Iran Sanctions
Kenneth Katzman
Specialist in Middle Eastern Affairs
May 426, 2010
Congressional Research Service
7-5700
www.crs.gov
RS20871
CRS Report for Congress
Prepared for Members and Committees of Congress
Iran Sanctions
Summary
Numerous U.S. laws and regulations have been adopted or issued to try to slow Iran’s weapons of
mass mass
destruction programs and curb its support for militant groups. The U.S. belief is that sanctions canU.S. sanctions are intended to
reduce the revenue available to Iran’s government and to generate to support these activities and generate
domestic pressure within Iran
to adopt policies more acceptable to the international community. International
Some United Nations sanctions have
been enacted since 2006, primarily to try to curtail supply to Iran of weapons-related technology,
rather than inflict damage on Iran’s civilian economy. The imposed since 2006, with many of those same
objectives, although more narrowly targeted to avoid harming the civilian population of Iran. The
wide range of U.S. sanctions restrict
U.S. trade with and investment in Iran, prohibit U.S. foreign
aid to Iran, and require 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. Foreign subsidiaries of U.S. firms remain
generally exempt from the trade ban since they
operate under the laws of the countries where
these subsidiaries are incorporated.
Successive U.S. Administrations have identified sanctioning Iran’s energy sector as a key Iranian economic
vulnerability because 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’s
energy sector 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 to refrain from investing in energy projects in Iran.
Possibly as a result, 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 effort
to exploit Iran’s dependence on imports of
gasoline, in the 111th Congress, H.R. 2194 (which passed the House on December 15, 2009),
awaits conference action expected in late June 2010), would add 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. AThe Senate version was passed on January 28, 2010 (S. 2799),
which contains these sanctions as well as
version would also add a broad range of other measures further restricting the
already limited
amount of U.S. trade with Iran. It was passed as an amendment to H.R. 2194 on
March 11, 2010, and conference action on the differing versions began in late April.
The effectiveness of U.S. and international sanctions on Iran, by most accounts, is unclear. Some
Iranian economic sectors have clearly been harmed by sanctions, but any such effects have not, to
date, caused a demonstrable shift in Iran’s commitment to its nuclear program. However, the
The sanctions
have also fostered a growing perception that Iran is an international outcast has caused several major international
firms to announce, in late 2009 and early 2010, an end to , demonstrated by the
announcement over the past two years by several major international firms that they are ending
their business pursuits in Iran. To try to
further Iran’s isolation by highlighting its authoritarian political system, the Obama
Administration appears to be shifting—in U.S. regulations and in discussions with U.S. allies on
a possible new U.N. Security Council Resolution—to targeting Iran’s Islamic Revolutionary
Guard Corps for sanctions. This shift is intended to weaken the Guard as a proliferationsupporting organization, as well as to expose its role in trying to crush the democratic opposition
in Iran. A parallel trend in Congress, reflected in several bills that have passed or are in various
stages of consideration, further Iran’s isolation and strengthen the domestic
opposition, the Obama Administration and Congress appear to be increasingly emphasizing
further measures that would sanction Iranian officials who are human rights abusers, facilitate
the the
democracy movement’s access to information, and express outright U.S. support for the
overthrow of the regimeopposition. For a broader analysis of policy on Iran, see CRS Report RL32048,
Iran: U.S.
Concerns and Policy Responses, by Kenneth Katzman.
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Contents
Overview ....................................................................................................................................1
The Iran Sanctions Act (ISA) ......................................................................................................1
Legislative History and Provisions ........................................................................................2
Key Provisions/”Triggers” and Available Sanctions .........................................................2
Available Sanctions Under ISA .......................................................................................3
Waiver and Termination Authority...................................................................................3
ISA Sunset ......................................................................................................................4
Implementation, Effectiveness, and Ongoing Challenges.......................................................4
Application to Energy Routes..........................................................................................4
Application to Energy Purchases From or Sales to Iran....................................................6
Application to Iranian Firms or the Revolutionary Guard ................................................6
Effectiveness of ISA .......................................................................................................6
Efforts in the 111th Congress to Expand ISA Application to Gasoline Production and
Sales—H.R. 2194 ..............................................................................................................78
Legislation in the 111th Congress .....................................................................................9
Administration Review of Potential ISA Violations ....................................................... 1415
Ban on U.S. Trade and Investment With Iran............................................................................. 2021
Application to Foreign Subsidiaries of U.S. Firms ............................................................... 2122
Treasury Department “Targeted Financial Measures” ................................................................ 2324
Terrorism List Designation-Related Sanctions ........................................................................... 2425
Executive Order 13224 ....................................................................................................... 2526
Proliferation-Related Sanctions ................................................................................................. 2526
Iran-Iraq Arms Nonproliferation Act ................................................................................... 2627
Iran-Syria-North Korea Nonproliferation Act ...................................................................... 2627
Executive Order 13382 ....................................................................................................... 2627
Foreign Aid Restrictions for Suppliers of Iran...................................................................... 2627
Implementation ................................................................................................................... 2627
Relations to International Sanctions........................................................................................... 2728
European/Japanese/Other Foreign Country Policy on Sanctions and Trade
Agreements................................................................................................................ 2829
World Bank Loans ........................................................................................................ 2930
Efforts to Promote Divestment .................................................................................................. 2931
Sanctions and Other Proposals to Support Iran’s Opposition...................................................... 3031
Expanding Internet and Communications Freedoms ............................................................ 3031
Measures to Sanction Human Rights Abuses and Promote the Opposition ........................... 3132
Blocked Iranian Property and Assets ......................................................................................... 3132
Tables
Table 1. Comparison of House and Senate Versions of H.R. 2194.............................................. 10
Table 2. Post-1999 Major Investments/Major Development Projects in Iran’s Energy
Sector .................................................................................................................................... 1617
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Table 3. Summary of Provisions of U.N. Resolutions on Iran Nuclear Program (1737,
1747, and 1803) ..................................................................................................................... 28
Table 4. Entities Sanctioned Under U.N. Resolutions and U.S. Laws and Executive
Orders.................................................................................................................................... 3334
Contacts
Author Contact Information ...................................................................................................... 3840
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Overview
The Obama Administration’s overall policy approach toward Iran has contrasted with the Bush
Administration’s by actively engaging Iran in negotiations on the nuclear issue, rather than
focusing only on increasing sanctions on Iran. That approach was not initially altered because of
the Iranian dispute over its June 12, 2009, elections. However, with subsequent negotiations
yielding no firm Iranian agreement to compromise, the Administration has turned its focus to
imposing additional “biting” U.N. sanctions against Iran.
While international sanctions on Iran are a relatively recent (post-2006) development, Iran has
long been subject to one of the most stringent U.S. sanctions regime of any country in the world.
Many of these sanctions overlap each other as well as the several U.N. sanctions imposed since
2006 because of Iran’s nuclear program development. While seeking to increase international
sanctions against Iran, the Administration has begun to also alter some U.S. regulations to help
Iran’s domestic opposition and undermine the pillars of Iran’s regime. In February 2010, the
Administration sanctioned additional firms linked to Iran’s Revolutionary Guard. The
Administration also has modified U.S. regulations to allow U.S. Internet software to reach Iran—
a move that appears to support a congressional trend to try to help the domestic opposition in
Iran. President Obama renewed for another year the U.S. trade and investment ban on Iran
(Executive Order 12959) in March 2010.
A particular focus of Iran-related legislation in the 111th Congress has been to expand the
provisions of the Iran Sanctions Act (ISA) to apply to sales to Iran of gasoline and related
equipment and services. ISA, in its current form, has caused differences of opinion between the
United States and its European allies ever since its adoption in 1996 because it mandates U.S.
imposition of sanctions on foreign firms. The Administration has sought to ensure that the
congressional sanctions initiative does not hamper cooperation with key international partners
whose support is needed to adopt stricter international sanctions. Still, the growing sentiment in
the United States and Europe for additional international and national sanctions against Iran has
caused some major international firms—some foreign subsidiaries of U.S. firms and some
completely international firms—to pull out of the Iranian market in order not to jeopardize their
businesses in these larger markets.
The Iran Sanctions Act (ISA)
The Iran Sanctions Act (ISA) is one among many U.S. sanctions in place against Iran. It has
attracted substantial attention because it authorizes penalties against foreign firms, many of which
are incorporated in countries that are allies of the United States. In the past, U.S. allies have
objected to banning trade with Iran and to the U.S. imposition of sanctions, such as ISA, that
apply to non-U.S. companies. This opposition has been despite the fact that most European
countries share the U.S. goal of ensuring that Iran does not become a nuclear power. Congress
and the Clinton Administration saw ISA as a potential mechanism to compel U.S. allies to join the
United States in enacting trade sanctions against Iran. American firms are restricted from trading
with or investing in Iran under separate U.S. executive measures, as discussed below. A bill now
in conference in the 111th Congress proposes amending the act to curtail additional types of
activity, such as selling gasoline and gasoline shipping services to Iran.
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Legislative History and Provisions
Originally called the Iran and Libya Sanctions Act (ILSA), ISA was enacted to try to deny Iran
the resources to further its nuclear program and to support terrorist organizations such as
Hizbollah, Hamas, and Palestine Islamic Jihad. Iran’s petroleum sector generates about 20% of
Iran’s GDP, but its onshore oil fields and oil industry infrastructure are aging and need substantial
investment. Its large natural gas resources (940 trillion cubic feet, exceeded only by Russia) were
undeveloped when ISA was first enacted. Iran has 136.3 billion barrels of proven oil reserves, the
third-largest after Saudi Arabia and Canada.
The opportunity to try to harm Iran’s energy sector came in November 1995, when Iran opened
its energy sector to foreign investment. To accommodate its ideology to retain control of its
national resources, Iran used a “buy-back” investment program in which foreign firms recoup
their investments from the proceeds of oil and gas discoveries but do not receive equity. With
input from the Administration, on September 8, 1995, Senator Alfonse D’Amato introduced the
“Iran Foreign Oil Sanctions Act” to sanction foreign firms’ exports to Iran of energy technology.
A revised version instead sanctioning investment in Iran’s energy sector passed the Senate on
December 18, 1995 (voice vote). On December 20, 1995, the Senate passed a version applying
the provisions to Libya, which was refusing to yield for trial the two intelligence agents suspected
in the December 21, 1988, bombing of Pan Am 103. The House passed H.R. 3107, on June 19,
1996 (415-0), and then concurred on a Senate version adopted on July 16, 1996 (unanimous
consent). The Iran and Libya Sanctions Act was signed on August 5, 1996 (P.L. 104-172).
Key Provisions/”Triggers” and Available Sanctions
ISA consists of a number of “triggers”—transactions with Iran that would be considered
violations of ISA and could cause a firm or entity to be sanctioned under ISA’s provisions. ISA
provides a number of different sanctions that the President could impose that would harm a
foreign firm’s business opportunities in the United States. ISA does not, and probably could not
practically, compel any foreign government to take action against one of its firms.
ISA requires the President to sanction companies (entities, persons) that make an “investment” of
more than $20 million in one year in Iran’s energy sector,1 or that sell to Iran weapons of mass
destruction (WMD) technology or “destabilizing numbers and types” of advanced conventional
weapons.2 ISA is primarily targeting foreign firms, because American firms are already prohibited
from investing in Iran under the 1995 trade and investment ban discussed earlier.
There is no time frame for the Administration to determine that a firm has violated ISA’s
provisions. P.L. 109-293, the “Iran Freedom Support Act” (signed September 30, 2006) amended
1
The definition of “investment” in ISA (Section 14 (9)) includes not only equity and royalty arrangements (including
additions to existing investment, as added by P.L. 107-24) but any contract that includes “responsibility for the
development of petroleum resources” of Iran. These definitions are interpreted by the State Department to include
pipelines to or through Iran, as well as contracts to lead the construction, upgrading, or expansions of such energy
related projects as refineries. However, the definition does not include sales of technology, goods, or services for such
projects, or financing of such purchases. For Libya, the threshold was $40 million, and sanctionable activity included
export to Libya of technology banned by Pan Am 103-related Security Council Resolutions 748 (March 31, 1992) and
883 (November 11, 1993). Under Section 4(d) of the Act, for Iran, the threshold dropped to $20 million, from $40
million, one year after enactment, when U.S. allies did not join a multilateral sanctions regime against Iran.
2
This latter “trigger” was added by P.L. 109-293.
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ISA by calling for, but not requiring, a 180-day time limit for a violation determination (there is
no time limit in the original law). Other ISA amendments under that law included recommending
against U.S. nuclear agreements with countries that supply nuclear technology to Iran and
expanding provisions of the USA Patriot Act (P.L. 107-56) to curb money-laundering for use to
further WMD programs.
Earlier versions of legislation (H.R. 282, S. 333) that ultimately became P.L. 109-293 contained
ISA amendment proposals that were viewed by the Bush Administration as too inflexible and
restrictive, and potentially harmful to U.S. relations with its allies. These provisions included
setting a mandatory 90-day time limit for the Administration to determine whether an investment
is a violation; cutting U.S. foreign assistance to countries whose companies violate ISA; and
applying the U.S.-Iran trade ban to foreign subsidiaries of U.S. firms.
Available Sanctions Under ISA
Once a firm is determined to be a violator, ISA requires the imposition of two of a menu of six
sanctions on that firm. The available sanctions the President can select from (Section 6) include
1. denial of Export-Import Bank loans, credits, or credit guarantees for U.S. exports
to the sanctioned entity
2. denial of licenses for the U.S. export of military or militarily useful technology
3. denial of U.S. bank loans exceeding $10 million in one year
4. if the entity is a financial institution, a prohibition on its service as a primary
dealer in U.S. government bonds; and/or a prohibition on its serving as a
repository for U.S. government funds (each counts as one sanction)
5. prohibition on U.S. government procurement from the entity; and
6. restriction on imports from the violating entity, in accordance with the
International Emergency Economic Powers Act (IEEPA, 50 U.S.C. 1701).
Waiver and Termination Authority
The President has the authority under ISA to waive sanctions if he certifies that doing so is
important to the U.S. national interest (Section 9(c)). There was also waiver authority if the parent
country of the violating firm joined a sanctions regime against Iran, but this waiver provision was
changed by P.L. 109-293 to allow for a waiver determination based on U.S. vital national security
interests. ISA application to Iran would terminate if Iran is determined by the Administration to
have ceased its efforts to acquire WMD and is removed from the U.S. list of state sponsors of
terrorism, and no longer “poses a significant threat” to U.S. national security and U.S. allies.3
In the 110th Congress, several bills contained provisions that would have further amended ISA,
but they were not adopted. H.R. 1400, which passed the House on September 25, 2007 (397-16),
The existing version of ISA (Section5(f)) also contains several exceptions such that the President
is not required to impose sanctions that prevent procurement of defense articles and services
under existing contracts, in cases where a firm is the sole source supplier of a particular defense
3
This latter termination requirement added by P.L. 109-293. This law also removed Libya from
the Act, although
application to Libya effectively terminated when the President determined on
April 23, 2004, that Libya had fulfilled
the requirements of all U.N. resolutions on Pan Am 103.
