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Iran Sanctions

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Iran Sanctions Kenneth Katzman Specialist in Middle Eastern Affairs January 10March 21, 2013 Congressional Research Service 7-5700 www.crs.gov RS20871 CRS Report for Congress Prepared for Members and Committees of Congress Iran Sanctions Summary The principal objective of international sanctions—to compel Iran to verifiably confine its nuclear program to purely peaceful usesreach an agreement that ensures that its nuclear program can only be used for civilian purposes—has not been achieved to date. However, a broad international coalition has imposedthe progressively strict sanctions on Iran’s oil export lifeline, adversely affecting key economic sectors have harmed Iran’s economy to the point where key Iran leaders are considering the need for a nuclear compromiseengaging diplomatically with the international community on the nuclear issue. Among the key causes of Iranian leaders’ growing economic worry concern: • Oil exports provide about 70% of Iran’s government revenues, and Iran’s oil exports have declined to about 1.25 million barrels by the end of 2012—a dramatic decline as of March 2013—a halving from the 2.5 million barrels per day Iran exported during 2011. The cause causes of the drop hashave been a European Union embargo on purchases of Iranian crude oil that took full effect on July 1, 2012 coupled with, and decisions by several other Iranian oil customers to substantially reduce purchases of Iranian oil in order to comply with a provision of. To date, 20 of Iran’s oil customers have reduced Iranian oil imports sufficiently to achieve an exemption from U.S. sanctions under the FY2012 National Defense Authorization Act (P.L. 112-81). To date, 20 countries have been deemed in compliance. 112-81). • The loss of hard currency revenues from oil—, coupled with the cut-off of Iran from the international banking system and the decline of Iran’s foreign exchange reserves—, has caused a collapse in the value of Iran’s currency, the rial, in early October. That collapse prompted street demonstrations and, in response, Iran has tried to impose currency controls and arrested some illegal currency traders. These steps have not restored public confidence in the regime’s economic management—inflation has soared, industrial production has fallen, and some of the more expensive medicines are reported to be in short supply. That collapse prompted street demonstrations in October 2012, and increased inflation to over 50%, according to many experts. There have also been unintended consequences that include a shortage of some advanced Western-made medicines. • The Iranian government and Iranian citizens, particularly those linked to the government, are finding ways around the sanctions, including creating front companies, using informal banking exchange mechanisms, cornering the market for some imports, investing in hard assets such as real estate and precious metals, and profiting from the drop in the value of Iran’s currency. Sanctions may be slowing Iran’s nuclear and missile programs by hampering Iran’s ability to obtain some needed technology from foreign sources. However, Department of Defense and other assessments indicate that sanctions have not stopped Iran from developing some new weaponry with indigenous skillsindigenously. Iran is also judged not complying with U.N. requirements that it halt any weapons weapons shipments outside its borders, particularly with regard to purported Iranian weapons shipments to help by providing arms to the embattled Assad government in Syria. And, international sanctions targeting the regime’s human rights abuses do not appear to have altered Iran’s repression of dissent or its its efforts to monitor public use of the Internet. Despite the imposition of what many now consider to be “crippling” sanctions, some in Congress believe that economic pressure on Iran needs to increase further and faster. In the 112th Congress, H.R. 1905, P.L. 112-158 (“ the Iran Threat Reduction and Syria Human Rights Act of 2012”), makes sanctionable numerous additional forms of foreign energy dealings with Iran, including shipments of crude oil, and enhances (P.L. 112-158) made sanctionable the shipping of Iranian crude oil, and it enhanced human rights-related provisions of previous Iran sanctions -related laws. A provision of the FY2013 National Defense Authorization Act (H.R. 4310, signed into law on January 2, 2013, as P.L. 112-239) sanctions transactions with several key sectors of Iran’s economic infrastructure such as energy and shipbuilding, and punishes sales of many material inputs for manufacturing. inputs for manufacturing. A bill in the 113th Congress, H.R. 850, would authorize, but not mandate, U.S. sanctions against nearly all trade with Iran. For a broader analysis of policy on Iran, see CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth Katzman. Congressional Research Service Iran Sanctions Contents Overview and Objectives ................................................................................................................. 1 Energy Sector Sanctions: The Iran Sanctions Act (ISA) and Related Laws and Executive Orders ........................................................................................................................................... 12 The Iran Sanctions Act and Amendments.................................................................................. 2 Key “Triggers” .................................................................................................................... 23 Mandate and Time Frame to Investigate ISA Violations..................................................... 6 Available Sanctions Under ISA ........................................................................................... 7 Waivers, Exemptions, and Termination Authority .............................................................. 89 Termination Requirements .................................................................................................. 9 Sunset Provisions ................................................................................................................ 9 10 Interpretations and Implementation of ISA and Related Laws ................................................ 10 Application to Crude Oil or Natural Gas Purchases from Iran ......................................... 10 Application to Sales to Iran of Energy-Related Equipment .............................................. 10 Application to Financing but Not Official Credit Guarantee Agencies............................. 10 Application to Energy Pipelines ........................................................................................ 11 Application to Iranian Energy Institutions/NIOC and NITC ............................................ 11 Application to the Revolutionary Guard ........................................................................... 12 Application to Liquefied Natural Gas ............................................................................... 13 Sanctions Imposed Under ISA ................................................................................................ 13 ISA Sanctions Determinations and Exemptions................................................................ 14 Sanctioning Oil Payments to Iran’s Central Bank: Section 1245 of FY2012 National Defense Authorization Act (P.L. 112-81) ............................................................................. 17 Implementation/Exemptions Issued .................................................................................. 18 P.L. 112-158 Impedes Repatriation of Hard Currency to Iran........................................... 19 Related MeasuresExpanded Sanctions on Trade with Iran Imposed by FY2013 National Defense Authorization Bill (H.R. 4310, P.L. 112-239) .............................................................................................................. 20 19 Ban on U.S. Trade and Investment Withwith Iran ................................................................................. 20 21 Major Provisions of the Trade and Investment Ban: What isIs Allowed or Prohibited .............. 21 Implementation ........................................................................................................................ 23 21 Non-Application to Refined Oil Withwith Iranian Content ...................................................... 22 23 Application to Humanitarian Donations and Support ....................................................... 23 Application to Foreign Subsidiaries of U.S. Firms ........................................................... 2423 Financial Sanctions: CISADA and Sanctions on Dealings with Iran’s Central Bank.................... 2623 Early Efforts: Targeted Financial Measures ............................................................................ 2624 Banking Provisions of CISADA ............................................................................................. 2724 Related Measure Added by FY2013 National Defense Authorization Act ....................... 2825 Sanctions Imposed............................................................................................................. 2825 Section 311 of the Patriot Act .................................................................................................. 2825 Executive Order 13599 on Impounding Iranian Assets.......................................................... 26 28 Sanctions on Iran’s Central Bank ....................................in the FY2012 NDAA.................................................. 2926 Electronic Payments (SWIFT) Cutoff ............................................................................... 2926 Terrorism-Related Sanctions.......................................................................................................... 2926 Sanctions Triggered by Terrorism List Designation: Ban on U.S. Aid, Arms Sales, Dual-Use Exports, and Certain Programs for Iran ............................................................... 2926 No Ban on U.S. Official Humanitarian Aid ...................................................................... 3027 Executive Order 13224: Sanctioning Terrorism Supporting Entities ...................................... 30 Congressional Research Service Iran Sanctions 27 Implementation.................................................................................................................. 