Report to Congress on Iran Sanctions

July 16, 2019 7:33 AM

The following is the July 12, 2019 Congressional Research Service report, Iran Sanctions.

From the report

Successive Administrations have used sanctions extensively to try to change Iran’s behavior. Sanctions have had a substantial effect on Iran’s economy but little, if any, observable effect on Iran’s conventional defense programs or regional malign activities. 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.

The 2015 multilateral nuclear accord (Joint Comprehensive Plan of Action, JCPOA) 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.

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 (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. However, the economic rebound did not prevent sporadic unrest from erupting in December 2017. And, 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.

The Trump Administration has made sanctions central to efforts to apply “maximum pressure” on Iran’s regime. On May 8, 2018, President Trump announced that the United States would no longer participate in the JCPOA and U.S. secondary sanctions were reimposed 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 significantly, the value of Iran’s currency has declined sharply, and unrest has continued, although not to the point where the regime is threatened. But, 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. To that end, 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. On November 5, 2018, the Administration granted 180-day “Significant Reduction Exceptions” (SREs) to eight countries—enabling them to import Iranian oil without penalty as long as they continue to reduce purchases of Iranian oil. On April 22, 2019, the Administration announced it would not renew any SREs when they expire on May 2, 2019, instead seeking to drive Iran’s oil exports as close to zero as possible. 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. The economic difficulties and other U.S. pressure measures have prompted Iran to cease performing some of the nuclear commitments of the JCPOA.

Download the document here.

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