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article or service. The President also is not required to prevent procurement or importation of
essential spare parts or component parts.
In the 110th Congress, several bills contained provisions that would have further amended ISA,
but they were not adopted. H.R. 1400, which passed the House on September 25, 2007 (397-16),
would have removed the Administration’s ability to waive ISA sanctions under Section 9(c),
national interest grounds, but it would not have imposed on the Administration a time limit to
determine whether a project is sanctionable.
ISA Sunset
ISA was to sunset on August 5, 2001, in a climate of lessening tensions with Iran (and Libya).
During 1999 and 2000, the Clinton Administration had eased the trade ban on Iran somewhat to
try to engage the relatively moderate Iranian President Mohammad Khatemi. However, some
maintained that Iran would view its expiration as a concession, and renewal legislation was
enacted (P.L. 107-24, August 3, 2001). This law required an Administration report on ISA’s
effectiveness within 24 to 30 months of enactment; that report was submitted to Congress in
January 2004 and did not recommend that ISA be repealed. Currently, as discussed below, ISA is
scheduled to sunset on December 31, 2011 (as provided by P.L. 109-293).
Implementation, Effectiveness, and Ongoing Challenges
Traditionally reticent to impose economic sanctions, the European Union opposed ISA as an
extraterritorial application of U.S. law and filed a formal complaint before the World Trade
Organization (WTO). In April 1997, the United States and the EU agreed to avoid a trade
confrontation over ISA and a separate Cuba sanctions law (P.L. 104-114). The agreement
involved the dropping of the WTO complaint and the May 18, 1998, decision by the Clinton
Administration to waive ISA sanctions (“national interest”—Section 9(c) waiver) on the first
project determined to be in violation. That project was a $2 billion4 contract, signed in September
1997, for Total SA of France and its partners, Gazprom of Russia and Petronas of Malaysia to
develop phases 2 and 3 of the 25-phase South Pars gas field. The EU pledged to increase
cooperation with the United States on non-proliferation and counter-terrorism, and the
Administration indicated future investments by EU firms in Iran would not be sanctioned.5
Since the Total/Petronas/Gazprom project in 1998, no projects have been determined as violations
of ISA. As shown in Table 2 below, several foreign investment agreements have been agreed with
Iran since the 1998 Total consortium waiver, although some have been stalled, not reached final
agreement, or may not have resulted in actual production.
Application to Energy Routes
As noted in the footnote earlier, ISA’s definition of sanctionable “investment”—which specifies
investment in Iran’s petroleum resources, defined as petroleum and natural gas—has been
interpreted by successive administrations to include construction of energy routes to or through
Iran. The Clinton and Bush Administrations used the threat of ISA sanctions to deter oil routes
involving Iran and thereby successfully promoted an alternate route from Azerbaijan (Baku) to
Turkey (Ceyhan). The route became operational in 2005.
4
Dollar figures for investments in Iran represent public estimates of the amounts investing firms are expected to spend
over the life of a project, which might in some cases be several decades.
5
Text of announcement of waiver decision by then Secretary of State Madeleine Albright, containing expectation of
similar waivers in the future. http://www.parstimes.com/law/albright_southpars.html
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interpreted by successive administrations to include construction of energy routes to or through
Iran. The Clinton and Bush Administrations used the threat of ISA sanctions to deter oil routes
involving Iran and thereby successfully promoted an alternate route from Azerbaijan (Baku) to
Turkey (Ceyhan). The route became operational in 2005.
No determination of sanctionability was issued on a 1997 project viewed as necessary to U.S. ally
Turkey—an Iran-Turkey natural gas pipeline in which each constructed the pipeline on its side of
their border. State Department testimony stated that Turkey would be importing gas originating in
Turkmenistan, not Iran, under a swap arrangement. However, direct Iranian gas exports to Turkey
began in 2001, and, as shown in Table 2, in July 2007, a preliminary agreement was reached to
build a second Iran-Turkey pipeline, through which Iranian gas would also flow to Europe. That
agreement was not finalized during Iranian President Mahmoud Ahmadinejad’s visit to Turkey in
August 2008 because of Turkish commercial concerns but the deal remains under active
discussion. On February 23, 2009, Iranian newspapers said Iran had formed a joint venture with a
Turkish firm to export 35 billion cubic meters of gas per year to Europe; 50% of the venture
would be owned by the National Iranian Gas Export Company (NIGEC).
Iran and Kuwait reportedly are holding talks on the construction of a 350 mile pipeline that would
bring Iranian gas to Kuwait. The two sides have apparently reached agreement on volumes (8.5
million cubic meters of gas would go to Kuwait each day) but not on price.6 In May 2009, Iran
and Armenia inaugurated a natural gas pipeline between the two, built by Gazprom of Russia.
Iran-India Pipeline
Another pending pipeline project would run from Iran to India, through Pakistan (IPI pipeline).
The three governments have stated they are committed to the $7 billion project, which would take
about three years to complete, but India did not sign a deal “finalization” that was signed by Iran
and Pakistan on November 11, 2007. India had re-entered discussions on the project following
Iranian President Mahmoud Ahmadinejad’s visit to India in April 2008, which also resulted in
Indian firms’ winning preliminary Iranian approval to take equity stakes in the Azadegan oil field
project and South Pars gas field Phase 12. India did not attend further talks on the project in
September 2008, raising continued concerns on security of the pipeline, the location at which the
gas would be officially transferred to India, pricing of the gas, tariffs, and the source in Iran of the
gas to be sold. Perhaps to address some of those concerns, but also perhaps to move forward
whether or not India joins the project, in January 2009 Iran and Pakistan amended the proposed
pricing formula for the exported gas to reflect new energy market conditions. However, there has
been no evident movement on the project since that time. During the Bush Administration,
Secretary of State Rice on several occasions “expressed U.S. concern” about the pipeline deal or
called it “unacceptable,” but no U.S. official in either the Bush or the Obama Administration has
stated outright that it would be sanctioned.
European Gas Pipeline Routes
Iran also is attempting to position itself as a gas exporter to Europe. A potential project involving
Iran is the Nabucco pipeline project, which would transport Iranian gas to western Europe. Iran,
6
http://www.kuwaittimes.net/read_news.php?newsid=NDQ0OTY1NTU4;
http://english.farsnews.com/newstext.php?nn=8901181055
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Turkey, and Austria reportedly have negotiated on that project. The Bush Administration did not
support Iran’s participation in the project, and the Obama Administration apparently takes the
same view, even though the project might make Europe less dependent on Russian gas supplies.
Iran’s Energy Minister Gholam-Hossein Nozari said on April 2, 2009, that Iran is considering
6
http://www.kuwaittimes.net/read_news.php?newsid=NDQ0OTY1NTU4;
http://english.farsnews.com/newstext.php?nn=8901181055
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negotiating a gas export route—the “Persian Pipeline”—that would send gas to Europe via Iraq,
Syria, and the Mediterranean Sea.
Application to Energy Purchases From or Sales to Iran
Major purchases of oil or natural gas from Iran would not appear to constitute violations of ISA,
as it exists currently, because ISA sanctions investment in Iran, not trade with Iran (even in energy
products). Nor do sales to Iran of equipment or services for Iran to build its own energy projects
appear to meet the definition of investment under the Act. Some of the deals listed in the chart
later in this report involve combinations of investment and purchase.
In March 2008, Switzerland’s EGL utility agreed to buy 194 trillion cubic feet per year of Iranian
gas for 25 years, through a Trans-Adriatic Pipeline (TAP) to be built by 2010, a deal valued at
over $15 billion. The United States criticized the deal as sending the “wrong message” to Iran.
However, as testified by Under Secretary of State Burns on July 9, 2008, the deal appears to
involve only purchase of Iranian gas, not exploration, and would likely not be considered an ISA
violation. In August 2008, Germany’s Steiner-Prematechnik-Gastec Co. agreed to apply its
method of turning gas into liquid fuel at three Iranian plants.
Application to Iranian Firms or the Revolutionary Guard
As noted above, any firm that meets the definition of investing in Iran’s energy sector under ISA
could be determined to violate ISA. Although ISA is widely understood to apply to firms around
the world that reach an investment agreement with Iran, the provisions could also be applied to
Iranian firms and entities subordinate to the National Iranian Oil Company (NIOC), which is
supervised by the Oil Ministry. However, such entities do not do business in the United States and
would not likely be harmed by any of the penalties that would be imposed under ISA, if a
violation were determined. Some of the major components of NIOC are:
•
The Iranian Offshore Oil Company;
•
The National Iranian Gas Export Co.;
•
National Iranian Tanker Company; and
•
Petroleum Engineering and Development Co.
The actual construction and work is done through a series of contractors. Some of them, such as
Khatam ol-Anbia and Oriental Kish, have been identified by the U.S. government as controlled
by Iran’s Revolutionary Guard. The relationship of other Iranian contractors to the Guard, if any,
is unclear. Some of the Iranian contractor firms include: Pasargad Oil Co, Zagros Petrochem. Co,
Sazeh Consultants, Qeshm Energy, Sadid Industrial Group, and others.
Effectiveness of ISA
U.S. administrations have maintained that, even without actually imposing ISA sanctions, the
threat of imposing sanctions—coupled with Iran’s reputedly difficult negotiating behavior, and
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compounded by Iran’s growing isolation because of its nuclear program—have combined to slow
the development of Iran’s energy sector. Some Members of Congress believe that ISA would have
been even more effective if successive administrations had imposed sanctions, and have
expressed frustration that the executive branch has not imposed ISA sanctions.
Some observers maintain that, over and above the threat of ISA sanctions and the international
pressure on Iran, it is Iran’s negotiating behavior that has slowed international investment in
Iran’s energy sector. Some international executives that have negotiated with Iran say Iran insists
on deals that leave little profit, and that Iran frequently seeks to renegotiate provisions of a
contract after it is ratified.
Some key energy investors in Iran, such as major European firms Repsol, Royal Dutch Shell, and
Total, have announced pullouts from some of their Iran projects, declined to make further
investments, or resold their investments to other companies. On July 12, 2008, Total and
Petronas, the original South Pars investors, pulled out of a deal to develop a liquified natural gas
(LNG) export capability at Phase 11 of South Pars, saying that investing in Iran at a time of
growing international pressure over its nuclear program is “too risky.” Also in 2008, Japan
significantly reduced its participation in the development of Iran’s large Azadegan field. Some of
the void has been filled, at least partly, by Asian firms such as those of China and Malaysia.
However, even if these agreements are implemented, these companies are perceived as not being
as technically capable as those that have withdrawn from Iran.
These trends have constrained Iran’s energy sector significantly; Iran’s deputy Oil Minister said
in November 2008 that Iran needs about $145 billion in new investment over the next 10 years in
order to build a thriving energy sector. As a result of sanctions and the overall climate of
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international isolation of Iran, its oil production has not grown—it remains at about 4.1 million
barrels per day (mbd)—although it has not fallen either.
Some analyses, including by the National Academy of Sciences, say that, partly because of
growing domestic consumption, Iranian oil exports are declining to the point where Iran might
have negligible exports of oil by 2015.7 Others maintain that Iran’s gas sector can more than
compensate for declining oil exports, although it needs gas to re-inject into its oil fields and
remains a relatively minor gas exporter. It exports about 3.6 trillion cubic feet of gas, primarily to
Turkey. A GAO study of December 2007, (GAO-08-58), contains a chart of post-2003
investments in Iran’s energy sector, totaling over $20 billion in investment, although the chart
includes petrochemical and refinery projects, as well as projects that do not exceed the $20
million in one year threshold for ISA sanctionability.
In the 110th Congress, several bills—including S. 970, S. 3227, S. 3445, H.R. 957 (passed the
House on July 31, 2007), and H.R. 7112 (which passed the House on September 26, 2008)—
would have (1) expanded the definition of sanctionable entities to official credit guarantee
agencies, such as France’s COFACE and Germany’s Hermes, and to financial institutions and
insurers generally; and (2) made investment to develop a liquified natural gas (LNG) sector in
Iran a sanctionable violation. Iran has no LNG export terminals, in part because the technology
for such terminals is patented by U.S. firms and unavailable for sale to Iran.
7
Stern, Roger. “The Iranian Petroleum Crisis and United States National Security,” Proceedings of the National
Academy of Sciences of the United States of America. December 26, 2006.
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Efforts in the 111th Congress to Expand ISA Application to Gasoline
Production and Sales—H.R. 2194
ISA, as currently constituted, has limited evident applications to Iran’s gasoline dependency. Iran
is dependent on gasoline imports to supply about 30%-40% of its gasoline needs. To try to reduce
that dependence, Iran has plans to build or expand, possibly with foreign investment, at least eight
refineries. Selling Iran equipment with which it can build or expand its refineries using its own
construction capabilities would not appear to constitute “investment” under the current definition
of ISA. However, taking responsibility for constructing oil refineries or petrochemical plants in
Iran could constitute sanctionable projects under ISA because ISA’s definition of investment
includes “responsibility for the development of petroleum resources located in Iran.” (Table 2
provides some information on openly announced contracts to upgrade or refurbish Iranian oil
refineries.)
It is not clear whether or not Iranian investments in energy projects in other countries, such as
Iranian investment to help build five oil refineries in Asia (China, Indonesia, Malaysia, and
Singapore) and in Syria, reported in June 2007, would constitute “investment” under ISA.
Gasoline Sales
As noted, selling or shipping gasoline to Iran does not appear to meet the definition of
sanctionable activity under ISA. There appears to be a relatively limited group of major gasoline
suppliers to Iran. In March 2010, several of them announced that they have stopped or would stop
7
Stern, Roger. “The Iranian Petroleum Crisis and United States National Security,” Proceedings of the National
Academy of Sciences of the United States of America. December 26, 2006.
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Iran Sanctions
supplying gasoline to Iran.8 As noted in a New York Times report of March 7, 2010,9 some firms
that have supplied Iran have received U.S. credit guarantees or contracts. The main suppliers to
Iran and the status of their sales to Iran are
•
Vitol of Switzerland (which said in March 2010 it has stopped sales of gasoline
to Iran);10
•
Trafigura of Switzerland (which also says it has stopped sales);
•
Glencore of Switzerland;
•
Total of France;
•
Reliance Industries of India (reportedly has promised to end sales to Iran);11
•
Petronas of Malaysia (said in mid-April 2010 it had stopped sales to Iran;12
•
Lukoil of Russia (reportedly said in April 2010 that it will end sales to Iran);13
8
Information in this section derived from, Blas, Javier. “Traders Cut Iran Petrol Line.” Financial Times, March 8,
2010.