30 27 Congressional Research Service Iran Sanctions Proliferation-Related U.S. Sanctions ............................................................................................. 3128 Iran-Iraq Arms Nonproliferation Act ....................................................................................... 3128 Iran-North Korea-Syria Nonproliferation Act ......................................................................... 3128 Executive Order 13382 ............................................................................................................ 3229 Implementation.................................................................................................................. 3229 Foreign Aid Restrictions for Suppliers of Iran ........................................................................ 3229 U.S. Efforts to Promote Divestment .............................................................................................. 3229 U.S. Sanctions Intended to Support Democratic Change in Iran or Alter Iran’s Foreign Policy .......................................................................................................................................... 3230 Expanding Internet and Communications Freedoms ............................................................... 3330 CISADA Provisions .......................................................................................................... 3330 March 2010 Administration Regulations: Providing Free Software to Iranians ............... 3330 Executive Order 13606, P.L. 112-158, Executive Order 13628 ........................................ 3431 Measures to Sanction Human Rights Abuses and Promote the Opposition ............................ 3532 Section 105 of CISADA and Executive Order 13553 ....................................................... 3532 Executive Order 13438 and 13572: Sanctioning Iranian Involvement in the Region .................................................................................................................. 3633 Separate Visa Ban.............................................................................................................. 3633 Blocked Iranian Property and Assets ............................................................................................. 3734 U.N. Sanctions ............................................................................................................................... 3735 International Implementation and Compliance.............................................................................. 3936 Iran Evasion Attempts ............................................................................................................. 37 European Union ....................................................................................................................... 3937 EU Oil Embargo and Central Bank of Iran Cutoff ............................................................ 4037 Japan and South Korea ............................................................................................................ 4239 India ......................................................................................................................................... 4240 Pakistan ................................................................................................................................... 4341 China and Russia ..................................................................................................................... 4341 China ................................................................................................................................. 4341 Turkey/CaucususCaucasus ..................................................................................................................... 4442 Armenia ............................................................................................................................. 4542 Persian Gulf and Other Regional States Iraq .............................................................................................................. 45 Afghanistan . 43 Afghanistan............................................................................................................................. 45. 43 Latin America .......................................................................................................................... 4644 Africa ....................................................................................................................................... 4644 Contrast Withwith Previous Periods ................................................................................................ 4644 World Bank Loans ................................................................................................................... 4745 Effectiveness of Sanctions on Iran ................................................................................................. 5149 Effect on Iran’s Nuclear Program Decisions and Capabilities ................................................ 5249 Counter-Proliferation Effects ............................................................................................. 52...... 49 Effects on Iran’s Regional Political and Military Influence .................................................... 5349 General Political Effects .......................................................................................................... 5350 Human Rights-Related Effects ................................................................................................ 5450 Economic Effects/Currency Collapse .......................................................................................... 54........................... 51 Foreign Companies Exiting the Iran Market ..................................................................... 5754 Foreign Firms Reportedly Remaining in the Iran Market ................................................. 5856 Effect on Energy Sector Long-Term Development ................................................................. 5957 Concerns About “Backfill”................................................................................................ 59 58 Congressional Research Service Iran Sanctions Effect on Gasoline Availability and Importation ............................................................... 6564 Humanitarian Effects/Air Safety ............................................................................................. 6766 Possible Additional Sanctions........................................................................................................ 67 U.S. Legislative Initiatives in 2012 66 H.R. 850 .............................................................................................................................. 68 Possible Additional U.S. or.... 67 Other Possible U.S. and International Sanctions ................................................................... 68.. 67 Sanctions Easing/Incentives .................................................................................................... 7068 Tables Table 1. Summary of Provisions of U.N. Resolutions on Iran Nuclear Program (1737, 1747, 1803, and 1929) ................................................................................................................ 3836 Table 2. Top Energy Buyers From Iran and Reductions ................................................................ 4139 Table 3. Comparison Between U.S., U.N., and EU and Allied Country Sanctions ....................... 4846 Table 4. Post-1999 Major Investments/Major Development Projects in Iran’s Energy Sector ............................................................................................................... 6059 Table 5. Firms That Sold or Are Selling Gasoline to Iran.............................................................. 6665 Table 6. Entities Sanctioned Under U.N. Resolutions and U.S. Laws and Executive Orders ................................................................................................ 7170 Contacts Author Contact Information........................................................................................................... 8180 Congressional Research Service Iran Sanctions Overview and Objectives U.S. sanctions have been a major feature of U.S. Iran policy since Iran’s 1979 Islamic revolution, but U.N. and worldwide bilateral sanctions on Iran are a relatively recent (post-2006) development. Many of the U.S. sanctions overlap each other as well as with the U.N. sanctions and national measures of European and some Asian countries now in place. Some U.S. sanctions, particularly the 1996 Iran Sanctions Act (ISA), caused differences of opinion between the United States and its European allies because they mandate U.S. imposition of sanctions on foreign firms. Successive Administrations have sought to ensure that U.S. sanctions do not hamper cooperation with key international partners whose support is needed to isolate Iran. Almost all U.S. sanctions provisions provide the President with waiver authority; those provisions that do not provide waiver authority are noted in this paper. Some U.S. sanctions have been enacted into law, some have been imposed by executive order (under the International Emergency Economic Powers Act, IEEPA, and other authorities), and others based on administration determinations authorized by law (for example sanctions triggered by Iran’s designation as a state sponsor of terrorism). The objectives of U.S. sanctions have evolved over time. In the mid-1980s, U.S. sanctions were intended to try to compel Iran to cease supporting acts of terrorism and to limit Iran’s strategic power in the Middle East more generally. Since the mid-1990s, U.S. sanctions have focused increasingly on persuading or compelling Iran to limit the scope of its nuclear program to purposes that can only be civilian. As Iran’s nuclear program has been increasingly identified as a potential threat to stability in the Middle East and global energy supplies, the international community has joined U.S. sanctions to try to force Iran to verifiably demonstrate that the program is for purely peaceful purposes. This report analyzes U.S. and international sanctions against Iran and, in so doing, provides examples, based on a wide range of open source reporting, of companies and countries that conduct business with Iran. CRS has no way to independently corroborate any of the reporting on which these examples are based and no mandate to assess whether any entity is complying with U.S. or international sanctions against Iran. SomeImplementation of some of the sanctions areis subject to interpretation regarding implementation. On November 13, 2012, the Administration published in the Federal Register (Volume 77, Number 219) “Policy Guidance” explaining how it intends to implement many of the sanctions discussed below.1 The guidance also sets out examples of specific products and chemicals that are included in the definitions of such terms as “petroleum,” “petroleum products,” and “petrochemical products” that are used in the laws and executive orders discussed below. 