPOA flowing to Iran. If Europe and other major trading partners are unsuccessful in reducing the effects of the reimposed U.S. sanctions, there is substantial potential for Iranian leaders to decide to cease participating in the JCPOA.