9
Becker, Jo and Ron Nixon. “U.S. Enriches Companies Defying Its Policy on Iran.” New York Times, March 7, 2010.
10
http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105
11
http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105
12
http://www.ft.com/cms/s/0/009370f0-486e-11df-9a5d-00144feab49a.html
13
http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105
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Iran Sanctions
•
Royal Dutch Shell of the Netherlands (which says it stopped sales to Iran in
2009);14
•
British Petroleum of United Kingdom (told CRS in e-mail conversation in late
2009 that it is not selling gasoline to Iran);
•
ZhenHua Oil of China (China’s firms reportedly supply one-third of Iran’s
gasoline imports);15
•
Petroleos de Venezuela (reportedly reached a September 2009 deal to supply Iran
with gasoline);
•
Kuwait’s Independent Petroleum Group supplies Iran;16 and
•
Munich Re, Allianz, and Hannover Re reportedly have exited the market for
insuring gasoline shipments for Iran.17
The cessation of supplies to Iran by the large suppliers listed above, particularly Vitol, Glencore,
and Trafigura, could affect Iran because they jointly supplied half of Iran’s imports of about
130,000 barrels per day worth of gasoline. Some accounts say refineries in Bahrain and UAE may
have picked up some of the shortfall, in addition to the other suppliers listed above.
8
Information in this section derived from, Blas, Javier. “Traders Cut Iran Petrol Line.” Financial Times, March 8,
2010.
9
Becker, Jo and Ron Nixon. “U.S. Enriches Companies Defying Its Policy on Iran.” New York Times, March 7, 2010.
10
http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105
11
http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105
12
http://www.ft.com/cms/s/0/009370f0-486e-11df-9a5d-00144feab49a.html
13
http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105
14
http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105
15
Blas, Javier, Carola Hoyas, and Daniel Dombey. “Chinese Companies Supply Iran With Petrol.” Financial Times,
September 23, 2009.
16
http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105
17
http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105
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Iran Sanctions
Legislation in the 111th Congress
A number of ideas to expand ISA’s application to gasoline sales to Iran have been advanced,
although some believe that a sanction such as this would only be effective if it applied to all
countries under a U.N. Security Council resolution rather than a unilateral U.S. sanction. In the
110th Congress, H.R. 2880 would have made sales to Iran of refined petroleum resources a
violation of ISA.
In the 111th Congress, a few initiatives have been adopted. Using U.S. funds to fill the Strategic
Petroleum Reserve with products from firms that sell over $1 million worth of gasoline to Iran is
prevented by the FY2010 Energy and Water Appropriation (H.R. 3183, P.L. 111-85, signed
October 28, 2009). A provision of the FY2010 consolidated appropriation (P.L. 111-117) would
deny Eximbank credits to any firm that sells gasoline to Iran, provides equipment to Iran that it
can use to expand its oil refinery capabilities, or performs gasoline production projects in Iran.
In the past, some threats to cut off U.S. credits have deterred sales to Iran. The Reliance Industries
Ltd. of India decision to cease new sales of refined gasoline to Iran (as of December 31, 2008),
mentioned above, came after several Members of Congress urged the Exim Bank of the United
States to suspend assistance to Reliance, on the grounds that it was assisting Iran’s economy with
the gas sales. The Exim Bank, in August 2008, had extended a total of $900 million in financing
guarantees to Reliance to help it expand.
14
http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105
Blas, Javier, Carola Hoyas, and Daniel Dombey. “Chinese Companies Supply Iran With Petrol.” Financial Times,
September 23, 2009.
16
http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105
17
http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105
15
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Iran Sanctions
Iran Refined Petroleum Sanctions Act (IRPSA) and Comprehensive Iran
Sanctions, Accountability, and Divestment Act
In April 2009, several bills were introduced—H.R. 2194, S. 908, H.R. 1208, and H.R. 1985—that
would amend ISA to make sanctionable efforts by foreign firms to supply refined gasoline to Iran
or to supply equipment to Iran that could be used by Iran to expand or construction oil refineries.
H.R. 2194 and S. 908 were both titled the Iran Refined Petroleum Sanctions Act of 2009
(IRPSA). H.R. 2194 passed the House on December 15, 2009, by a vote of 412-12, with four
others voting “present” and six others not voting. The opposing and “present” votes included
several Members who have opposed several post-September 11 U.S. military operations in the
Middle East/South Asia region.
A bill in the Senate, the “Dodd-Shelby Comprehensive Iran Sanctions, Accountability, and
Divestment Act,” (S. 2799), was reported to the full Senate by the Senate Banking Committee on
November 19, 2009, and passed the Senate, by voice vote, on January 28, 2010. It was adopted
by the Senate under unanimous consent as a substitute amendment to H.R. 2194 on March 11,
2010, setting up conference action on the two versions of H.R. 2194. The Senate bill contains
very similar provisions of the Refined Petroleum Sanctions Act, but, as discussed in Table 1
below, adds provisions affecting U.S.-Iran trade and other issues. The House bill is considered
more restrictive of presidential waiver authorities as pertaining to sanctioning firms that sell
gasoline or related equipment and services to Iran. Conferees have been named in both chambers,
and a public meeting of the conference, chaired by Representative Berman on the House side, and
Senator Dodd on the Senate side, was held on April 28, 2010.
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Iran Sanctions
Table 1. Comparison of House and Senate Versions of H.R. 2194
House Version
Senate Version
General Goals: Seeks to expand the authorities of the
Iran Sanctions Act (ISA, P.L. 104-172) to deter sales by
foreign companies of gasoline to Iran.
Contains provisions sanctioning sales of gasoline to Iran
similar to H.R. 2194, but also would affect several other
U.S. sanctions against Iran already in place, including
revoking exemptions to the U.S. ban on trade with Iran,
and extending the U.S. trade ban with Iran to foreign
subsidiaries of U.S. companies.
Statement of U.S. Policy on Sanctioning Iran’s
Central Bank:
Section 108 urges the President to use existing U.S.
authorities to impose U.S. sanctions against the Iranian
Central Bank or other Iranian banks engaged in
proliferation or support of terrorist groups.
Section2(c) and 3(a) state that it shall be U.S. policy to
fully enforce ISA to encourage foreign governments:
- to cease investing in Iran’s energy sector.
- to sanction Iran’s Central Bank and other financial
institutions that do business with the Iranian Central
Bank (or any Iranian bank involved in proliferation or
support of terrorist activities).
Extension of ISA to Sales of Gasoline:
Section 3(a) would amend ISA to make sanctionable:
- the sale to Iran of equipment or services (of over
$200,000 in value, or $500,000 combined sales in one
year) that would enable Iran to maintain or expand its
domestic production of refined petroleum.
Congressional Research Service
Such authorities could include Section 311 of the USA
Patriot Act (31 U.S.C. 5318A), which authorizes
designation of foreign banks as “of primary money
laundering concern” and thereby cut off their relations
with U.S. banks.
Section 102(a) contains similar provisions regarding both
gasoline sales and sales of equipment and services for
Iran to expand its own refinery capacity. However, sets
the aggregate one-year sale value at $1 million—double
the level of the House bill.
10
Iran Sanctions
House Version
Senate Version
domestic production of refined petroleum.
-- or, the sale to Iran of refined petroleum products or
ships, vehicles, or insurance or reinsurance to provide
such gasoline to Iran (same dollar values as sale of
equipment).
Expansion of ISA Sanctions:
Similar to House bill (Section 102(a)).
Section 3(b) would mandate certain sanctions (not
currently authorized by ISA) on sellers of the equipment,
gasoline, or services described in Section 3(a) to include:
- prohibition of any transactions in foreign exchange with
sanctioned entity;
- prohibition of credit or payments to the sanctioned
entity;
- and, prohibition on any transactions involving U.S.based property of the sanctioned entity.
(These sanctions would be imposed in addition to the
required two out of six sanctions currently specified in
ISA.)
U.S. Government Enforcement Mechanism:
Section 3(b) also requires the heads of U.S. Government
agencies to ensure that their agencies contract with firms
that certify to the U.S. agency that they are not selling
any of the equipment, products, or services to Iran
(gasoline and related equipment and services) specified in
Section 3(a).
Section 103(b)(4) contains a similar provision, but
mandates that the head of a U.S. agency may not contract
with a person that meets criteria of sanctionability in the
Act. Would not require the bidding/contracting firm to
certify its own compliance, thereby placing the burden of
verifying such compliance on the U.S. executive agency.
The section contains certain penalties, such as
prohibition on future bids for U.S. government contracts,
Congressional Research Service
10
Iran Sanctions
House Version
Senate Version
to be imposed on any firm that makes a false certification
about such activity.
Additional Sanctions Against Suppliers of
Nuclear, Missile, or Advanced Conventional
Weapons Technology to Iran:
No equivalent, although, as noted below, the Senate bill
does contain several proliferation-related provisions.
Section 3(c) provides an additional ISA sanction to be
imposed on any country whose entity(ies) violate ISA by
providing nuclear weapons-related technology or missile
technology to Iran.
The sanction to be imposed on such country is a ban on
any nuclear cooperation agreement with the United
States under the Atomic Energy Act of 1954, and a
prohibition on U.S. sales to that country of nuclear
technology in accordance with such an agreement.
The sanction can be waived if the President certifies to
Congress that the country in question is taking effective
actions against its violating entities.
Alterations to Waiver and Implementation
Provisions:
No similar provisions
Section 3(d)(1) imposes a requirement (rather than an
non-binding exhortation in the existing law) that the
Administration “immediately” initiate an investigation of
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11
Iran Sanctions
House Version
Senate Version
any potentially sanctionable activity under ISA.
Section 3(d)(2) would require the President to certify
that a waiver of penalties on violating entities described
above is “vital to the national security interest of the
United States.” rather than, as currently stipulated in ISA,
is “important to the national interest of the United
States.”
Required Reports:
Section 3(e) would amend ISA’s current Administration
reporting requirements to also include an assessment of
Iran’s support for militant movements and to acquire
weapons of mass destruction technology.
A new reporting requirement would be created (every
six months) on firms providing Iran gasoline and related
equipment and services specified above, as well as the
names and dates of such activity, and any contracts such
entities have with U.S. Government agencies.
The required report is to include information on persons
the President determines is affiliated with Iran’s Islamic
Revolutionary Guard Corp (IRGC), as well as persons
providing material support to the IRGC ore conducting
financial transactions with the IRGC or its affiliates.
Section 107 contains a provision similar to the new
reporting requirement of the House bill with regard to
firms that sold gasoline and related equipment and
services to Iran, and invested in Iran’s energy sector.
The Senate bill does not require reporting on the IRGC
that is stipulated in the House bill, or the report on IranG-20 trade.
However, the Senate bill (Section 109) expresses the
sense of Congress that the United States “continue to
target” the IRGC for supporting terrorism, its role in
proliferation, and its oppressive activities against the
people of Iran.
Also required is an Administration report, within one
year of enactment, on trade between Iran and countries
in the G-20.
Expansion of ISA Definitions:
Similar provision contained in Section 102(d).
Section 3(f) would expand the definitions of investing
entities, or persons, contained in ISA, to include:
Congressional Research Service
11
Iran Sanctions
House Version
Senate Version
- export credit agencies. (Such a provision is widely
considered controversial because export credit agencies
are arms of their governments, and therefore sanctioning
such agencies is considered a sanction against a
government.)
Termination Provisions:
Title IV would terminate the Act’s provisions 30 days
after the President certifies that Iran has:
Section 3(g) would terminate sanctions against persons
who are sanctioned, under the Act, for sales of WMDrelated technology, if the President certifies that Iran has
ceased activities to acquire a nuclear device and has
ceased enrichment of uranium and other nuclear
activities.
- and, has ceased the pursuit and development
of WMD and ballistic missile technology.
ISA Sunset:
No similar provision
- ceased support for international terrorism and qualifies
for removal from the U.S. “terrorism list”
Section 3(h) would extend all provisions of ISA until
2016. It is currently scheduled to “sunset” on December
31, 2011, as amended by the Iran Freedom Support Act
(P.L. 109-293).
Modification to U.S. Ban on Trade With and
Investment in Iran:
No provision
Congressional Research Service
Section 103(b)(1) would ban all imports of Iranian origin
from the United States, with the exception of
informational material. Currently, modifications to the
U.S. trade ban with Iran (Executive Order 12959 of May
6, 1995) that became effective in 2000 permit imports of
12
Iran Sanctions
House Version
Senate Version
Iranian luxury goods, such as carpets, caviar, nuts, and
dried fruits.
- Section 103(b)(2)) generally reiterates/codifies current
provisions of U.S. trade ban related to U.S. exports to
Iran. Provision would prohibit exports to Iran of all
goods except food and medical devices, informational
material, articles used for humanitarian assistance to Iran,
or goods needed to ensure safe operation of civilian
aircraft.
Freezing of Assets/Travel Restriction on
Revolutionary Guard and Related Entities and
Persons.
No provision
Application of U.S. Trade Ban to Subsidiaries:
No provision
Sanctioning Certain Information Technology
Sales to Iran:
No provision
Congressional Research ServiceTreasury Department Authorization
No provision
Hezbollah
No specific provision, although, as noted above, the
House bill does expand ISA reporting requirements to
include Iran’s activities to support terrorist movements.
Lebanese Hezbollah is named as a Foreign Terrorist
Organization (FTO) by the U.S. State Department.
Divestment
No provisions
Section 103(b)(3) mandates the President to freeze the
assets of Iranian diplomats, IRGC, or other Iranian official
personnel deemed a threat to U.S. national security
under the International Emergency Economic Powers Act
(50 U.S.C. 1701 et seq.). Provision would require freezing
of assets of families and associates of persons so
designated. Section 109 calls for a ban on travel of IRGC
and affiliated persons.
Section 104 would apply the provisions of the U.S. trade
ban with Iran (Executive Order 12959) to subsidiaries of
U.S. firms. if the subsidiary is established or maintained for
the purpose of avoiding the U.S. ban on trade with Iran .
The definition of subsidiary, under the
provision, is any
entity that is more than 50% owned or
is directed by a
U.S. person or firm.
Section 105 prohibits U.S. executive agencies from
contracting with firms that export sensitive technology to
Iran. “Sensitive technology” is defined as hardware,
software, telecommunications equipment, or other
technology that restricts the free flow of information in
Iran or which monitor or restrict “speech” of the people
of Iran.
12
Iran Sanctions
House Version
Senate Version
Treasury Department Authorization
Section 106(b) authorizes $64.611 million for FY2010
(and “such sums as may be necessary” for FY2011 and
2012) for the Treasury Department’s Office of
Terrorism and Financial Intelligence. The funds are
authorized to ensure that countries such as Iran are not
misusing the international financial system for illicit
purposes. Iran is not mentioned specifically. $104.26
million is authorized by the section for FY2010 for the
Department’s Financial Crimes Enforcement Network.