1 http://www.regulations.gov/#!documentDetail;D=DOS_FRDOC_0001-2175. Congressional Research Service 1 Iran Sanctions Energy Sector Sanctions: The Iran Sanctions Act (ISA) and Related Laws and Executive Orders Since 1996, Congress and successive Administrations have put in place steps to try to force foreign energy firms to choose between participating in the U.S. market, or continuing to operate in or conduct various energy-related transactions with Iran. 1 http://www.regulations.gov/#!documentDetail;D=DOS_FRDOC_0001-2175 Congressional Research Service 1 Iran Sanctions The Iran Sanctions Act and Amendments The Iran Sanctions Act (ISA) is the core of the energy-related U.S. sanctions. It took advantage of the opportunity for the United States to try to harm Iran’s energy sector when Iran, in November 1995, opened the sector to foreign investment. To accommodate its insistence on retaining control of its national resources, Iran used a “buy-back” investment program in which foreign firms gradually recoup their investments as oil and gas is discovered and then produced. 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). Since its enactment in 1996, ISA has attracted substantial attention because it is an “extraterritorial sanction”—it authorizes U.S. penalties against foreign firms, many of which are incorporated in countries that are U.S. allies. American firms are separately restricted from trading with or investing in Iran under separate U.S. executive orders, as discussed below. Its application has been further expanded by the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2012 (CISADA, P.L. 111-195 enacted July 1, 2010), Executive Order 13590 of November 21, 2011, Executive Order 13622 of July 30, 2012, and the Iran Threat Reduction and Syria Human Rights Act of 2012 (H.R. 1905, P.L. 112-158, signed August 10, 2012).several laws enacted since 2010, as discussed below. In addition, several executive orders have been issued that authorize the application of ISA sanctions to specified violators, but the executive orders do not amend ISA itself. (An executive order cannot amend a law passed by Congress and signed by the President.) 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 (which is about $870 billion), about 80% of its foreign exchange earnings, and about 50% of its government revenue for 2012. Iran’s oil sector is as old as the petroleum industry itself (early 20th century), and Iran’s onshore oil fields are past peak production and in need of substantial investment. Iran has 136.3 billion barrels of proven oil reserves, the third largest after Saudi Arabia and Canada. With the exception of relatively small swap and barter arrangements with neighboring countries, virtually all of Iran’s oil exports flow through the Strait of Hormuz, which carries about one-third of all internationally traded oil exported by Iran and other countries on the Persian Gulf. Iran’s large natural gas resources (940 trillion cubic feet, exceeded only by Russia) were virtually undeveloped when ISA was first enacted. Its gas exports are small, and most of its gas is injected into its oil fields to boost their production. Congressional Research Service 2 Iran Sanctions Key “Triggers” 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. When triggered, 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 act against one of its firms. Congressional Research Service 2 Iran Sanctions Sanctions imposed against violators are discussed below, unless specified. Original Trigger: “Investment” in Iran’s Energy Sector ISA primarily targets foreign firms, because American firms are already prohibited from investing in Iran under the 1995 trade and investment ban discussed below. The original version of ISA requires the President to sanction companies (entities, persons) that make an “investment”2 of more than $20 million3 in one year in Iran’s energy sector.4 The definition of “investment” in ISA (§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. CISADAThe Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA, P.L. 111-195) did not alter this trigger but it did amend the definition of investment to explicitly include pipelines to or through Iran and contracts to lead the construction, upgrading, or expansions of energy projects. Trigger Added: Sales of Weapons of Mass Destruction and Advanced Conventional Weapons-Related Technology The Iran Freedom Support Act (P.L. 109-293, signed September 30, 2006) amended ISA to add a —by adding Section 5(b)(1)—to add a trigger: that ISA sanctions should be imposed on firms or persons who sell to Iran (or to persons who the exporter knows will re-export to Iran) technology useful for weapons of mass destruction (WMD) or “destabilizing numbers and types” of advanced conventional weapons. No sanctions have been imposed on any entity under Section 5(b)(1)sanctions should be imposed on entities that sell to Iran weapons of mass destruction (WMD) technology or “destabilizing numbers and types” of advanced conventional weapons. Trigger Added by CISADA: Sales of Gasoline and Related Equipment and Services The originally enacted version of ISA did not address Iran’s gasoline dependency because that version did not make sanctionable sales to Iran of gasoline or of equipment with which Iran can itself build or expand its refineries or import gasoline.5 And, it did not clearly make sanctionable Iranian investments in oil refineries abroad. In 2010, many in Congress argued that ISA should be amended to address Iran’s dependency on gasoline imports—which at that time constituted about 40% of Iran’s total gasoline needs—and there were a limited group of major gasoline suppliers to Iran. Others believed that sanction would not be effective because the Iranian government could circumvent its effects through rationing, reducing gasoline subsidies, or increasing gasoline production. 2 As amended by CISADA (P.L. 111-195), these definitions include pipelines to or through Iran, as well as contracts to lead the construction, upgrading, or expansions of energy projects. CISADA also changes the definition of investment to eliminate the exemption from sanctions for sales of energy-related equipment to Iran, if such sales are structured as investments or ongoing profit-earning ventures. 3 Under §4(d) of the original 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. However, P.L. 111-195 explicit sets the threshold investment level at $20 million. 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). 4 The original ISA definition of energy sector included oil and natural gas, and CISADA added to that definition: liquefied natural gas (LNG), oil or LNG tankers, and products to make or transport pipelines that transport oil or LNG. 5 Taking responsibility for constructing oil refineries or petrochemical plants in Iran (for example managing or playing a major role in the construction contracts) did constitute sanctionable projects under the original version of ISA because ISA’s definition of investment includes “responsibility for the development of petroleum resources located in Iran.” Table 4 provides some information on openly announced contracts to upgrade or refurbish Iranian oil refineries. Congressional Research Service 3 Iran Sanctions An effort to sanction gasoline sales—H.R. 2880—failed in the 110th Congress. In the 111th Congress, a few initiatives to sanction sales of gasoline to Iran were adopted. These included the FY2010 Energy and Water Appropriation (P.L. 111-85, October 28, 2009), which prohibited the use of U.S. funds to fill the Strategic Petroleum Reserve with products from firms that sell over $1 million worth of gasoline to Iran., and the FY2010 consolidated appropriation (P.L. 111-117) denied Ex-Im Bank credits to any firm that sold gasoline and related equipment and services to Iran. These initiatives did deter some gasoline sales to Iran, including prompting a decision in December 2008 by Reliance Industries Ltd. of India to at least temporarily cease new sales of refined gasoline to Iran. The Ex-Im Bank, in August 2008, had extended a total of $900 million in Congressional Research Service 3 Iran Sanctions Trigger Added by CISADA: Sales of Gasoline and Related Equipment and Services The originally enacted version of ISA did not address Iran’s gasoline dependency because that version did not make sanctionable sales to Iran of gasoline or of equipment with which Iran can itself build or expand its refineries or import gasoline.5 And it did not clearly make sanctionable Iranian investments in oil refineries abroad. Many in Congress argued that ISA should be amended to address Iran’s dependency on gasoline imports—which at that time constituted about 40% of Iran’s total gasoline needs. Others believed that Iran could easily circumvent the effects of this sanction through rationing, reducing gasoline subsidies, or increasing gasoline production. A bill in the 110th Congress to sanction gasoline sales (H.R. 2880) was not enacted. In the 111th Congress, a few related initiatives were enacted, including the FY2010 Energy and Water Appropriation (P.L. 111-85, October 28, 2009), which prohibited the use of U.S. funds to fill the Strategic Petroleum Reserve with products from firms that sell over $1 million worth of gasoline to Iran. The FY2010 Consolidated Appropriations Act (P.L. 111-117) denied Ex-Im Bank credits to any firm that sold gasoline and related equipment and services to Iran. These initiatives did prompt a decision in December 2008 by Reliance Industries Ltd. of India to at least temporarily cease new sales of refined gasoline to Iran. The Ex-Im Bank, in August 2008, had extended a total of $900 million in financing guarantees to Reliance to help it expand. CISADA Enactment and Provisions. Later in the 111th Congress, H.R. 2194, (Iran Refined Petroleum Sanctions Act), containing the gasoline-related provisions discussed above, was passed was passed by the House on December 15, 2009, by a vote of 412-12. 