No provision
Hezbollah
No specific provision, although, as noted above, the
House bill does expand ISA reporting requirements to
include Iran’s activities to support terrorist movements.
Lebanese Hezbollah is named as a Foreign Terrorist
Organization (FTO) by the U.S. State Department.
Divestment
No provisions
Section 110 contains a sense of Congress that the
President impose the full range of sanctions under the
International Emergency Economic Powers Act (50
U.S.C. 1701) on Hezbollah, and that the President renew
international efforts to disarm Hezbollah in Lebanon (as
called for by U.N. Security Council Resolutions 1559 and
1701).
Title II of the Senate bill (Section 203) prevents criminal,
civil, or administrative action against any investment firm
or officer or adviser based on its decision to divest from
securities that:
- have investments or operations in Sudan described in
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Iran Sanctions
House Version
Senate Version
the Sudan Accountability and Divestment Act of 2007
- or, engage in investments in Iran that would be
considered sanctionable by the Senate bill.
Prevention of Transshipment, Reexportation, or
Diversion of Sensitive Items to Iran
No provision
Section 302 requires a report by the Director of
National Intelligence that identifies all countries
considered a concern to allow transshipment or
diversion of WMD-related technology to Iran
(technically: “items subject to the provision of the Export
Administration Regulations”).
Section 303 requires the Secretary of Commerce to
designate a country as a “Destination of Possible
Diversion Concern” if such country is considered to have
inadequate export controls or is unwilling to prevent the
diversion of U.S. technology to Iran. The provision
stipulates government-to- government discussions are to
take place to improve that country’s export control
systems.
If such efforts did not lead to improvement, the section
would mandate designation of that country as a
“Destination of Diversion Concern” and would set up a
strict licensing requirement for U.S. exports of sensitive
technologies to that country.
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Iran Sanctions
Likely Effects and Timing of the Legislation
Obama Administration officials are said to be concerned by some provisions of H.R. 2194
because of the legislation’s potential to weaken allied unity on Iran at a crucial time in
considering new international sanctions on Iran. The Administration had reportedly sought to
persuade Members to delay further work on H.R. 2194 until a new U.N. sanctions resolution is
adopted, although that time sequencing may not be met. To assuage U.S. allies, the
Administration reportedly wants any agreed bill to automatically exempt from sanctions firms of
countries that are cooperating against the Iranian nuclear program. This could include firms of
China, which is a key player in negotiations on a new U.N. sanctions resolution on Iran. The
outcome of House-Senate efforts to reconcile the two versions is difficult to predict, but
congressional sentiment to sanction Iran appears to be substantial and conference action is
believed by many observers as likely to achieve a consensus on a final bill, possibly by mid-May
2010, according to House Foreign Affairs Committee Chairman Berman.18
—for fear that some P5+1 countries might refuse to support the U.N. resolution if there is
a chance they will be sanctioned by a new U.S. law. Apparently bowing to the Administration
argument, and in light of the May 18 agreement of the P5+1 on a new sanctions draft, House
Foreign Affairs Committee Chairman Berman announced on May 15, 2010 that the conference
committee on H.R. 2194 would not complete its work until after the U.N. resolution is adopted
and in order to assess the results of a June 16, 2010 European Union meeting, which will discuss
Iran. The conference committee formally began work in April 2010.
In terms of content, the outcome of the conference to reconcile the two versions is difficult to
predict, but congressional sentiment to sanction Iran appears to be substantial. It is believed the
final version will likely contain many of the extensive provisions of the Senate version, and some
of the efforts to compel sanctions on violating firms from the House version. However, the
Administration reportedly is insistent that any agreed bill automatically exempt from sanctions
firms of countries that are cooperating against the Iranian nuclear program. The specific criteria
that would define such “cooperation” are reportedly under discussion. The Administration
concern is that countries which fear penalties under a new U.S. law would withdraw their
cooperation with the United States on future sanctions resolutions and measures against Iran.
Congressional Research Service
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Iran Sanctions
Those supporting these bills say that the legislation will strengthen President Obama’s ability to
obtain an agreement with Iran that might impose limitations on its nuclear program. The
legislation might demonstrate to Iran that there are substantial downsides to rebuffing the U.S.
overtures
international criticism of its nuclear program. Iran’s dependence on gasoline imports could, at the
very least, cause Iran’s government
to have to spend more for such imports. Others, however,
believe the government would not
import more gasoline, but rather ration it or reduce subsidies
for it in an effort to reduce gasoline
consumption. Many believe that Iran has many willing
gasoline suppliers who might ignore a
U.S. law along these lines. Still others believe that a
gasoline ban would cause Iranians to blame
the United States and United Nations for its plight
and cause Iranians to rally around President
Ahmadinejad and rebuild his popularity.1918
Administration Review of Potential ISA Violations20Violations19
Several Members of Congress have, in recent years, questioned why there have been no penalties
imposed for violations of ISA. State Department reports to Congress on ISA, required every six
months, have routinely stated that U.S. diplomats raise U.S. policy concerns about Iran with
investing companies and their parent countries. However, these reports have not specifically
stated which foreign companies, if any, were being investigated for ISA violations. No
publication of such deals has been placed in the Federal Register (requirement of Section 5e of
ISA).
In 2008, possibly sensing some congressional unrest over this fact, Under Secretary of State for
Political Affairs William Burns testified on July 9, 2008 (House Foreign Affairs Committee), that
the Statoil project (listed in Table 2) is under review for ISA sanctions. Statoil is incorporated in
Norway, which is not an EU member and which would therefore not fall under the 1998 U.S.-EU
agreement discussed above. Burns did not mention any of the other projects, and no other specific
projects have been named since. Nor was there a formal State Department determination on
Statoil subsequently.
18
http://www.nypost.com/p/blogs/capitol/iran_sanctions_move_is_late_FR2UwEEGY4oNkrWcooA3hL
Askari, Hossein and Trita Parsi. “Throwing Ahmadinejad a Lifeline.” New York Times op-ed. August 15, 2009.
20
Much of this section is derived from a meeting between the CRS author and officials of the State Department’s
Economics Bureau, which is tasked with the referenced review of investment projects. November 24, 2009.
19
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Iran Sanctions
Possibly in response to the new legislative initiatives in the 111th Congress, and to an October
2009 letter signed by 50 Members of Congress referencing the CRS table below, Assistant
Secretary of State for Near Eastern Affairs Jeffrey Feltman testified before the House Foreign
Affairs Committee on October 28, 2009, that the Obama Administration would review
investments in Iran for violations of ISA. Feltman testified that the preliminary review would be
completed within 45 days (by December 11) to determine which projects, if any, require further
investigation. Feltman testified that some announced projects were for political purposes and did
not result in actual investment. State Department officials told CRS in November 2009 that
projects involving Iran and Venezuela appeared to fall into the category of symbolic
announcement rather than actual implemented projects.
On February 25, 2010, Secretary of State Clinton testified before the House Foreign Affairs
Committee that the State Department’s preliminary review was completed in early February and
that some of the cases reviewed “deserve[] more consideration” and were undergoing additional
scrutiny. The preliminary review, according to the testimony, was conducted, in part, through
State Department officials’ contacts with their counterpart officials abroad and corporation
18
Askari, Hossein and Trita Parsi. “Throwing Ahmadinejad a Lifeline.” New York Times op-ed. August 15, 2009.
Much of this section is derived from a meeting between the CRS author and officials of the State Department’s
Economics Bureau, which is tasked with the referenced review of investment projects. November 24, 2009.
19
Congressional Research Service
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Iran Sanctions
officials. The additional investigations of problematic investments will involve the intelligence
community, according to Secretary Clinton. State Department officials told CRS in November
2009 that any projects that the State Department plan is to complete the additional investigation
and determine violations within 180 days of the completion of the preliminary review. (The 180day time frame is, according to the Department officials, consistent with the Iran Freedom
Support Act amendments to ISA discussed above.)
In part because the preliminary review was not completed by mid-December 2009, as was
expected, Representative Mark Kirk and Representative Ron Klein circulated a “Dear Colleague”
letter requesting support for “The Iran Sanctions Enhancement Act” providing for a monthly
GAO report on potential ISA violators, and completion of an investigation of potential violations
within 45 days of any GAO identification of possible violations.
Congressional Research Service
1516
Table 2. Post-1999 Major Investments/Major Development Projects in Iran’s Energy Sector
Date
Feb. 1999
Apr. 1999
Nov.
1999
Apr. 2000
July 2000
Mar. 2001
June 2001
May 2002
Field/Project
Doroud (oil)
(Energy Information Agency, Department of Energy, August 2006.)
Balal (oil)
(“Balal Field Development in Iran Completed,” World Market Research Centre, May 17, 2004.)
Soroush and Nowruz (oil)
(“News in Brief: Iran.” Middle East Economic Digest, (MEED) January 24, 2003.)
Anaran bloc (oil)
(MEED Special Report, December 16, 2005, pp. 48-50.)
Phase 4 and 5, South Pars (gas)
(Petroleum Economist, December 1, 2004.)
Caspian Sea oil exploration—construction of submersible drilling rig for Iranian partner
(IPR Strategic Business Information Database, March 11, 2001.)
Oct. 2002
Jan. 2004
CRS-1617
Value
Output/Goal
Totalfina Elf (France)/ENI
(Italy)
$1 billion
205,000 bpd
Totalfina Elf/ Bow Valley
(Canada)/ENI
$300
million
40,000 bpd
Royal Dutch Shell
(Netherlands)/Japex (Japan)
$800
million
190,000 bpd
Norsk Hydro
(Norway)/Gazprom
(Russia)/Lukoil (Russia) No
production to date
$120
million
65,000
$1.9
billion
2 billion
cu.ft./day (cfd)
$225
million
NA
$1 billion
100,000 bpd
$80
million
25,000 bpd
$1.6
billion
2 billion cfd
ENI
Gas onstream as of Dec.
2004
GVA Consultants (Sweden)
Darkhovin (oil)
ENI
(“Darkhovin Production Doubles.” Gulf Daily News, May 1, 2008.)
Field in production
Masjid-e-Soleyman (oil)
(“CNPC Gains Upstream Foothold.” MEED, September 3, 2004.)
Phase 9 + 10, South Pars (gas)
Sep. 2002
Company(ies)/Status (If
Known)
Sheer Energy
(Canada)/China National
Petroleum Company
(CNPC). Local partner is
Naftgaran Engineering
LG (South Korea)
(“OIEC Surpasses South Korean Company in South Pars.” IPR Strategic Business Information
Database, November 15, 2004.)
On stream as of early 2009
Phase 6, 7, 8, South Pars (gas)
Statoil (Norway)
(Petroleum Economist, March 1, 2006.)
began producing late 2008
$2.65
billion
3 billion cfd
Azadegan (oil)
Inpex (Japan) 10% stake.
$200
260,000 bpd
Date
Field/Project
(“Japan Mulls Azadegan Options.” APS Review Oil Market Trends, November 27, 2006.)
Company(ies)/Status (If
Known)
CNPC. agreed to develop
“north Azadegan” in Jan.
2009
Value
Output/Goal
million
(Inpex
stake);
China
$1.76
billion
Petrobras (Brazil)
Tusan Block
Aug. 2004
(“Iran-Petrobras Operations.” APS Review Gas Market Trends, April 6, 2009; “Brazil’s Petrobras
Sees Few Prospects for Iran Oil.”) http://www.reuters.com/article/idUSN0317110720090703
Yadavaran (oil)
Oct. 2004
2005
(“Iran, China’s Sinopec Ink Yadavaran Oilfield Development Contract.” Payvand’s Iran News,
December 9, 2009.)
Saveh bloc (oil)
GAO report, cited below
Oil found in block in Feb.
2009, but not in
commercial quantity,
according to the firm
$178
million
No production
Sinopec (China), deal
finalized December 9, 2007
$2 billion
300,000 bpd
PTT (Thailand)
?
?
Sinopec (China)
$20
million
?
Sinopec (China); JGC
(Japan)
$959
million
Expansion to
produce 250,000
bpd
Norsk Hydro (Norway)
$49
million
?
Garmsar bloc (oil)
June 2006
Deal finalized in June 2009
("China's Sinopec signs a deal to develop oil block in Iran - report", Forbes, 20 June 2009,
http://www.forbes.com/feeds/afx/2006/06/20/afx2829188.html.)
Arak Refinery expansion
July 2006
Sept.
2006
(GAO report; Fimco FZE Machinery Website;
http://www.fimco.org/index.php?option=com_content&task=view&id=70&Itemid=78.)
Khorramabad block (oil)
(PR Strategic Business Information Database, September 18, 2006)
Esfahan refinery upgrade
Mar. 07
Dec.
2007
(“Daelim, Others to Upgrade Iran’s Esfahan Refinery.” Chemical News and Intelligence, March 19,
2007.)
Golshan and Ferdows onshore and offshore gas fields and LNG plant
contract modified but reaffirmed December 2008
(GAO report; Oil Daily, January 14, 2008.)
CRS-1718
Daelim (S. Korea)
SKS Ventures, Petrofield
Subsidiary (Malaysia)
NA
$16
billion
3.4 billion cfd
Date
Field/Project
Company(ies)/Status (If
Known)
2007
Jofeir Field (oil)
Belneftekhim (Belarus)
(unspec)
GAO report cited below
No production to date
2008
Feb. 2008
Apr. 2008
?
Dayyer Bloc (Persian Gulf, offshore, oil)
GAO report cited below
Edison (Italy)
Lavan field (offshore natural gas)
PGNiG (Poland)
GAO report cited below
Status unclear
Moghan 2 (onshore oil and gas, Ardebil province)
GAO report cited below
Kermanshah petrochemical plant (new construction)
GAO report cited below
INA (Croatia)
Nov.
2009
(Chinadaily.com. “CNPC to Develop Azadegan Oilfield”
http://www.chinadaily.com.cn/bizchina/2009-01/16/content_7403699.htm)
South Pars: Phase 12—Part 2 and Part 3
(“Italy, South Korea To Develop South Pars Phase 12.” Press TV (Iran). November 3, 2009.
http://www.presstv.com/pop/Print/?id=110308.)
Output/Goal
$450
million
40,000 bpd
$44
million
?
$2 billion
$40 $140
million
(dispute
over
size)
?
300,000 metric
tons/yr
Uhde (Germany)
“North Azadegan”
Jan. 2009
Value
CNPC (China)
$1.75
billion
Daelim (S. Korea)—Part 2;
Tecnimont (Italy)—Part 3
$4 billion
($2 bn
each
part)
CNPC (China)
$4.7
billion
China National Offshore
Oil Co.
$16
billion
75,000 bpd
South Pars: Phase 11
Feb. 2010
Drilling to Begin in March 2010
(“CNPC in Gas Deal, Beefs Up Tehran Team—Source.” Reuters India, February 10, 2010.
http://in.reuters.com.articlePrint?articleId=INTOE61909U20100210.)