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, 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; it added to the House bill several provisions beyond amending ISA—provisions affecting U.S.-Iran trade and other issues. The conference report more closely resembled the more expansive Senate version. The President signed the final version—the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA) on July 1, 2010 (P.L. 111-195). CISADA’s main provisions to amend ISA made, which, among other provisions, amended ISA to make sanctionable: • Sales to Iran of over $1 million worth (or $5 million in a one year period) of gasoline and related aviation and other fuels. (Fuel oil, a petroleum by-product which is reportedly being sold to Iran by exporters in the Kurdish region of Iraq, is not included in the definition of refined petroleum.) • Sales to Iran of equipment or services (same dollar threshold as above) which would help Iran make or import gasoline. Examples of such sales include equipment and services that Iran can use to construct or maintain its oil refineries, or provision of services such as gasoline shipping or related port operations. Executive Order 13590 (November 21, 2011): Application of ISA to Sales of Energy Sector Equipment and Services, Including Petrochemicals In the wake of a November 8, 2011, IAEA report indicating Iran might have worked on nuclear explosive technology, on November 21, 2011, the Administration issued Executive Order 13590, under the International Emergency Economic Powers Act (IEEPA). The Order expanding on the authorities of the Iran Sanctions Act by directing the Secretary of State to impose at least one (1) of the available ISA sanctions on foreign firms that:5 Taking responsibility for constructing oil refineries or petrochemical plants in Iran (for example managing or playing a major role in the construction contracts) did constitute sanctionable projects under the original version of ISA because ISA’s definition of investment includes “responsibility for the development of petroleum resources located in Iran.” Table 4 provides some information on openly announced contracts to upgrade or refurbish Iranian oil refineries. Congressional Research Service 4 Iran Sanctions Trigger Added by Executive Order 13590 (November 21, 2011) and the Iran Threat Reduction and Syria Human Rights Act (P.L. 112-158): Sanctioning Sales of Energy Sector Equipment and Services, Including Petrochemicals In the wake of a November 8, 2011, IAEA report indicating Iran might have worked on nuclear explosive technology, on November 21, 2011, the Administration issued Executive Order 13590 to sanction sales to Iran of equipment it can use in its energy sector. As noted above, the executive order did not—and cannot—amend ISA itself. However, the order was later codified in Section 201 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (P.L. 112-158), which added Section 5(a)(5 and 6) to ISA. The provisions sanctions firms that • Provide to Iran $1 million or more (or $5 million in a one year period) worth of goods or services that Iran could use to maintain or enhance its oil and gas sector. This made sanctionable the activity in Iran of, for example, transactions with Iran by global oil services firms and the sale to Iran of gear typically used in the oil industryenergy industry gear such as drills, pumps, vacuums, oil rigs, and the like. Congressional Research Service 4 Iran Sanctions • Provide to Iran $250,000 (or $1 million in a one year period) worth of goods or services that Iran could use to maintain or expand its production of petrochemical products.6 • These two triggers—sale to Iran of general oil industry equipment and of petrochemical production equipment—were codified in Section 201 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (P.L. 112-158). All ISA provisions, such as time frame to begin and complete an investigation of suspected transactions and other provisions, therefore apply to these transactions. Trigger Added by Executive Order 13622 of July 30, 2012: Purchasing of Iranian Crude Oil and Petrochemical Products and Provision of Precious Metals On July 30, 2012, President Obama issued Executive Order 13622 applying virtually all of the . As discussed above, an executive order cannot amend a law, and Executive Order 13622 does not amend ISA. The order applies virtually all of the ISA sanctions—and restrictions on foreign banks—to entities that the President determines have: • purchased oil or other petroleum products from Iran,7 • conducted transactions with the National Iranian Oil Company (NIOC) or Naftiran Intertrade Company (NICO), or • purchased petrochemical products from Iran. Under the Executive Order, sanctionsSanctions do not apply if the parent country of the entity conducting these transactions has received an exemption under Section 1245 of P.L. 112-81—an exemption earned for “significantly reducing” oil purchases from Iran. (See below for more information on the Section 1245 sanctions and exemption process.) The E.O.Section 5 of Executive Order 13622 also blocks U.S.-based property of firms individuals or firms determined to have provided financial support to NIOC, NICO, or the Central Bank of Iran, or to have helped Iran purchase U.S. bank notes or precious metals precious metals. This section of the order would 6 A definition of what chemicals and products are considered “petrochemical products” is found in a Policy Guidance statement published in the Federal Register on November 13, 2012. http://www.regulations.gov/ #!documentDetail;D=DOS_FRDOC_0001-2175 7 A definition of what chemicals and products are considered “petroleum products” for the purposes of the order are in the policy guidance issued November 13, 2012. http://www.regulations.gov/ #!documentDetail;D=DOS_FRDOC_0001-2175. Congressional Research Service 5 Iran Sanctions presumably affect foreign firms that transfer gold or other precious metals to Iran in exchange for oil. Triggers Added by the Iran Threat Reduction and Syria Act (P.L. 112-158, H.R. 1905) Section 201 of the Iran Threat Reduction and Syria Human Rights Act (P.L. 112-158, signed August 10, 2012) amends ISA —or applies ISA sanctions—by adding several sanctions triggers, including: including • ownership of a vessel that is used to transport Iranian crude oil. This sanction does not apply in cases of transporting oil to countries that have received exemptions under P.L. 112-81, discussed below. The section also authorizes but does not require the President, subject to regulations, to prohibit a ship from 6 A definition of what chemicals and products are considered “petrochemical products” is found in a Policy Guidance statement published in the Federal Register on November 13, 2012. http://www.regulations.gov/#!documentDetail;D=DOS_FRDOC_0001-2175 7 A definition of what chemicals and products are considered “petroleum products” for the purposes of the Order are in the policy guidance issued November 13, 2012. http://www.regulations.gov/#!documentDetail;D=DOS_FRDOC_0001-2175 Congressional Research Service 5 Iran Sanctions putting to port in the United States for two years, if it is owned by a person sanctioned under this provision. (Adds Section 5(a)(7) to ISA.) • Participation in a joint oil and gas development venture with Iran, outside Iran, if that venture was established after January 1, 2002. The effective date carves out an exemption for exempts energy ventures in the Caspian Sea, such as the Shah Deniz oil field there. (Adds Section 5(a)(4) to ISA.) • Participation in a joint venture with Iran relating to the mining, production, or transportation of uranium. • Purchasing or facilitating the issuance of sovereign debt of the government of Iran, including Iranian government bonds. • Selling threshold amounts of energy industry equipment, including for the production of petrochemicals. This provision represents a codification of Executive Order 13590, above. A separate provision of this law (Section 212) requires application of the “five out of twelve” ISA sanctions on any company (Adds Section 5(b)(2) to ISA.) • Selling threshold amounts of energy industry equipment, including for the production of petrochemicals. This provision codifies Executive Order 13590, as discussed above, and adds Section 5(a)(5 and 6 to ISA). Separate provisions of this law (§§212, 213, and 302) do not specifically amend ISA, but require the application of five out of 12 ISA sanctions on any company: • that provides insurance or re-insurance for the National Iranian Oil Company Company (NIOC) or the National Iranian Tanker Company (NITC). The provision does not specifically amend ISA. Another provision, Section 302, requires the application of the 5 out of 12 ISA sanctions against any person determined to have engaged; • that purchases or facilitates the issuance of sovereign debt of the government of Iran, including Iranian government bonds; or • that engages in a “significant transaction” with the Islamic Revolutionary Guard Corps (IRGC) or any of its officials, agents, or affiliates. The provision does not specifically amend ISA. Executive Order 13628 of October 9, 2012 On October 9, 2012, the Administration issued Executive Order 13628. The Order implements the Iran Threat Reduction and Syria Human Rights Act primarily by specifying the separate authorities of the Department of State and the Department of the Treasury to impose the selected sanctions. The Order also blocks the property of those Iranians deemed to have committed censorship or limited free expression in Iran, as discussed further below Corps (IRGC) or any of its officials, agents, or affiliates. Mandate and Time Frame to Investigate ISA Violations In the original version of ISA, there was no firm requirement, and no time limit, for the Administration to investigate potential violations and determine that a firm has violated ISA’s provisions. CISADA, Section 102(g)(5), altered that by mandating that the Administration begin an investigation of potential ISA violations when there is “credible information” about a potential violation. The same section made mandatory the 180-day time limit for a determination of violation. Under Section 102(h)(5), the mandate to investigate gasoline related sales can be delayed an additional 180 days if an Administration report, submitted to Congress by June 1, 2011, asserts that its policies have produced a significant result in sales of gasoline to Iran. No such report was submitted. Congressional Research Service 6 Iran Sanctions However, there was still a lack of precision over what constitutes “credible information” that an investment or sanctionable sale has been undertaken. P.L. 112-158 (Iran Threat Reduction and Syria Human Rights Act) contains a provision amending ISA to provide a specific definition of “credible information,” including a corporate Congressional Research Service 6 Iran Sanctions announcement or corporate filing to its shareholders that it has undertaken transactions with Iran that are potentially sanctionable under ISA. Earlier, P.L. 109-293, the “Iran Freedom Support Act” (signed September 30, 2006) amended 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).8 Early versions of that legislation (H.R. 282, S. 333) contained ISA amendment proposals that were viewed by the Bush Administration as too restrictive, including 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. Oversight Mechanisms: Reports Required The Iran Threat Reduction and Syria Human Rights Act (P.L. 112-158) sets up several mechanisms for Congress to oversee whether the Administration is investigating ISA violations. Section 223 requires a Government Accountability Office report, within 120 days of enactment, and another such report a year later, on companies that have undertaken specified activities with Iran that might constitute violations of ISA. Section 224 amends a reporting requirement in Section 110(b) of CISADA by requiring an Administration report every 180 days on investment in Iran’s energy sector, joint ventures with Iran, and estimates of Iran’s imports and exports of petroleum products. The GAO reports have been issued; there is no information available on whether the required Administration reports have been issued as well. Available Sanctions Under ISA Once a firm is determined to be a violator, the original version of ISA required the imposition of two of a menu of six sanctions on that firm. CISADA added three new possible sanctions and required the imposition of at least three out of the nine against violators. H.R. 1905 amends ISA by adding three available sanctions and requiring imposition on 5 out of the 12 available sanctions. Executive Order 13590, and the July 30, 2012, Executive Orderexecutive order, discussed above, provide for exactly the same penalties as those in ISA. The 12 available sanctions against the sanctioned entity, from which the Secretary of State or the Treasury can select at least 5 (§6), include: 1. denial of Export-Import Bank loans, credits, or credit guarantees for U.S. exports to the sanctioned entity (original ISA); 2. denial of licenses for the U.S. export of military or militarily useful technology to the entity (original ISA); 3. denial of U.S. bank loans exceeding $10 million in one year to the entity (original ISA); 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) (original ISA); 8 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 moneylaundering for use to further WMD programs. Congressional Research Service 7 Iran Sanctions 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) (original ISA); 5. prohibition on U.S. government procurement from the entity (original ISA); 6. prohibitions in transactions in foreign exchange by the entity (added by CISADA); 7. prohibition on any credit or payments between the entity and any U.S. financial institution (added by CISADA); 8. prohibition of the sanctioned entity from acquiring, holding, using, or trading any U.S.-based property which the sanctioned entity has a (financial) interest in (added by CISADA); 9. restriction on imports from the sanctioned entity, in accordance with the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. 1701) (original ISA); 10. a ban on a U.S. person from investing in or purchasing significant amounts of equity or debt instruments of a sanctioned person (added by Iran Threat Reduction and Syria Human Rights Act, P.L. 112-158); 11. exclusion from the United States of corporate officers or controlling shareholders of a sanctioned firm (added by P.L. 112-158). 12. imposition of any of the ISA sanctions on principal offices of a sanctioned firm (added by P.L. 112-158). Mandatory ISA Sanction Imposed by CISADA: Prohibition on Contracts With with the U.S. Government There is a mandatory sanction under ISA, in addition to the “five5 out of twelve12” menu above. CISADA CISADA (§102(b)) added a requirement in ISA that companies, as a condition of obtaining a U.S. government contract, certify to the relevant U.S. government agency, that the firm—and any companies it owns or controls—are not violating ISA. A provision added by P.L. 112-158 (Section 311) also requires a certification that the contractor is not knowingly engaging in a significant transaction with Iran’s Islamic Revolutionary Guard Corps (IRGC), or any of its agents or affiliates that have been sanctioned under several Executive Ordersexecutive orders discussed below. A contract may be terminated—and further penalties imposed—if it is determined that the company’s certification of compliance was false. CISADA and P.L. 112-158 required revisions of the Federal Acquisition Regulation to reflect these requirements. The CISADA requirement was imposed in regulations, as per an interim rule issued on September 29, 2010, and presumably the same procedure will be followed for the P.L. 112-158 amendments. A GAO report to Congress of February 25, 2013, found that one foreign firm that is active in Iran’s energy sector, Daelim of South Korea, had received a U.S. government contract ($1.5 million to build housing at a military base in South Korea) during June 2011-December 2012.9 9 GAO-13-344R Iran. Congressional Research Service 8 Iran Sanctions Waivers, Exemptions, and Termination Authority The President had the authority under the original version of ISA to waive sanctions if he certifies that doing so is important to the U.S. national interest (§9(c)). CISADA (§102(c)) changed the 9(c) ISA waiver standard to “necessary” to the national interest. H.R. 1905 modifies the standard somewhat to “essential to the national security interests” of the United States. For sanctionable transactions involving WMD equipment, the waiver standard, as modified by P.L. 112-158, is “‘vital’ to the national security interests.” Congressional Research Service 8 Iran Sanctions Under the original version of ISA, there was also waiver authority (§4(c)) if the parent country of the violating firm joined a sanctions regime against Iran, but this waiver provision was changed by the Iran Freedom Support Act (P.L. 109-293) to allow for a waiver determination based on U.S. vital national security interests. The Section 4(c) waiver was altered by CISADA to provide for a six month (extendable) waiver if doing so is vital to the national interest and if the parent country of the violating entity is “closely cooperating” with U.S. efforts against Iran’s WMD and advanced conventional weapons program. The criteria of “closely cooperating” are defined in the conference report, with primary focus on implementing all U.N. sanctions against Iran. It could be argued that using a Section 4 waiver, rather than a Section 9 waiver, would support U.S. diplomacy with the parent country of the offending entity. ISA (§5(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 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, 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). “Special Rule” Exempting Firms That End Their Business Withwith Iran ISA, under a provision added by CISADA (§102(g)(5)), provides a means—a so-called “special rule”—for firms to avoid any possibility of U.S. sanctions by pledging to verifiably end their business with Iran and to forgo any sanctionable business with Iran in the future. Under the special rule, the Administration is not required to make a determination of sanctionability against a firm that makes such pledges. The special rule has been invoked on several occasions, as discussed below. However, there is some imprecision in the time frame under which countries can wind down their Iran business, and some firms could yet be working in Iran for several more years under their pledges. Energy firms insist they needed time to wind down their investments in Iran because, under the buy-back program used by Iran, the energy firms are paid back their investment over time, making it highly costly for them to suddenly end operations in Iran. Termination Requirements In its entirety, ISA application to Iran would terminate if the Administration determines that Iran has ceased its efforts to acquire WMD; is removed from the U.S. list of state sponsors of Congressional Research Service 9 Iran Sanctions terrorism; and no longer “poses a significant threat” to U.S. national security and U.S. allies.9 The 10 The amendments to ISA made by CISADA (sanctions for selling gasoline and related equipment) would terminate if the first two criteria are met. This termination provision, and the sunset provisions discussed below, do not apply to those laws that apply ISA sanctions without specifically amending ISA. Sunset Provisions Without such determinations, ISA was to sunset on August 5, 2001, in a climate of lessening tensions with Iran (and Libya) during the presidency in Iran of moderate 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 9 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. Congressional Research Service 9 Iran Sanctions Congress in January 2004 and did not recommend that ISA be repealed. The ISA sunset was subsequently extended to December 31, 2011 (by P.L. 109-293). The current sunset— December 31, 2016—was established by CISADA. Interpretations and Implementation of ISA and Related Laws The sections below analyze how ISA, as amended by the related laws, have been interpreted and implemented through real-world cases and examples. Application to Crude Oil or Natural Gas Purchases from Iran Prior to the issuing of Executive Order 13622 and the enactment of P.L. 112-158, purchases of oil or natural gas from Iran were not considered violations of ISA. As noted above, the Executive Orderexecutive order and that law essentially render purchasing Iranian oil sanctionable —if the parent country of of the energy buyer or shipper has not received a sanctions exemption under P.L. 112-81, which is discussed below. New customers for Iranian oil are automatically sanctionable under the Order and under order and P.L. 