Totals:
$41 billion investment
Other Pending/Preliminary Deals
North Pars Gas Field (offshore gas). Includes gas purchases (Dec. 2006)
CRS-1819
3.6 billion cfd
Company(ies)/Status (If
Known)
Value
Output/Goal
Royal Dutch Shell, Repsol
(Spain)
$4.3
billion
?
Phase 22, 23, 24 - South Pars (gas), incl. transport Iranian gas to Turkey, and on to Europe and building three
power plants in Iran. Initialed July 2007; not finalized to date.
Turkish Petroleum
Company (TPAO)
$12.
billion
2 billion cfd
Iran’s Kish gas field (April 2008) Includes pipeline from Iran to Oman
Oman (co-financing of
project)
$7 billion
1 billion cfd
Phase 12 South Pars (gas)—part 1. Incl. LNG terminal construction and Farzad-B natural gas bloc (March
2009)
China-led consortium;
project originally subscribed
in May 2007 by OMV
(Austria); possibly taken
over by Indian firms
(ONGC, Oil India Ltd.,
Hinduja, Petronet)
$8
billion+
20 million
tonnes of LNG
annually by 2012
South Pars gas field (September 2009)
Petroleos de Venezuela
S.A.; 10% stake in venture
$760
million
Sinopec
$up to 6
billion if
new
refinery
is built
Date
Field/Project
(http://english.peopledaily.com.cn/200705/19/print20070519_376139.html)
Phase 13, 14 - South Pars (gas); (Feb. 2007).
Deadline to finalize as May 20, 2009 apparently not met; firms submitted revised proposals to Iran in June 2009.
(http://www.rigzone.com/news/article.asp?a_id=77040&hmpn=1)
(http://www.presstv.ir/detail.aspx?id=112062§ionid=351020103)
Abadan refinery
upgrade and expansion; building a new refinery at Hormuz on the Persian Gulf coast (August 2009)
Sources: As noted in table, a wide variety of other press announcements and sources, CRS conversations with officials of the State Department Bureau of Economics
(November 2009), CRS conversations with officials of embassies of the parent government of some of the listed companies (2005-2009). Some reported deals come from a
March 2010 GAO report, “Firms Reported in Open Sources as Having Commercial Activity in Iran’s Oil, Gas, and Petrochemical Sectors.” GAO-10-515R Iran’s Oil, Gas,
and Petrochemical Sectors. http://www.gao.gov/new.items/d10515r.pdf. The GAO report lists 41 firms with “commercial activity in Iran’s energy sector; several of the listed
agreements do not appear to constitute “investment,” as defined in ISA.
Note: CRS has neither the authority nor the means to determine which of these projects, if any, might constitute a violation of the Iran Sanctions Act. CRS has no way to
confirm the precise status of any of the announced investments, and some investments may have been resold to other firms or terms altered since agreement. In virtually
all cases, such investments and contracts represent private agreements between Iran and its instruments and the investing firms, and firms are not necessarily required to
confirm or publicly release the terms of their arrangements with Iran. $20 million+ investments in oil and gas fields, refinery upgrades, and major project leadership are
included in this table. Responsibility for a project to develop Iran’s energy sector is part of ISA investment definition.
CRS-1920
Iran Sanctions
Ban on U.S. Trade and Investment With Iran
ISA was enacted, in part, because U.S. allies refused to adopt a ban on trade with and investment
in Iran. Such a U.S. ban was imposed on May 6, 1995, when President Clinton issued Executive
Order 12959.2120 This followed an earlier March 1995 executive order barring U.S. investment in
Iran’s energy sector. The trade and investment ban was intended to blunt criticism that U.S. trade
with Iran made U.S. appeals for multilateral containment of Iran less credible. Each March since
1995 (and most recently on March 10, 2010), the U.S. Administration has renewed a declaration
of a state of emergency that triggered the investment ban.
Some modifications to the trade ban since 1999 account for the trade between the United States
and Iran which was about $350 million worth of goods for all of 2009 ($281 million in exports to
Iran, and $67 million in imports from Iran). That is about half the value of the bilateral trade in
2008.
The U.S. ban on trade and investment does not apply to foreign firms. Neither is foreign trade
with Iran in purely civilian goods banned by any U.N. Security Council resolution. A very wide
range of foreign firms conduct trade with or have a corporate presence with Iran. Some of the
well-known firms include Alcatel-Lucent of France; Bank of Tokyou-Mitsubishi UFJ; BNP
Paribas of France; Bosch of Germany; Canon of Japan; Fiat SPA of Italy; Ericsson of Sweden;
ING Group of the Netherlands; Mercedes of Germany; Renault of France; Samsung of South
Korea; Sony of Japan; Volkswagen of Germany; Volvo of Sweden; ThyssenKrupp of Germany;
and numerous others. As discussed further later, Siemens of Germany was active in the Iran
telecommunications infrastructure market, but announced in February 2010 that it would cease
pursuing business in Iran. KPMG of the Netherlands reportedly pulled out of the Iran market as
of April 2010.
Some of the foreign firms that trade with Iran, such as Mitsui and Co. of Japan; Mitsui of Japan,
ABB Ltd of Switzerland, Alstom of France, and Schneider Electric of France, are discussed in the
March 7, 2010, New York Times article on foreign firms that do business with Iran and also
receive U.S. contracts or financing. The Times article does not claim that these firms have
violated any U.S. sanctions laws.
The following conditions and modifications, as administered by the Office of Foreign Assets
Control (OFAC) of the Treasury Department, apply:
•
Some goods related to the safe operation of civilian aircraft may be licensed for
export to Iran, and as recently as September 2006, the George W. Bush
Administration, in the interests of safe operations of civilian aircraft, permitted a
sale by General Electric of Airbus engine spare parts to be installed on several
Iran Air passenger aircraft (by European airline contractors).
2120
The Executive Order was issued under the authority of: The International Emergency Economic Powers Act (IEEPA,
50 U.S.C. 1701 et seq.; the National Emergencies Act (50 U.S.C. 1601 et seq.; Section 505 of the International Security
and Development Cooperation Act of 1985 (22 U.S.C. 2349aa-9) and Section 301 of Title 3, United States Code. An
August 1997 amendment to the trade ban (Executive Order 13059) prevented U.S. companies from knowingly
exporting goods to a third country for incorporation into products destined for Iran.
Congressional Research Service
2021
Iran Sanctions
•
U.S. firms may not negotiate with Iran or to trade Iranian oil overseas, but U.S.
companies may apply for licenses to conduct “swaps” of Caspian Sea oil with
Iran. A Mobil Corporation application to do so was denied in April 1999.
•
According to the regulations that implement the trade ban (Iranian Transactions
Regulations, Part 560 of the Code of Federal Regulations, the ban does not apply
to personal communications, or to humanitarian donations. However, U.S. nongovernment organizations (NGOs) require a specific license to operate in Iran.
•
Since April 1999, commercial sales of food and medical products to Iran have
been allowed, on a case-by-case basis and subject to OFAC licensing. According
to OFAC in April 2007, licenses for exports of medicines to treat HIV and
leukemia are routinely expedited for sale to Iran, and license applications are
viewed favorably for business school exchanges, earthquake safety seminars,
plant and animal conservation, and medical training in Iran. Private letters of
credit can be used to finance approved transactions, but no U.S. government
credit guarantees are available, and U.S. exporters are not permitted to deal
directly with Iranian banks. The FY2001 agriculture appropriations law (P.L.
106-387) contained a provision banning the use of official credit guarantees for
food and medical sales to Iran and other countries on the U.S. terrorism list,
except Cuba, although allowing for a presidential waiver to permit such credit
guarantees. No U.S. Administration has authorized credit guarantees, to date.
•
In April 2000, the trade ban was further eased to allow U.S. importation of
Iranian nuts, dried fruits, carpets, and caviar. The United States was the largest
market for Iranian carpets before the 1979 revolution, but U.S. anti-dumping
tariffs imposed on Iranian products in 1986 dampened of many Iranian products.
The tariff on Iranian carpets is now about 3%-6%, and the duty on Iranian caviar
is about 15%. In December 2004, U.S. sanctions were further modified to allow
Americans to freely engage in ordinary publishing activities with entities in Iran
(and Cuba and Sudan). As of mid-2007, the product most imported from Iran by
U.S. importers is pomegranate juice concentrate. In the 110th Congress, H.R.
1400, S. 970, S. 3445, and H.R. 7112 would have re-imposed the full import ban.
Application to Foreign Subsidiaries of U.S. Firms
The U.S. trade ban does not bar subsidiaries of U.S. firms from dealing with Iran, as long as the
subsidiary has no operational relationship to the parent company. The March 7, 2010, New York
Times article, cited above, discusses some subsidiaries of U.S. firms that have been active in Iran
and which have received U.S. government contracts, grants, loans, or loan guarantees.
Among major foreign subsidiaries of U.S. firms that have traded with Iran are the following:
•
Halliburton. On January 11, 2005, Iran said it had contracted with U.S. company
Halliburton, and an Iranian company, Oriental Kish, to drill for gas in Phases 9
and 10 of South Pars. Halliburton reportedly provided $30 million to $35 million
worth of services per year through Oriental Kish, leaving unclear whether
Halliburton would be considered in violation of the U.S. trade and investment
Congressional Research Service
2122
Iran Sanctions
ban or the Iran Sanctions Act (ISA)2221—because the deals involved a subsidiary of
Halliburton (Cayman Islands-registered Halliburton Products and Service, Ltd.,
based in Dubai). On April 10, 2007, Halliburton announced that its subsidiaries
were, as promised in January 2005, no longer operating in Iran.
•
General Electric (GE). The firm announced in February 2005 that it would seek
no new business in Iran, and it reportedly wound down pre-existing contracts by
July 2008. GE was selling Iran equipment and services for hydroelectric, oil and
gas services, and medical diagnostic projects through Italian, Canadian, and
French subsidiaries.
•
Foreign subsidiaries of several other U.S. energy equipment firms have been and
may still be in the Iranian market, according to their “10-K” filings with the
Securities and Exchange Commission. These include Natco Group,2322 Overseas
Shipholding Group, 2423 UOP (a Honeywell subsidiary),25 Itron2624 Itron25, Fluor, 2726
Flowserve,2827 Parker Drilling, Vantage Energy Services, 2928 Weatherford, 30and29and a
few others. However, in March 2010, Ingersoll Rand, maker of air compressors
and cooling systems, said it would no longer allow its subsidiaries to do business
in Iran.3130 On March 1, 2010, Caterpillar Corp. said it had altered its policies to
prevent foreign subsidiaries from selling equipment to independent dealers that
have been reselling the equipment to Iran.3231 In April 2010, it was reported that
foreign partners of several U.S. or other U.S. accounting firms had cut their ties
with Iran, including partners of PricewaterhouseCoopers and Ernst and Young. 3332
The pullout of KPMG was discussed above.
•
An Irish subsidiary of the Coca Cola company provides syrup for the U.S.-brand
soft drink to an Iranian distributor, Khoshgovar. Local versions of both Coke and
of Pepsi (with Iranian-made syrups) are also marketed in Iran by distributors who
licensed the recipes for those soft drinks before the Islamic revolution and before
the trade ban was imposed on Iran.
2221
“Iran Says Halliburton Won Drilling Contract.” Washington Times, January 11, 2005.
Form 10-K Filed for fiscal year ended December 31, 2008.
2423
Prada, Paulo, and Betsy McKay. Trading Outcry Intensifies. Wall Street Journal, March 27, 2007; Brush, Michael.
Are You Investing in Terrorism? MSN Money, July 9, 2007.
2524
New York Times, March 7, 2010, cited previously.
2625
Subsidiaries of the Registrant at December 31, 2009.
http://www.sec.gov/Archives/edgar/data/780571/000078057110000007/ex_21-1.htm
2726
“Exhibit to 10-K Filed February 25, 2009.” Officials of Fluor claim that their only dealings with Iran involve
property in Iran owned by a Fluor subsidiary, which the subsidiary has been unable to dispose of. CRS conversation
with Fluor, December 2009.
2827
Form 10-K for Fiscal year ended December 31, 2009.
2928
Form 10-K for Fiscal year ended December 31, 2007.
23
3022
29
Form 10-K for Fiscal year ended December 31, 2008, claims firm directed its subsidiaries to cease new business in
Iran and Cuba, Syria, and Sudan as of September 2007.
3130
Nixon, Ron. “2 Corporations Say Business With Tehran Will Be Curbed.” New York Times, March 11, 2010.
3231
“Caterpillar Says Tightens ‘No-Iran’ Business Policy.” Reuters, March 1, 2010.
3332
Baker, Peter. “U.S. and Foreign Companies Feeling Pressure to Sever Ties With Iran.” New York Times, April 24,
2010.
Congressional Research Service
2223
Iran Sanctions
In the 110th Congress, S. 970, S. 3227, S. 3445, and three House-passed bills (H.R. 1400, H.R.
7112, and H.R. 957)—would have applied sanctions to the parent companies of U.S. subsidiaries
if those subsidiaries are directed or formedby the parent company to trade with Iran. As noted, in the 111th Congress, the
The Senate version of H.R. 2194
H.R. 2194, which awaits conference action, contains a similar provision.
Treasury Department “Targeted Financial
Measures”
Various “targeted financial measures” have been undertaken by the Treasury Department,
particularly the office of Under Secretary of the Treasury Stuart Levey (who has remained in the
Obama Administration). Since 2006, strengthened by leverage provided in five U.N. Security
Council Resolutions, Levey and other officials have been able to convince numerous foreign
banks that dealing with Iran entails financial risk and furthers terrorism and proliferation.
Treasury Secretary Timothy Geithner has described Levey as having “led the design of a
remarkably successful program”34with33with regard to targeting Iran’s proliferation networks. The
actions have, according to the International Monetary Fund, partly dried up financing for energy
industry and other projects in Iran.
In the first major summation of the effort, Treasury and State Departments officials, in April 17,
2008, testimony before the House Foreign Affairs Committee, said they had persuaded at least 40
banks not to provide financing for exports to Iran or to process dollar transactions for Iranian
banks. Among those that have pulled out of Iran are UBS (Switzerland), HSBC (Britain),
Germany’s Commerzbank A.G. and Deutsche Bank AG. U.S. financial diplomacy has reportedly
convinced Kuwaiti banks to stop transactions with Iranian accounts,3534 and some banks in Asia
(primarily South Korea and Japan) and the rest of the Middle East have done the same. The
International Monetary Fund and other sources report that these measures are making it more
difficult to fund energy industry and other projects in Iran and for importers/exporters to conduct
trade in expensive items.