112-81 because it is not possible for any new purchaser to receive an exemption under P.L. 112-81—only existing customers are eligible for such exemption. Application to Sales to Iran of Energy-Related Equipment The original version of ISA did not sanction sales to Iran of equipment that Iran could use to explore or extract its own oil or gas resources, unless such sales were structured to provide ongoing profits or royalties (and therefore meet the definition of investments as provided in ISA).10 For example, selling Iran an oil or gas drill rig or motors or other gear that Iran will use to drill for oil or gas were not sanctionable under ISA, unless the sale is structured to provide the seller ongoing profits or royalties. However, this exception was essentially voided by Executive Order 13590 (November 21, 2011) and by P.L. 112-158, which consider such sales sanctionable. Application to Financing but Not Official Credit Guarantee Agencies The definitions of investment and other provisions of ISA make clear that financing for investment in Iran’s energy sector, or for sales of gasoline and refinery-related equipment and services, constitute sanctionable activity. Therefore, banks and other financial institutions that assist energy investment and refining and gasoline procurement activities could be sanctioned under ISA. However, these definitions—including those in Executive Order 13622 and in P.L. 112-158—are not interpreted to apply to official credit guarantee agencies—such as France’s COFACE and Germany’s Hermes. These credit guarantee agencies are arms of their parent governments, and ISA does not provide for sanctioning governments or their agencies. 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)— 10 Prior to CISADA, the definition of investment in ISA specifically exempted sales of equipment or services under that definition. CISADA omitted that exclusion. Congressional Research Service 10 Iran Sanctions would have made such export credit guarantee agencies sanctionable, as well as financial institutions and insurers generally. Early versions of CISADA would have made these entities sanctionable but this was not included in the final law under P.L. 112-81. Only customers that were buying Iranian oil prior to the effective date of the order or of P.L. 112-81 are eligible for the exemption. Application to Financing but Not Official Credit Guarantee Agencies The definitions of investment and other provisions of ISA make clear that financing for investment in Iran’s energy sector, or for sales of gasoline and refinery-related equipment and services, constitute sanctionable activity. Therefore, banks and other financial institutions that assist energy investment and refining and gasoline procurement activities could be sanctioned under ISA. However, these definitions—including those in Executive Order 13622 and in P.L. 112-158—are not interpreted to apply to official credit guarantee agencies—such as France’s COFACE and 10 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. Congressional Research Service 10 Iran Sanctions Germany’s Hermes. These credit guarantee agencies are arms of their parent governments, and ISA does not provide for sanctioning governments or their agencies. In the 110th Congress, several bills that passed the House (H.R. 957 and H.R. 7112) would have made such export credit guarantee agencies sanctionable, as well as financial institutions and insurers generally. Early versions of CISADA would have made these entities sanctionable but this was not included in the final law, out of concern for alienating U.S. allies. Application to Energy Pipelines ISA’s definition of sanctionable “investment” has been consistently interpreted by successive administrations to include construction of energy pipelines to or through Iran. Such pipelines are deemed to help Iran develop its petroleum (oil and natural gas) sector. This interpretation was reinforced by amendments to ISA in CISADA, which specifically included in the definition of petroleum resources “products used to construct or maintain pipelines used to transport oil or liquefied natural gas.” In discussing a potential Iran-Pakistan gas pipeline in March 2012, March 2012, Secretary of State Clinton made clear that the Obama Administration interprets the provision to be applicable from the beginning of pipeline construction, and not from the start of oil or gas flow through a finished project.11 Only a few significant pipelines involving Iran have been constructed. These pipelines serve as the main vehicle through which Iran exports natural gas, in part because U.S. sanctions have made it difficult for Iran to develop a liquefied natural gas (LNG) export capability. One pipeline, built in 1997, carries natural gas from Iran to Turkey. Each country constructed the pipeline on its side of their border. At the time the project was under construction, State Department testimony stated that Turkey would be importing gas originating in Turkmenistan, not Iran, under a swap arrangement. That was one reason given for why the State Department did not determine that the project was sanctionable under ISA. However, many believe the decision not to sanction the pipeline was because the line was viewed as crucial to the energy security of Turkey, a key U.S. ally. Even though direct Iranian gas exports to Turkey through the line began in 2001, no determination of sanctionability has been madethe project has not been determined to have violated ISA. In May 2009, Iran and Armenia inaugurated a natural gas pipeline between the two, built by Gazprom of Russia. Armenia is Iran’s other main gas customer, aside from Turkey. No determination of sanctionability has been announced. 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. Section 6 of Executive Order 13622 exempts from sanctions under Section 5 of the order any pipelines that bring gas from Azerbaijan to Europe and Turkey. Application to Iranian Energy Institutions/NIOC and NITC Many in the Administration and Congress have sought to sanction Iran’s key oil production and export institutions. As noted above, provisions of P.L. 112-158 and Executive Order 13622 explicitly sanction foreign dealings with the National Iranian Oil Company (NIOC), which is — although they do not amend ISA—apply ISA sanctions to dealings with the National Iranian Oil 11 http://dawn.com/2012/03/01/tough-us-warning-on-iran-gas-pipeline/. Congressional Research Service 11 Iran Sanctions Company (NIOC), which is supervised by the Oil Ministry, the National Iranian Tanker Company (NITC), and a previously sanctioned firm, Naftiran Intertrade Company (NICO), which is a subsidiary of NIOC. Section 312 of P.L. 112-158 requires an Administration determination, within 45 days of enactment (by September 24, 2012) whether NIOC and NITC are IRGC agents or affiliates. If so, 11 http://dawn.com/2012/03/01/tough-us-warning-on-iran-gas-pipeline/. Congressional Research Service 11 Iran Sanctions financial transactions with those organizations would be sanctionable under CISADA (prohibition on opening U.S.-based accounts). And, under Section 302 of P.L. 112-158, any person who engages in a significant transaction with NIOC and NITC is subject to the imposition of 5 of theout of 12 ISA sanctions. On September 24, 2012, the Department of the Treasury informed Congress that it had determined that NIOC and NITC are agents or affiliates of the IRGC, triggering the specified specified sanctions. And, as noted below, on November 8, 2012, the Treasury Department named NIOC as a proliferation entity under Executive Order 13382—that designation triggers sanctions, under under Section 104 of CISADA, on any foreign bank that deals directly with NIOC, including with a a NIOC bank account in a foreign country. Some of the other major components of NIOC—although not explicitly sanctioned—are: • Thethe Iranian Offshore Oil Company; • Thethe National Iranian Gas Export Co.; and • Petroleum Engineering and Development Co. Application to the Revolutionary Guard Much of the work on Iran’s oil and gas fields 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 the IRGC and have been sanctioned under various Executive Ordersexecutive orders, discussed below. The August 2011 confirmation of Khatam ol-Anbia’s chief, Rostam Ghasemi, as oil minister, has caused the U.S. government and many experts to assess that the IRGC role in Iran’s energy sector is growing. As a consequence of his position in Iran, Ghasemi also serves during 2012 as chair of the Organization of Petroleum Exporting Countries (OPEC) because it is Iran’s turn to hold that rotating post. Ghasemi has been subjected to asset freezes by the United States and an asset freeze and travel ban by the European Union. However, under an agreement between OPEC and Austria, Ghasemi is allowed to travel to Vienna (OPEC’s headquarters) to attend OPEC meetings and perform his duties as rotating head of the organization. P.L. 112-158 (Section 311) amends ISA to mandate a ban on government contracts for companies that fail to certify that they are not transacting business with the IRGC any of its sanctioned affiliates, as noted above. Another section of P.L. 112-158 (Section 302) applies ISA sanctions to the IRGC, although it does not actually amend ISA itself. The section requires application of 5 out of 12 ISA sanctions to persons that materially assist, with financing or technology, the IRGC, or assist or engage in “significant” transactions with any of its affiliates that are sanctioned under Executive Executive Order 13382, 13224, or similar Executive Ordersexecutive orders discussed below—or which are determined to be affiliates of the IRGC. These provisions are intended, in part, to deter foreign firms from partnering with any of the IRGC companies involved in Iran’s energy sector. However, some Iranian firms that work in Congressional Research Service 12 Iran Sanctions Iran’s energy sector have not been sanctioned under any U.S. Executive Orderexecutive order and their relations with the IRGC are unclear, meaning that Section 302 of P.L. 112-158 might not trigger any sanctions against these firms. These firms include Pasargad Oil Co, Zagros Petrochem. Co, Sazeh Consultants, Qeshm Energy, and Sadid Industrial Group. Congressional Research Service 12 Iran Sanctions Non-ISA-Related Provisions of P.L. 112-158 Specific to the IRGC Separate provisions of P.L. 112-158, not related to ISA, impose sanctions on persons and firms that support the IRGC. Section 301 requires the President, within 90 days of enactment (by November 9, 2012), to identify “officials, agents, or affiliates” of the IRGC and to impose sanctions in accordance with Executive Order 13382 or 13224 (which are discussed later in this paper), including blocking any such designee’s U.S.