Some of these results have come about through U.S. pressure. In 2004, the Treasury Department
fined UBS $100 million for the unauthorized movement of U.S. dollars to Iran and other
sanctioned countries, and in December 2005, the Treasury Department fined Dutch bank ABN
Amro $80 million for failing to fully report the processing of financial transactions involving
Iran’s Bank Melli (and another bank partially owned by Libya). In the biggest such instance, on
December 16, 2009, the Treasury Department announced that Credit Suisse would pay a $536
million settlement to the United States for illicitly processing Iranian transactions with U.S.
banks. Credit Suisse, according to the Treasury Department, saw business opportunity by picking
up the transactions business from a competitor who had, in accordance with U.S. regulations
discussed below, ceased processing dollar transactions for Iranian banks. Credit Suisse also
pledged to cease doing business with Iran.
In action intended to cut Iran off from the U.S. banking system, on September 6, 2006, the
Treasury Department barred U.S. banks from handling any indirect transactions (“U-turn
3433
Hearing of the Financial Services and General Government Subcommittee of the House Appropriations Committee,
Federal News Service, May 21, 2009.
3534
Mufson, Steven and Robin Wright. “Iran Adapts to Economic Pressure.” Washington Post, October 29, 2007.
Congressional Research Service
2324
Iran Sanctions
transactions, meaning transactions with non-Iranian foreign banks that are handling transactions
on behalf of an Iranian bank) with Iran’s Bank Saderat (see above), which the Administration
accuses of providing funds to Hezbollah. 3635 Bank Sepah is subject to asset freezes and transactions
limitations as a result of Resolutions 1737 and 1747. The Treasury Department extended that UTurn restriction to all Iranian banks on November 6, 2008.
Thus far, the Treasury Department has not designated any bank as a “money laundering entity”
for Iran-related transactions (under Section 311 of the USA Patriot Act), although some say that
step has been threatened at times. Nor has Treasury imposed any specific sanctions against Bank
Markazi (Central Bank) which, according to a February 25, 2008, Wall Street Journal story, is
helping other Iranian banks circumvent the U.S. and U.N. banking pressure. Several European
countries reportedly oppose such a sanction as an extreme step with potential humanitarian
consequences, for example by preventing Iran from keeping its currency stable. S. 3445, a Senate
bill in the 110th Congress, and a counterpart passed by the House on September 26, 2008 (H.R.
7112), called for this sanction. The Senate version of H.R. 2194, the “Dodd-Shelby” bill,
referenced above, in the 111th Congress has a similar provision.
In enforcing U.S. sanctions, on December 17, 2008, the U.S. Attorney for the Southern District of
New York filed a civil action seeking to seize the assets of the Assa Company, a UK-chartered
entity. Assa allegedly was maintaining the interests of Bank Melli in an office building in New
York City. An Iranian foundation, the Alavi Foundation, allegedly is an investor in the building.
However, Treasury Department officials say that some of these efforts have gone as far as
possible and, in concert with statements by Secretary of State Clinton and other officials in early
2010, Treasury officials are attempting to target the Revolutionary Guard and its corporate arms
and suppliers. Four Guard-related Iranian firms, and one Guard official affiliated with the Guard’s
corporate activities, were designated by the Treasury Department as proliferation entities under
Executive Order 13382.
Terrorism List Designation-Related Sanctions
Several U.S. sanctions are in effect as a result of Iran’s presence on the U.S. “terrorism list.” The
list was established by Section 6(j) of the Export Administration Act of 1979 (P.L. 96-72, as
amended), sanctioning countries determined to have provided repeated support for acts of
international terrorism. Iran was added to the list in January 1984, following the October 1983
bombing of the U.S. Marine barracks in Lebanon (believed perpetrated by Hezbollah). Sanctions
imposed as a consequence include a ban on U.S. foreign aid to Iran; restrictions on U.S. exports
to Iran of dual use items; and requires the United States to vote against international loans to Iran.
•
3635
The terrorism list designation restricts sales of U.S. dual use items (Export
Administration Act, as continued through presidential authorities under the
International Emergency Economic Powers Act, IEEPA, as implemented by
executive orders), and, under other laws, bans direct U.S. financial assistance
(Section 620A of the Foreign Assistance Act, FAA, P.L. 87-195) and arms sales
(Section 40 of the Arms Export Control Act, P.L. 95-92, as amended), and
requires the United States to vote to oppose multilateral lending to the designated
Kessler, Glenn. “U.S. Moves to Isolate Iranian Banks.” Washington Post, September 9, 2006.
Congressional Research Service
2425
Iran Sanctions
countries (Section 327 of the Anti-Terrorism and Effective Death Penalty Act of
1996, P.L. 104-132). Waivers are provided under these laws, but successive
foreign aid appropriations laws since the late 1980s ban direct assistance to Iran
(loans, credits, insurance, Eximbank credits) without providing for a waiver.
•
Section 307 of the FAA (added in 1985) names Iran as unable to benefit from
U.S. contributions to international organizations, and require proportionate cuts if
these institutions work in Iran. No waiver is provided for.
•
The Anti-Terrorism and Effective Death Penalty Act (Sections 325 and 326 of
P.L. 104-132) requires the President to withhold U.S. foreign assistance to any
country that provides to a terrorism list country foreign assistance or arms.
Waivers are provided.
U.S. sanctions laws do not bar disaster aid, and the United States donated $125,000, through
relief agencies, to help victims of two earthquakes in Iran (February and May 1997), and another
$350,000 worth of aid to the victims of a June 22, 2002, earthquake. (The World Bank provided
some earthquake related lending as well.) The United States provided $5.7 million in assistance
(out of total governmental pledges of about $32 million, of which $17 million have been
remitted) to the victims of the December 2003 earthquake in Bam, Iran, which killed as many as
40,000 people and destroyed 90% of Bam’s buildings. The United States military flew in 68,000
kilograms of supplies to Bam.
In the Bam case, there was also a temporary exemption made in the regulations to allow for
donations to Iran of humanitarian goods by American citizens and organizations. Those
exemptions were extended several times but expired in March 2004.
Executive Order 13224
The separate, but related, Executive Order 13324 (September 23, 2001) authorizes the President
to freeze the assets of and bar U.S. transactions with entities determined to be supporting
international terrorism. This order, issued two weeks after the September 11 attacks, under the
authority of the IEEPA, the National Emergencies Act, the U.N. Participation Act of 1945, and
Section 301 of the U.S. Code, was intended to primarily target Al Qaeda-related entities.
However, it has increasingly been applied to Iranian entities. Such Iran-related entities named and
sanctioned under this order are in Table 4 at the end of this report. Table 4 includes the names of
Iranian entities sanctioned under other orders and under United Nations resolutions pertaining to
Iran’s nuclear program.
Proliferation-Related Sanctions
Iran is prevented from receiving advanced technology from the United States under relevant and
Iran-specific anti-proliferation laws37laws36 and by Executive Order 13382 (June 28, 2005).
3736
Such laws include the Atomic Energy Act of 1954 and the Energy Policy Act of 2005 (P.L. 109-58).
Congressional Research Service
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Iran Sanctions
Iran-Iraq Arms Nonproliferation Act
The Iran-Iraq Arms Nonproliferation Act (P.L. 102-484) requires denial of license applications for
exports to Iran of dual use items, and imposes sanctions on foreign countries that transfer to Iran
“destabilizing numbers and types of conventional weapons,” as well as WMD technology. The
Iran-Iraq Act (Section 1603) also provides for a “presumption of denial” for all dual use exports
to Iran (which would include computer software). A waiver to permit such exports, on a case-bycase basis, is provided for.
Iran-Syria-North Korea Nonproliferation Act
The Iran Nonproliferation Act (P.L. 106-178), now called the Iran-Syria-North Korea NonProliferation Act) authorizes sanctions on foreign persons (individuals or corporations, not
countries or governments) that are determined by the Administration to have assisted Iran’s
WMD programs. It bans U.S. extraordinary payments to the Russian Aviation and Space Agency
in connection with the international space station unless the President can certify that the agency
or entities under its control had not transferred any WMD or missile technology to Iran within the
year prior.3837 (A Continuing Resolution for FY2009, which funded the U.S. government through
March 2009, waived this law to allow NASA to continue to use Russian vehicles to access the
International Space Station.)
Executive Order 13382
Executive Order 13382 allows the President to block the assets of proliferators of weapons of
mass destruction (WMD) and their supporters under the authority granted by the International
Emergency Economic Powers Act (IEEPA, 50 U.S.C. 1701 et seq.), the National Emergencies
Act (50 U.S.C. 1601 et seq.), and Section 301 of Title 3, United States Code.
Foreign Aid Restrictions for Suppliers of Iran
In addition, successive foreign aid appropriations punish the Russian Federation for assisting Iran
by withholding 60% of any U.S. assistance to the Russian Federation unless it terminates
technical assistance to Iran’s nuclear and ballistic missiles programs.
Implementation
The George W. Bush Administration decided to impose sanctions for violations of the executive
orders and laws discussed above, and it sanctioned numerous entities as discussed below. The
Obama Administration has continued to sanction entities under these provisions. Iranian entities
designated under these laws and orders are listed in Table 4 at the end of this report, including the
four Revolutionary Guard-affiliated firms designated under E.O. 13382 in February 2010.
3837
The provision contains certain exceptions to ensure the safety of astronauts, but it nonetheless threatened to limit
U.S. access to the international space station after April 2006, when Russia started charging the United States for
transportation on its Soyuz spacecraft. Legislation in the 109th Congress (S. 1713, P.L. 109-112) amended the provision
in order to facilitate continued U.S. access and extended INA sanctions provisions to Syria.
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Despite these efforts, Iran has used loopholes and other devices, such as front companies, to elude
U.S. and international sanctions. Some of these efforts focus on countries perceived as having lax
enforcement of export control laws, such as UAE and Malaysia. In some cases, Iran has been
able, according to some reports, to obtain sophisticated technology even from U.S. firms.3938
Relations to International Sanctions
The U.S. sanctions discussed in this report are more comprehensive than those imposed, to date,
by the United Nations Security Council. However, there is some overlap between the U.N.
sanctions and those imposed by the United States and some of its allies under their separate
national authorities.
As part of a multilateral process of attempting to convince Iran to choose the path of negotiations
or face further penalty, during 2006-2008, three U.N. Security Council resolutions—1737, 1747,
and 1803—imposed sanctions primarily on Iran’s weapons of mass destruction (WMD)
infrastructure. While pressing for sanctions, the multilateral group negotiation with Iran (“P5+1:”
the Security Council permanent members, plus Germany) at the same time offered Iran incentives
to suspend uranium enrichment; the last meeting between Iran and the P5+1 to discuss these
issues was in July 2008. The negotiations made little progress, and then entered a hiatus for the
U.S. presidential election, the establishment of the Obama Administration, and then the Iranian
presidential election. Iranian entities and persons sanctioned by the United Nations are included
in Table 4 at the end of this report.
As noted above, talks resumed on October 1, 2009, and were viewed as productive. However,
Iran’s refusal to agree to implementing terms by the end of 2009 prompted renewed discussions
between the United States and its partners about new international sanctions. Some P5+1 ideas
reportedly under discussion include: adding many more Revolutionary Guard officials and
affiliated firms to those under sanction; reducing or ending the provision of trade credits for Iran;
and banning further international investment in Iran’s energy sector. These sanctions would
continue a trend in the United States, in which the Administration is focusing on sanctioning the
Revolutionary Guard and other security organs that are suppressing the Iranian protesters.
Other ideas reportedly floated but then retracted to attract broader U.N. Security Council support
included adding banks, possibly including Iran’s Central Bank, to the list of those recommended
to be cut off from the international banking system; banning insurance or reinsurance to carry
gasoline products to Iran; expanding authority to search shipments by Iran’s shipping and cargo
entities; and banning arms sales to Iran. According to U.S. diplomats in April 2010, China, which
had long been opposing a new round of U.N. sanctions against Iran, has become convinced that
Iran is not negotiating in good faith, and it has begun to negotiate the specifics of a new U.N.
resolution. The Obama Administration said it hoped to complete the negotiations on a new
resolution before the end of April 2010, at which time the Security Council presidency passes
from Japan, a key U.S. ally, to Lebanon, which for domestic reasons is hesitant to move against
Iran. April closed without announced agreement, potentially implying that any new Security
Council resolution might wait until Mexico’s turn as Council president in June.
39The main provisions of the existing U.N. sanctions are below.
Table 3. Summary of Provisions of U.N. Resolutions on Iran Nuclear Program
(1737, 1747, and 1803)
Require Iran to suspend uranium enrichment (all)
Prohibit transfer to Iran of nuclear, missile, and dual use items to Iran, except for use in light water reactors (1737)
Prohibit Iran from exporting arms or WMD-useful technology (1747)
Freeze the assets of 40 named Iranian persons and entities, including Bank Sepah, and several Iranian front companies
Require that countries exercise restraint with respect to travel of 35 named Iranians and ban the travel of 5 others
Call on states not to export arms to Iran or support new business with Iran
Call for restraint in any international lending to Iran (with the exception of humanitarian projects) (1747).
Call for vigilance with respect to the foreign activities of all Iranian banks, particularly Bank Melli and Bank Saderat
(1803),
Calls on countries to inspect cargoes carried by Iran Air Cargo and Islamic Republic of Iran Shipping Lines if there are
indications they carry cargo banned for carriage to Iran. (1803)
Source: Text of U.N. Security Council resolutions 1737, 1747, and 1803. http://www.un.org. More information
on specific provisions of each of these resolutions is in CRS Report. CRS Report RL32048, Iran: U.S. Concerns and
Policy Responses, by Kenneth Katzman.
38
Warrick, Joby. “Iran Using Fronts to Get Bomb Parts From U.S.” Washington Post, January 11, 2009; Institute for
Science and International Security. “Iranian Entities’ Illicit Military Procurement Networks.” David Albright, Paul
Brannan, and Andrea Scheel. January 12, 2009.
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The main provisions of the current U.N. sanctions are below.
Table 3. Summary of Provisions of U.N. Resolutions on Iran Nuclear Program
(1737, 1747, and 1803)
Require Iran to suspend uranium enrichment (all)
Prohibit transfer to Iran of nuclear, missile, and dual use items to Iran, except for use in light water reactors (1737)
Prohibit Iran from exporting arms or WMD-useful technology (1747)
Freeze the assets of 40 named Iranian persons and entities, including Bank Sepah, and several Iranian front companies
Require that countries exercise restraint with respect to travel of 35 named Iranians and ban the travel of 5 others
Call on states not to export arms to Iran or support new business with Iran
Call for restraint in any international lending to Iran (with the exception of humanitarian projects) (1747).
Call for vigilance with respect to the foreign activities of all Iranian banks, particularly Bank Melli and Bank Saderat
(1803),
Calls on countries to inspect cargoes carried by Iran Air Cargo and Islamic Republic of Iran Shipping Lines if there are
indications they carry cargo banned for carriage to Iran. (1803)
Source: Text of U.N. Security Council resolutions 1737, 1747, and 1803. http://www.un.org. More information
on specific provisions of each of these resolutions is in CRS Report. CRS Report RL32048, Iran: U.S. Concerns and
Policy Responses, by Kenneth Katzman28
Iran Sanctions
About ten months into the Obama Administration, P5+1 nuclear talks with Iran took place on
October 1, 2009, and were viewed as productive, including a tentative agreement by Iran to ship
out 70% of its stockpile of enriched uranium out of Iran for reprocessing into a medically useful
form. However, Iran’s refusal to agree to implementing terms by the end of 2009 prompted
renewed discussions between the United States and its partners about new international sanctions.
On May 18, 2010, Secretary of State Clinton announced that the P5+1 countries had reached
agreement on a new U.N. sanctions resolution. The main points of the draft (which is discussed in
more detail and in context of the broader nuclear issue in CRS Report RL32048, Iran: U.S.
Concerns and Policy Responses) are: 39
•
It targets additional (unspecified to date) Revolutionary Guard officials and
affiliated firms for asset freezes.
•
It gives countries the authorization to inspect any shipments - and to dispose of
its cargo - if the shipments are suspected to carry contraband items. This
provision is modeled after a similar provision imposed on North Korea, which
did cause that country to reverse some of its shipments.
•
It bans sales to Iran of most categories of heavy arms to Iran and requests
restraint in sales of light arms.
•
The draft requires countries to insist that their companies refrain from doing
business with Iran if there is reason to believe that such business could further
Iran’s WMD programs.
•
It requests, but does not mandate, that countries prohibit Iranian banks to open in
their countries, or for their banks to open in Iran.
•
The draft did not include some measures discussed in press reports on the
negotiations, including: barring any foreign investment in Iranian bond offerings;
bar arms sales to Iran; banning insurance for transport contracts for shipments
involving Iran; banning international investment in Iran’s energy sector; and
banning the provision of trade credits to Iran.
It is expected that final action on the draft will happen in June, at which time Mexico takes over
the U.N. Security Council presidency (from Lebanon in May). The new sanctions, although far
from “crippling” or “biting,” might affirm Iran’s growing isolation if U.S. allies and corporations
in allied countries announce new bilateral sanctions or pullouts from the Iran market.
European/Japanese/Other Foreign Country Policy on Sanctions and Trade
Agreements
U.S. allies support the Obama Administration approach toward Iran more so than the George W.
Bush Administration approach, which was perceived as primarily punitive. U.S. and
European/allied approaches have been converging since 2002, when the nuclear issue came to the
fore. The EU countries have begun to implement some sanctions that exceed those mandated in
Security Council resolutions. In line with U.N. resolutions, EU countries have banned all dual use
exports for military end users in Iran. Several EU countries are discouraging their companies
from making any new investments in or soliciting any new business with Iran, and several
39
Text of the draft is at: http://media.washingtonpost.com/wp-srv/nation/pdf/iranresolution_051810.pdf.
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Iran Sanctions
European and Asian firms have pulled out of the Iran market in 2010. Several EU countries now
support sanctions on Iran that they opposed in earlier years.
Negotiations with Iran on a “Trade and Cooperation Agreement” (TCA) are not currently being
held; such an agreement would have lowered the tariffs or increased quotas for Iranian exports to
the EU countries.40 Similarly, there is insufficient international support to grant Iran membership
in the World Trade Organization (WTO) until there is progress on the nuclear issue. Iran first
attempted to apply to join the WTO in July 1996. On 22 occasions after that, representatives of
40
During the active period of talks, which began in December 2002, there were working groups focused not only on the
TCA terms and proliferation issues but also on Iran’s human rights record, Iran’s efforts to derail the Middle East peace
process, Iranian-sponsored terrorism, counter-narcotics, refugees, migration issues, and the Iranian opposition PMOI.
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Iran Sanctions
the Clinton and then the George W. Bush Administration blocked Iran from applying
(applications must be by consensus of the 148 members). As discussed above, as part of an effort
to assist the EU-3 nuclear talks with Iran, at a WTO meeting in May 2005, no opposition to Iran’s
application was registered, and Iran formally began accession talks.
Current allied policies are a shift since the 1990s, when EU countries maintained a policy of
“critical dialogue” with Iran, and the EU and Japan refused to join the 1995 U.S. trade and
investment ban on Iran. The European dialogue with Iran was suspended in April 1997 in
response to the German terrorism trial (“Mykonos trial”) that found high-level Iranian
involvement in killing Iranian dissidents in Germany, but resumed in May 1998 during Khatemi’s
presidency. In the 1990s, European and Japanese creditors—over U.S. objections—rescheduled
about $16 billion in Iranian debt. These countries (governments and private creditors)
rescheduled the debt bilaterally, in spite of Paris Club rules that call for multilateral rescheduling.
In July 2002, Iran tapped international capital markets for the first time since the Islamic
revolution, selling $500 million in bonds to European banks.
World Bank Loans
The EU and Japan appear to have made new international lending to Iran contingent on Iran’s
response to international nuclear demands. This represents a narrowing of past differences
between the United States and its allies on this issue. Acting under provisions of successive
foreign aid laws (which require the United States to vote against international loans to countries
named by the United States as sponsors of international terrorism), in 1993 the United States
voted its 16.5% share of the World Bank against loans to Iran of $460 million for electricity,
health, and irrigation projects, but the loans were approved. To block that lending, the FY1994FY1996 foreign aid appropriations (P.L. 103-87, P.L. 103-306, and P.L. 104-107) cut the amount
appropriated for the U.S. contribution to the Bank by the amount of those loans. The legislation
contributed to a temporary halt in new Bank lending to Iran.
During 1999-2005, Iran’s moderating image had led the World Bank to consider new loans over
U.S. opposition. In May 2000, the United States’ allies outvoted the United States to approve
$232 million in loans for health and sewage projects. During April 2003-May 2005, a total of
$725 million in loans were approved for environmental management, housing reform, water and
sanitation projects, and land management projects, in addition to $400 million in loans for
earthquake relief.
40
During the active period of talks, which began in December 2002, there were working groups focused not only on the
TCA terms and proliferation issues but also on Iran’s human rights record, Iran’s efforts to derail the Middle East peace
process, Iranian-sponsored terrorism, counter-narcotics, refugees, migration issues, and the Iranian opposition PMOI.
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Iran Sanctions
Efforts to Promote Divestment
A growing trend not only in Congress but in several states is to require or call for or require
divestment of shares of firms that have invested in Iran’s energy sector (at the same levels
considered sanctionable under the Iran Sanctions Act). 41 The concept of these sanctions is to
express the view of Western and other democracies that Iran is an outcast internationally.
41
For information on the steps taken by individual states, see National Conference of State Legislatures. State
Divestment Legislation.
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Iran Sanctions
Legislation in the 110th Congress, H.R. 1400, did not require divestment, but requires a
presidential report on firms that have invested in Iran’s energy sector. Another bill, H.R. 1357,
required government pension funds to divest of shares in firms that have made ISA-sanctionable
investments in Iran’s energy sector and bar government and private pension funds from future
investments in such firms. Two other bills, H.R. 2347 (passed by the House on July 31, 2007) and
S. 1430, would protect mutual fund and other investment companies from shareholder action for
any losses that would occur from divesting in firms that have investing in Iran’s energy sector.
In the 111th Congress, H.R. 1327 (Iran Sanctions Enabling Act), a bill similar to H.R. 2347 of the
110th Congress, was reported by the Financial Services Committee on April 28, 2009. It passed
the House on October 14, 2009, by a vote of 414-6. A similar bill. S. 1065, has been introduced in
the Senate. Some provisions along these lines are contained in the Senate version of H.R. 2194.
Sanctions and Other Proposals to Support Iran’s
Opposition
A major trend in the 111th Congress, after the Iran election dispute, has been efforts to promote
the prospects for the domestic opposition in Iran. Proposals to target the Revolutionary Guard for
sanctions represent the trend toward measures that undermine the legitimacy of Iran’s regime and
express support for the growing domestic opposition in Iran. The Revolutionary Guard is
involved in Iran’s WMD programs but it is also the key instrument through which the regime is
trying to suppress the pro-democracy protest. Some of the proposals discussed below could
potentially be included in any House and Senate conference agreement on H.R. 2194, whether or
not they were included in either the existing House or the Senate versions of that bill.
Expanding Internet and Communications Freedoms
Some Members have focused on expanding Internet freedom in Iran or preventing the Iranian
government from using the Internet to identify opponents. Subtitle D of the FY2010 Defense
Authorization (P.L. 111-84), called the “VOICE” (Victims of Iranian Censorship) Act contains
several provisions to increase U.S. broadcasting to Iran and to identify (in a report to be submitted
180 days after enactment, or April 25, 2009) companies that are selling Iran technology
equipment that it can use to suppress or monitor the internet usage of Iranians. The VOICE Act
also authorizes funds to document Iranian human rights abuses since the June 12, 2009,
presidential election. Another provision of P.L. 111-84 (Section 1241) requires an Administration
41
For information on the steps taken by individual states, see National Conference of State Legislatures. State
Divestment Legislation.
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Iran Sanctions
report, not later than January 31, 2010, on U.S. enforcement of sanctions against Iran, and the
effect of those sanctions on Iran.
S. 1475 and H.R. 3284, the “Reduce Iranian Cyber-Suppression Act,” would authorize the
President to ban U.S. government contracts with foreign companies that sell technology that Iran
could use to monitor or control Iranian usage of the internet. Firms, including a joint venture
between Nokia (Finland) and Siemens (Germany), reportedly sold such technology to Iran in
2008.42 Perhaps to avoid further embarrassment, Siemens announced on January 27, 2010, that it
42
Rhoads, Christopher. “Iran’s Web Spying Aided by Western Technology.” Wall Street Journal, June 22, 2009.
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Iran Sanctions
would stop signing new business deals in Iran as of mid-2010.43 Some question whether such a
sanction might reduce allied cooperation with the United States if allied companies are so
sanctioned. Some provisions along these lines are contained in the Senate version of H.R. 2194.
Also in line with this trend, on March 8, 2010, OFAC amended the Iran Transactions Regulations
that implement the U.S.-Iran trade ban to provide for a general license for providing to Iranians
free mass market software in order to facilitate internet communications. The ruling appears to
incorporate the major features of a legislative proposal, H.R. 4301, the “Iran Digital
Empowerment Act.” The OFAC determination required a waiver of the provision of the Iran-Iraq
Arms Nonproliferation Act (Section 1606 waiver provision) discussed above.
Measures to Sanction Human Rights Abuses and Promote the
Opposition
Another reflection of this trend have been efforts to sanction regime officials involved in
suppressing the domestic opposition in Iran. Senator John McCain proposed to offer amendments
to S. 2799 (the Senate version of what is now H.R. 2194) during Senate consideration of the bill.
These amendments would have focused on
Iran’s human rights abuses and suppression of
protests. Due to procedural issues, the amendments
were not offered and S. 2799 was passed by
voice vote. However, he subsequently introduced S.
3022, the “Iran Human Rights Sanctions
Act,” which would authorize financial sanctions and a
ban on U.S. visas for Iranian officials
determined to have committed human rights abuses against
Iranian citizens. A companion measure in the House is H.R. 4649. Some observers say that, in
anticipated conference action on H.R. 2194, provisions of S. 3022 might be considered for
inclusion in a unified billCompanion measures
in the House are H.R. 4647 and H.R. 4649, which differ only slightly with each other. Some
observers say that the conference committee on H.R. 2194 is likely to include the major
provisions of these bills.
Another bill, introduced by Senator Cornyn and Senator Brownback, (S. 3008) the “Iran
Democratic Transition Act,” calls for a forthright declaration that it is the policy of the United
States to support efforts by the Iranian people to remove the regime from power. It calls for the
use of U.S. broadcasting and humanitarian funds to help democratic organizations in Iran.
Blocked Iranian Property and Assets
Iranian leaders continue to assert that the United States is holding Iranian assets, and that this is
an impediment to improved relations. A U.S.-Iran Claims Tribunal at the Hague continues to
arbitrate cases resulting from the 1980 break in relations and freezing of some of Iran’s assets.
42
43
Rhoads, Christopher. “Iran’s Web Spying Aided by Western Technology.” Wall Street Journal, June 22, 2009.
End, Aurelia. “Siemens Quits Iran Amid Mounting Diplomatic Tensions.” Agence France Press, January 27, 2010.
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Iran Sanctions
Major cases yet to be decided center on hundreds of Foreign Military Sales (FMS) cases between
the United States and the Shah’s regime, which Iran claims it paid for but were unfulfilled. About
$400 million in proceeds from the resale of that equipment was placed in a DOD FMS account,
and about $22 million in Iranian diplomatic property remains blocked, although U.S. funds have
been disbursed—credited against the DOD FMS account—to pay judgments against Iran for past
acts of terrorism against Americans. Other disputes include the mistaken U.S. shoot-down on July
3, 1988, of an Iranian Airbus passenger jet (Iran Air flight 655), for which the United States, in
accordance with an ICJ judgment, paid Iran $61.8 million in compensation ($300,000 per wage
earning victim, $150,000 per non-wage earner) for the 248 Iranians killed. The United States has
not compensated Iran for the airplane itself. As it has in past similar cases, the Bush
43
End, Aurelia. “Siemens Quits Iran Amid Mounting Diplomatic Tensions.” Agence France Press, January 27, 2010.
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Iran Sanctions
Administration opposed a terrorism lawsuit against Iran by victims of the U.S. Embassy Tehran
seizure on the grounds of diplomatic obligation.44
44
See CRS Report RL31258, Suits Against Terrorist States by Victims of Terrorism, by Jennifer K. Elsea.
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Table 4. Entities Sanctioned Under U.N. Resolutions and
U.S. Laws and Executive Orders
(Persons listed are identified by the positions they held when designated; some have since changed.)