-based assets or property. Some of these designations, including of NIOC, were made by Treasury Department on November 8, 2012. Section 303 requires the imposition of sanctions on agencies of foreign governments that provide technical or financial support, or goods and services to sanctioned (under U.S. executive orders or U.N. resolutions) members or affiliates of the IRGC. Sanctions include a ban on U.S. assistance or credits for that foreign government agency, a ban on defense sales to it, a ban on U.S. arms sales to it, and a ban on exports to it of controlled U.S. technology. Application to Liquefied Natural Gas The original version of ISA did not apply to the development of liquefied natural gas. 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. However, as noted below, CISADA specifically includes LNG in the definition of petroleum resources and therefore makes investment in LNG (or supply of LNG tankers or pipelines) sanctionable. Sanctions Imposed Under ISA The Obama Administration has used ISA authorities to discourage companies from continuing their business with Iran. This is a contrast from the first 14 years after ISA’s passage, in which successive Administrations hesitated to confront companies of partner countries. Despite investments made in Iran’s energy sector, as shown in Table 4, the Administration made no violations determinations from 1998 until September 2010. The European Union opposed ISA as an extraterritorial application of U.S. law. 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 promise by the EU not to file any complaint with the World Trade Organization (WTO) over this issue, in exchange for the eventual May 18, 1998, announcement by the Clinton Administration to waive ISA sanctions (“national interest”—§9c—waiver) on the first project determined to be in violation. That project was a $2 billion12 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, for its part, pledged to increase cooperation with the United States on nonproliferation 12 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. Congressional Research Service 13 Iran Sanctions and counterterrorism. Then-Secretary of State Albright, in the May 18, 1998, waiver announcement, indicated that similar future such projects by EU firms in Iran would not be sanctioned, provided overall EU cooperation against Iranian terrorism and proliferation continued.13 12 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. 13 Text of announcement of waiver decision by then Secretary of State Madeleine Albright, containing expectation of (continued...) Congressional Research Service 13 Iran Sanctions However, the EU sanctions against Iran imposed since 2010 have largely rendered this understanding, and this past dispute, moot. The EU countries, as discussed below, have begun to adopt sanctions against Iran nearly as strict as the U.S. sanctions in place against Iran. ISA Sanctions Determinations and Exemptions14Exemptions Prior to the passage of CISADA, several Members of Congress questioned why no penalties had been imposed for violations of ISA. State Department reports to Congress on ISA, required every six months, did not specifically state which foreign companies, if any, were being investigated for ISA violations. No publication of such deals has been placed in the Federal Register, as required by Section 5e of ISA. In an effort to address the congressional criticism, 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 4) was under review for ISA sanctions. Statoil is incorporated in Norway, which is not an EU member, and did not fall under the 1998 U.S.-EU agreement discussed above. Possibly in response to an October 2009 letter signed by 50 Members of Congress referencing Table 4, then 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 complete a preliminary review of investments in Iran for violations of ISA by December 11, 2009. He testified that some announced projects did not result in actual investment. On February 25, 2010, then Secretary of State Clinton testified before the House Foreign Affairs Committee that the State Department’s preliminary review was completed and that some of the cases reviewed reviewed “deserve[] more consideration” and were undergoing additional scrutiny. The preliminary review was conducted, in large part, through State Department officials’ contacts with their counterpart officials abroad and corporation officials, but the additional investigations of problematic problematic investments would involve the intelligence community, according to Secretary Clinton. State Department officials told CRS in November 2009 that they intended to complete the additional investigation and determine violations within 180 days of the completion of the preliminary preliminary review, or by early August 2010. (The 180-day time frame was, according to the department department officials, consistent with the Iran Freedom Support Act amendments to ISA discussed above, even though the 180-day time frame was not mandatory before CISADA.) On June 22, 2010, then Assistant Secretary of State William Burns testified before the Senate Foreign Relations Relations Committee that there were “less than 10” cases of possible ISA violations. September 30, 2010, Sanctions Determinations15 Several determinations of sanctionability were made on September 30, 2010: Sanctions and Special Rule Exemptions14 • A Swiss-based Iranian-owned oil trading company—Naftiran Intertrade Company (NICO)—became the first firm to be sanctioned under ISA. The three penalties selected were: a ban on Ex-Im Bank credits; a denial of dual use export (...continued) similar waivers in the future, at http://www.parstimes.com/law/albright_southpars.html. 14 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. 15 State Department statement. September 30, 2010. Congressional Research Service 14 Iran Sanctions 13 Text of announcement of waiver decision by then Secretary of State Madeleine Albright, containing expectation of similar waivers in the future, at http://www.parstimes.com/law/albright_southpars.html. 14 State Department statement. September 30, 2010. Congressional Research Service 14 Iran Sanctions penalties selected were: a ban on Ex-Im Bank credits; a denial of dual use export licensing to the firm; and a denial of bank loans exceeding $10 million. The mandatory ban on receiving U.S. government contracts applies as well. Exemptions Issued: That same day, following a months-long Administration review discussed later, four major energy sector investing companies were deemed eligible to avoid sanctions, That same day, four major energy companies avoided sanctions under the ISA “special rule,” by ” for pledging to end their business in Iran. They are: • Total of France, • Statoil of Norway, • ENI of Italy, and • Royal Dutch Shell of Britain and the Netherlands. There remained some difference of opinion on the Administration invocation of the special rule, as evident at a hearing of the House Foreign Affairs Committee on December 1, 2010. At the hearing, then Under Secretary Burns stated that companies exempted under the special rule had pledged to end their existing investments in Iran “in the very near future.” Some Members of Congress questioned the imprecision of that time frame formulation, asserting that some firms would be working in Iran for several more years under their pledges. The energy firms insisted they needed time to wind down their investments in Iran—under the buy-back program used for investments in Iran, the energy firms are paid back their investment over time, making it highly costly for them to suddenly end operations in Iran. November 17, 2010, Special Rule Application. November 17, 2010, Special Rule for Inpex • Inpex of Japan was exempted from sanctions under the special rule on November 17, 2010, according to a State Department announcement. The firm announced on October 15, 2010, that it is shedding its stake in the Azadegan development project shown in the table. March 29, 2011, Sanctions Determination Against Belarusneft Several foreign investment agreements with Iran were not covered in the September 2010 determination but remained under Administration scrutiny. The Administration stated that determinations willwould be made within 180 days (by April 1, 2011). • On March 29, 2011, with that deadline approaching, the State Department announced that one additional firm would be sanctioned under ISA—Belarusneft, a subsidiary of the Belarus government owned Belneftekhim—for a $500 million contract with Naftiran (the company sanctioned in September 2010) to develop the Jofeir oil field discussed in Table 4. The three sanctions imposed were denial of Ex-Im Bank financing, denial of U.S. export licenses, and denial of U.S. loans above $10 million. Other subsidiaries of Belneftekhim were sanctioned in 2007 under Executive Order 13405 related to U.S. policy on Belarus. The Administration announcement did not indicate that some of the other investments in Table 4 or other investments, for which no ISA determinations have been made to date, are still under investigation. Congressional Research Service 15 Iran Sanctions May 24, 2011: ISAMay 24, 2011, Sanctions Imposed on Gasoline-Related Shippers On May 24, 2011, the Administration issued its first ISA sanctions determinations under the CISADAamended “trigger” that requires sanctions against salesSection 5(a)(3) of ISA (CISADA-amended “trigger”) for sales to Iran of gasoline and related equipment and and services.1615 The seven firms sanctioned were: • Petrochemical Commercial Company International (PCCI) of Bailiwick of Jersey and Iran • Royal Oyster Group (UAE) • Tanker Pacific (Singapore) • Allvale Maritime • Societie Anonyme Monegasque Et Aerienne (SAMAMA, Monaco) • Speedy Ship (UAE/Iran) • Associated Shipbroking (Monaco) • Petroleos de Venezuela (PDVSA) of Venezuela were16: 15 The reasons for the sanctions, including size of gasoline shipments to Iran, as well as the ISA-related sanctions selected, can be found at http://www.state.gov/r/pa/prs/ps/2011/05/164132.htm 16 The determinations of sanctionability of Allvale Maritime and SAMAMA were issued on September 13, 2011, as a “clarification” of the May 24 determinations, which named Ofer Brothers Group (and not Allvale or SAMAMA) as sanctioned entities at that time Brothers Group as sanctioned entities. Those two entities, as well as Tanker Pacific, are, according to an author conversation with an attorney for the Ofer Brothers Group, affiliated with a Europe-based trust linked to deceased Ofer brother Sami Ofer, and not Ofer Brothers Group based in Israel. Ofer Brothers Group, based in Israel, is not therefore under sanction. based in Israel. The firms named were subjected primarily to the financial-related sanctions provided in ISA. With respect to PDVSA, the Administration made clear in its announcementThe Administration stated that U.S.