Entities Named for Sanctions Under Resolution 1737
Atomic Energy Organization of Iran (AEIO) Mesbah Energy Company (Arak supplier)
Kalaye Electric (Natanz supplier))
Pars Trash Company (centrifuge program) Farayand Technique (centrifuge program)
Defense Industries Organization (DIO)
7th of Tir (DIO subordinate)
Shahid Hemmat Industrial Group (SHIG)—missile program
Shahid Bagheri Industrial Group (SBIG)—missile program
Fajr Industrial Group (missile program)
Mohammad Qanadi, AEIO Vice President
Behman Asgarpour (Arak manager)
Ehsan Monajemi (Natanz construction manager)
Jafar Mohammadi (Adviser to AEIO)
Gen. Hosein Salimi (Commander, IRGC Air Force)
Dawood Agha Jani (Natanz official)
Ali Hajinia Leilabadi (director of Mesbah Energy)
Lt. Gen. Mohammad Mehdi Nejad Nouri (Malak Ashtar University of Defence Technology rector)
Bahmanyar Morteza Bahmanyar (AIO official)
Reza Gholi Esmaeli (AIO official)
Ahmad Vahid Dastjerdi (head of Aerospace Industries Org., AIO)
Maj. Gen. Yahya Rahim Safavi (Commander in Chief, IRGC)
Entities/Persons Added by Resolution 1747
Ammunition and Metallurgy Industries Group (controls 7th of Tir)
Parchin Chemical Industries (branch of DIO)
Karaj Nuclear Research Center
Novin Energy Company
Cruise Missile Industry Group
Sanam Industrial Group (subordinate to AIO)
Ya Mahdi Industries Group
Kavoshyar Company (subsidiary of AEIO)
Sho’a Aviation (produces IRGC light aircraft for asymmetric warfare)
Bank Sepah (funds AIO and subordinate entities)
Esfahan Nuclear Fuel Research and Production Center and Esfahan Nuclear Technology Center
Qods Aeronautics Industries (produces UAV’s, para-gliders for IRGC asymmetric warfare)
Pars Aviation Services Company (maintains IRGC Air Force equipment)
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Gen. Mohammad Baqr Zolqadr (IRGC officer serving as deputy Interior Minister
Brig. Gen. Qasem Soleimani (Qods Force commander)
Fereidoun Abbasi-Davani (senior defense scientist)
Mohasen Fakrizadeh-Mahabai (defense scientist)
Seyed Jaber Safdari (Natanz manager)
Mohsen Hojati (head of Fajr Industrial Group)
Ahmad Derakshandeh (head of Bank Sepah)
Brig. Gen. Mohammad Reza Zahedi (IRGC ground forces commander)
Amir Rahimi (head of Esfahan nuclear facilities)
Mehrdada Akhlaghi Ketabachi (head of SBIG)
Naser Maleki (head of SHIG)
Brig. Gen. Morteza Reza’i (Deputy commander-in-chief, IRGC)
Vice Admiral Ali Akbar Ahmadiyan (chief of IRGC Joint Staff)
Brig. Gen. Mohammad Hejazi (Basij commander)
Entities Added by Resolution 1803
Thirteen Iranians named in Annex 1 to Resolution 1803; all reputedly involved in various aspects of nuclear program
Electro Sanam Co.
Abzar Boresh Kaveh Co. (centrifuge production)
Barzaganin Tejaral Tavanmad Saccal
Jabber Ibn Hayan
Khorasan Metallurgy Industries
Niru Battery Manufacturing Co. (Makes batteries for Iranian military and missile systems)
Ettehad Technical Group (AIO front co.)
Industrial Factories of Precision
Joza Industrial Co.
Pshgam (Pioneer) Energy Industries
Tamas Co. (involved in uranium enrichment)
Safety Equipment Procurement (AIO front, involved in missiles)
Entities Designated Under U.S. Executive Order 13382
(many designations coincident with designations under U.N. resolutions)
Entity
Date Named
Shahid Hemmat Industrial Group (Iran)
June 2005, September 2007
Shahid Bakeri Industrial Group (Iran)
June 2005, February 2009
Atomic Energy Organization of Iran
June 2005
Novin Energy Company (Iran)
January 2006
Mesbah Energy Company (Iran)
January 2006
Four Chinese entities: Beijing Alite Technologies, LIMMT
Economic and Trading Company, China Great Wall Industry
Corp, and China National Precision Machinery
June 2006
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Import/Export Corp.
Sanam Industrial Group (Iran)
July 2006
Ya Mahdi Industries Group (Iran)
July 2006
Bank Sepah (Iran)
January 2007
Defense Industries Organization (Iran)
March 2007
Pars Trash (Iran, nuclear program)
June 2007
Farayand Technique (Iran, nuclear program)
June 2007
Fajr Industries Group (Iran, missile program)
June 2007
Mizan Machine Manufacturing Group (Iran, missile prog.)
June 2007
Aerospace Industries Organization (AIO) (Iran)
September 2007
Korea Mining and Development Corp. (N. Korea)
September 2007
Islamic Revolutionary Guard Corps (IRGC)
October 21, 2007
Ministry of Defense and Armed Forces Logistics
October 21, 2007
Bank Melli (Iran’s largest bank, widely used by Guard); Bank
Melli Iran Zao (Moscow); Melli Bank PC (U.K.)
October 21, 2007
Bank Kargoshaee
October 21, 2007
Arian Bank (joint venture between Melli and Bank Saderat).
Based in Afghanistan
October 21, 2007
Bank Mellat (provides banking services to Iran’s nuclear
sector); Mellat Bank SB CJSC (Armenia). Reportedly has
$1.4 billion in assets in UAE
October 21, 2007
Persia International Bank PLC (U.K.)
October 21, 2007
Khatam ol Anbiya Gharargah Sazendegi Nooh (main IRGC
construction and contracting arm, with $7 billion in oil, gas
deals)
October 21, 2007
Oriental Oil Kish (Iranian oil exploration firm)
October 21, 2007
Ghorb Karbala; Ghorb Nooh (synonymous with Khatam ol
Anbiya)
October 21, 2007
Sepasad Engineering Company (Guard construction affiliate)
October 21, 2007
Omran Sahel (Guard construction affiliate)
October 21, 2007
Sahel Consultant Engineering (Guard construction affiliate)
October 21, 2007
Hara Company
October 21, 2007
Gharargahe Sazandegi Ghaem
October 21, 2007
Bahmanyar Morteza Bahmanyar (AIO, Iran missile official,
see above under Resolution 1737)
October 21, 2007
Ahmad Vahid Dastjerdi (AIO head, Iran missile program)
October 21, 2007
Reza Gholi Esmaeli (AIO, see under Resolution 1737)
October 21, 2007
Morteza Reza’i (deputy commander, IRGC) See also
Resolution 1747
October 21, 2007
Mohammad Hejazi (Basij commander). Also, Resolution
1747
October 21, 2007
Ali Akbar Ahmadian (Chief of IRGC Joint Staff). Resolution
1747
October 21, 2007
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Hosein Salimi (IRGC Air Force commander). Resolution
1737
October 21, 2007
Qasem Soleimani (Qods Force commander). Resolution
1747
October 21, 2007
Future Bank (Bahrain-based but allegedly controlled by Bank
Melli)
March 12, 2008
Yahya Rahim Safavi (former IRGC Commander in Chief
July 8, 2008
Mohsen Fakrizadeh-Mahabadi (senior Defense Ministry
scientist)
July 8, 2008
Dawood Agha-Jani (head of Natanz enrichment site)
July 8, 2008
Mohsen Hojati (head of Fajr Industries, involved in missile
program)
July 8, 2008
Mehrdada Akhlaghi Ketabachi (heads Shahid Bakeri Industrial
Group)
July 8, 2008
Naser Maliki (heads Shahid Hemmat Industrial Group)
July 8, 2008
Tamas Company (involved in uranium enrichment)
July 8, 2008
Shahid Sattari Industries (makes equipment for Shahid
Bakeri)
July 8, 2008
7th of Tir (involved in developing centrifuge technology)
Ammunition and Metallurgy Industries Group (partner of
of Tir)
July 8, 2008
7th
July 8, 2008
Parchin Chemical Industries (deals in chemicals used in
ballistic missile programs)
July 8, 2008
Karaj Nuclear Research Center
August 12, 2008
Esfahan Nuclear Fuel Research and Production Center
(NFRPC)
August 12, 2008
Jabber Ibn Hayyan (reports to Atomic Energy Org. of Iran,
AEIO)
August 12, 2008
Safety Equipment Procurement Company
August 12, 2008
Joza Industrial Company (front company for Shahid Hemmat
Industrial Group, SHIG)
August 12, 2008
Islamic Republic of Iran Shipping Lines (IRISL) and 18
affiliates, including Val Fajr 8; Kazar; Irinvestship; Shipping
Computer Services; Iran o Misr Shipping; Iran o Hind; IRISL
Marine Services; Iriatal Shipping; South Shipping; IRISL
Multimodal; Oasis; IRISL Europe; IRISL Benelux; IRISL China;
Asia Marine Network; CISCO Shipping; and IRISL Malta
September 10, 2008
Firms affiliated to the Ministry of Defense, including
Armament Industries Group; Farasakht Industries; Iran
Aircraft Manufacturing Industrial Co.; Iran Communications
Industries; Iran Electronics Industries; and Shiraz Electronics
Industries
September 17, 2008
Export Development Bank of Iran. Provides financial services
to Iran’s Ministry of Defense and Armed Forces Logistics
October 22, 2008
Assa Corporation (alleged front for Bank Melli involved in
managing property in New York City on behalf of Iran)
December 17, 2008
11 Entities Tied to Bank Melli: Bank Melli Iran Investment
March 3, 2009
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(BMIIC); Bank Melli Printing and Publishing; Melli Investment
Holding; Mehr Cayman Ltd.; Cement Investment and
Development; Mazandaran Cement Co.; Shomal Cement;
Mazandaran Textile; Melli Agrochemical; First Persian Equity
Fund; BMIIC Intel. General Trading
IRGC General Rostam Qasemi, head of Khatem ol-Anbiya
Construction Headquarters (key corporate arm of the
IRGC)
February 10, 2010 (see also October 21, 2007)
Fater Engineering Institute (linked to Khatem ol-Anbiya)
February 10, 2010
Imensazen Consultant Engineers Institute (linked to Khatem
ol-Anbiya
February 10, 2010
Makin Institute (linked to Khatem ol-Anbiya)
February 10, 2010
Rahab Institute (linked to Khatem on-Anbiya)
February 10, 2010
Entities Sanctioned Under Executive Order 13224 (Terrorism Entities)
Qods Force
October 21, 2007
Bank Saderat (allegedly used to funnel Iranian money to
Hezbollah, Hamas, PIJ, and other Iranian supported terrorist
groups)
October 21, 2007
Al Qaeda Operatives in Iran: Saad bin Laden; Mustafa Hamid;
Muhammad Rab’a al-Bahtiyti; Alis Saleh Husain
January 16, 2009
Entities Sanctioned Under the Iran North Korea Syria Non-Proliferation Act and other U.S.
Proliferation Laws
(Executive Order 12938)
Baltic State Technical University and Glavkosmos, both of
Russia
July 30, 1998 (E.O. 12938). Both removed in 2010 –
Baltic on Jan. 29, 2010 and Glavkosmos on March 4,
2010
D. Mendeleyev University of Chemical Technology of Russia
and Moscow Aviation Institute
January 8, 1999 (E.O. 12938). Both removed on May
21, 2010
Norinco (China). For alleged missile technology sale to Iran.
May 2003
Taiwan Foreign Trade General Corporation (Taiwan)
July 4, 2003
Tula Instrument Design Bureau (Russia). For alleged sales of
laser-guided artillery shells to Iran.
September 17, 2003 (also designated under Executive
Order 12938), removed May 21, 2010
13 entities sanctioned including companies from Russia,
China, Belarus, Macedonia, North Korea, UAE, and Taiwan.
April 7, 2004
14 entities from China, North Korea, Belarus, India (two
nuclear scientists, Dr. Surendar and Dr. Y.S.R. Prasad),
Russia, Spain, and Ukraine.
September 29, 2004
14 entities, mostly from China, for alleged supplying of Iran’s
missile program. Many, such as North Korea’s Changgwang
Sinyong and China’s Norinco and Great Wall Industry Corp,
have been sanctioned several times previously. Newly
sanctioned entities included North Korea’s Paeksan
Associated Corporation, and Taiwan’s Ecoma Enterprise Co.
December 2004 and January 2005
9 entities, including those from China (Norinco yet again),
India (two chemical companies), and Austria. Sanctions
against Dr. Surendar of India (see September 29, 2004) were
ended, presumably because of information exonerating him.
December 26, 2005
7 entities. Two Indian chemical companies (Balaji Amines
and Prachi Poly Products); two Russian firms
August 4, 2006 (see below for Rosobornexport
removal)
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Iran Sanctions
(Rosobornexport and aircraft manufacturer Sukhoi); two
North Korean entities (Korean Mining and Industrial
Development, and Korea Pugang Trading); and one Cuban
entity (Center for Genetic Engineering and Biotechnology).
August 4, 2006
9 entities. RosobornesksportRosobornexport, Tula Design, and Komna
Design Design
Office of Machine Building, and Alexei Safonov
(Russia); Zibo
Chemical, China National Aerotechnology,
January 2007
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Iran Sanctions
and China
National Electrical (China). Korean Mining and
Industrial Industrial
Development (North Korea) for WMD or
advanced advanced
weapons sales to Iran (and Syria).
January 2007 (see below for Tula and
Rosoboronexport removal)
14 entities, including Lebanese Hezbollah. Some were
penalized for transactions with Syria. Among the new
entities sanctioned for assisting Iran were Shanghai NonFerrous Metals Pudong Development Trade Company
(China); Iran’s Defense Industries Organization; Sokkia
Company (Singapore); Challenger Corporation (Malaysia);
Target Airfreight (Malaysia); Aerospace Logistics Services
(Mexico); and Arif Durrani (Pakistani national).
April 23, 2007
13 entities: China Xinshidai Co.; China Shipbuilding and
Offshore International Corp.; Huazhong CNC (China);
IRGC; Korea Mining Development Corp. (North Korea);
Korea Taesong Trading Co. (NK); Yolin/Yullin Tech, Inc.
(South Korea); Rosoboronexport (Russia sate arms export
agency); Sudan Master Technology; Sudan Technical Center
Co; Army Supply Bureau (Syria); R and M International
FZCO (UAE); Venezuelan Military Industries Co. (CAVIM);
October 23, 2008. Rosoboronexport removed May
21, 2010.
Entities Designated as Threats to Iraqi Stability under Executive Order 13438
Ahmad Forouzandeh. Commander of the Qods Force
Ramazan Headquarters, accused of fomenting sectarian
violence in Iraq and of organizing training in Iran for Iraqi
Shiite militia fighters
January 9, 2008
Abu Mustafa al-Sheibani. Iran based leader of network that
funnels Iranian arms to Shiite militias in Iraq.
January 9, 2008
Isma’il al-Lami (Abu Dura). Shiite militia leader, breakaway
from Sadr Mahdi Army, alleged to have committed mass
kidnapings and planned assassination attempts against Iraqi
Sunni politicians
January 9, 2008
Mishan al-Jabburi. Financier of Sunni insurgents, owner of
pro-insurgent Al-Zawra television, now banned
January 9, 2008
Al Zawra Television Station
January 9, 2008
Khata’ib Hezbollah (pro-Iranian Mahdi splinter group)
July 2, 2009
Abu Mahdi al-Muhandis
July 2, 2009
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Author Contact Information
Kenneth Katzman
Specialist in Middle Eastern Affairs
kkatzman@crs.loc.gov, 7-7612
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