-based subsidiaries (of PDVSA, such as Citgo), were not included in the determination and that U.S. purchases of Venezuelan oil would not be affected. Congressional Research Service 15 Iran Sanctions • Petrochemical Commercial Company International (PCCI) of Bailiwick of Jersey and Iran • Royal Oyster Group (UAE) • Tanker Pacific (Singapore) • Allvale Maritime • Societie Anonyme Monegasque Et Aerienne (SAMAMA, Monaco) • Speedy Ship (UAE/Iran) • Associated Shipbroking (Monaco) • Petroleos de Venezuela (PDVSA) of Venezuela Executive Order 13574. The day prior to the May 2011 sanctions announcement, President Obama issued an Executive OrderExecutive Order 13574 clarifying that it is the responsibility of the Treasury Department to implement those ISA sanctions that involve the financial sector, including bans on loans, credits, and foreign exchange for, or imports from the sanctioned entity, as well as blockage of property of the sanctioned entity (if these sanctions are selected by the Secretary of State, who makes the decision which penalties to impose on sanctioned entities). January 12, 2012, Determinations on Gasoline Sellers On January 12, 2012, the Administration determined that three firms had sold more than the threshold amounts of gasoline to Iran and imposedimposed ISA sanctions (ban on U.S. export licenses for sales to the firms; a ban on Export Import Bank financing for them; and denial of loans of over $10 million to them). The three firms are on three additional gasoline sellers to Iran: • Zhuhai Zhenrong Company (China), for brokering sales of $500 million worth of gasoline to Iran between July 2010 and January 2011. 16 The reasons for the sanctions, including size of gasoline shipments to Iran, as well as the ISA-related sanctions selected, can be found at http://www.state.gov/r/pa/prs/ps/2011/05/164132.htm Congressional Research Service 16 Iran Sanctions • Kuo Oil Pte. Ltd. (Singapore), an energy trading firm that sold $25 million worth of gasoline to Iran between late 2010 and early 2011. • FAL Oil Company Ltd. (UAE), an independent energy trader that sold Iran over $70 million worth of gasoline in late 2010. August 10, 2012, DeterminationSanctions on Syrian Energy Firm On August 10, 2012, the• The State Department sanctioned: • Sytrol, a Syrian government-run oil company, for selling Iran over $36 million worth of oil in April 2012. gasoline in April 2012. March 14, 2013, Determination Against Dimitri Cambis and Impire Shipping • Acting under Section 5(a)(8) of ISA, a provision added by the Iran Threat Reduction Act (P.L. 112-158), which sanctions owners of a vessels that conceal the Iranian origin of crude oil or petroleum productions, ISA sanctions (and Treasury Dept. sanctions under Executive Order 13599, which blocks property of the government of Iran) were imposed on Dr. Dimitri Cambis and his firm Impire Shipping. Also sanctioned were Kish Protection and Indemnity and Bimeh Markazi-Central Insurance of Iran (CII), and senior officials of these companies, for providing insurance to NITC. The Treasury sanctions were imposed on Congressional Research Service 16 Iran Sanctions Cambis, Impire, and eight UAE-based front companies used to conceal the Iranian oil transactions, as well as eight named oil tankers these companies. Sanctioning Oil Payments to Iran’s Central Bank: Section 1245 of FY2012 National Defense Authorization Act (P.L. 112-81) In late 2011, some in Congress believed that action was needed to cut off the mechanisms oil importers use to pay Iran hard currency for oil. Proposals to cut Iran’s Central Bank from the international financial system were based on that objective, as well as the view that the Central Bank helps other Iranian banks circumvent the U.S. and U.N. banking pressure. Some argued the Treasury Department should designate the Central Bank as a proliferation entity under Executive Order 13382 or a terrorism supporting entity under Executive Order 13224, but the Administration did not do so. In November 2011, provisions to sanction foreign banks that deal with Iran’s Central Bank were incorporated a FY2012 national defense authorization bill (H.R. 1540). The provision was modified slightly in conference action on the latter bill, enacted and signed on December 31, 2011 (P.L. 112-81). Section 1245 of P.L. 112-81, provides for the following: • Requires the President to prevent a foreign bank from opening an account in the United States—or impose strict limitations on existing U.S. accounts—if that bank processes payments through Iran’s Central Bank. • The provision applies to non-oil related transactions with the Central Bank of Iran 60 days after enactment (by February 29, 2012). • The provision applies to a foreign central bank only if the transaction with Iran’s Central Bank is for oil purchases. • Provides for a renewable waiver of 120 days duration if the President determines that doing so is in the national security interest. • The provision applied to transactions with the Central Bank for oil purchases only after 180 days (as of June 28, 2012). • Sanctions on transactions for oil apply only if the President certifies to Congress—90 days after enactment (by March 30, 2012), based on a report by the Energy Information Administration to be completed 60 days after enactment (by February 29, 2012)—that the oil market is adequately supplied. The EIA report and Administration certification are required every 90 days thereafter. • Foreign banks can be granted an exemption from sanctions (for any transactions with the Central Bank, not just for oil) if the President certifies that the parent Congressional Research Service 17 Iran Sanctions country of the bank has significantly reduced its purchases of oil from Iran. That determination is to be reviewed every 180 days. For countries whose banks receive an exemption, the 180 day time frame begins from the time that parent country last received an exemption. The Administration had initially opposed the provision. In testimony, Under Secretary David Cohen told the Senate Foreign Relations Committee on December 2, 2011, that the provision could lead to a rise in oil prices that would benefit Iran. Yet, the Administration later saw value in using the provision to pressure Iran. In the signing statement Congressional Research Service 17 Iran Sanctions on the overall bill, President Obama indicated he would implement the provision so as not to damage U.S. relations with partner countries. Implementation/Exemptions Issued On February 27, 2012, the Department of the Treasury announced regulations to implement this law. The first required EIA report was issued on February 29, 2012, saying “EIA estimates that the world oil market has become increasingly tight over the first two months of this year.” On March 30, 2012, President Obama determined that there is a sufficient supply of oil from countries other than Iran to permit countries to reduce their oil purchases from Iran. A subsequent EIA report of April 27, 2012, and Administration determination of June 11, 2012, made similar findings and certifications, triggering potential sanctions on banks incorporated in countries not deemed exempt as of June 28, 2012. Implementation of the provision was complicated by the absence in the legislation of a definition of “significant reduction” in oil purchases that would qualify a country for this exemption. However, the lack of definition gave the Administration substantial flexibility in dealing with foreign governments. On January 19, 2012, the Senators who drafted the provision wrote to Treasury Secretary Geithner agreeing with outside experts that the Treasury Department should define “significant reduction” as an 18% purchase reduction based on total price paid (not just volumes).17 Administration officials say they have adopted that general standard when considering exemptions. The EU embargo on purchases of Iranian oil, announced January 23, 2012, and which took full effect by July 1, 2012, implied that virtually all EU countries would obtain exemptions for having “significantly reduced” oil buys from Iran. As noted in the section and table below, several countries have reduced purchases from Iran and a total of 20 countries have been granted exemptions from the Section 1245 sanctions for at least a 180-day period (from the time of their exemption). Countries must continue to reduce their oil buys from Iran—relative to the previous 180-day period—to retain the exemption. And, as discussed above, retaining the exemption has become crucial to continuing oil-related commerce with Iran, because Executive Order 13622 and P.L. 112-158 sanctions oil dealings with Iran unless a parent country has an current exemption. P.L. 112-158 also amended Section 1245 such that any country that has received an exemption would retain that exemption if it completely ceases purchasing oil from Iran. 17 Text of letter from Senators Mark Kirk and Robert Menendez to Secretary Geithner. January 19, 2012. Congressional Research Service 18 Iran Sanctions Iran. The EU embargo on purchases of Iranian oil, announced January 23, 2012, and which took full effect by July 1, 2012, implied that virtually all EU countries would obtain exemptions for having “significantly reduced” oil buys from Iran. Exemptions Issued18 • On March 20, 2012, the Secretary of State announced the first group of 11 countries that had achieved an exemption for significantly reducing oil purchases from Iran: Belgium, the Czech Republic, France, Germany, Greece, Italy, Japan, the Netherlands, Poland, Spain, and Britain. On September 14, 2012, these exemptions were all renewed for another 180 days.19These exemptions were all renewed (for 180 days) on September 14, 2012,19 and again on March 13, 2013. • On June 11, 2012, the Administration granted seven more exemptions based on reductions of oil purchases from Iran of about 20% in each case: India, Korea, Turkey, Malaysia, South Africa, Sri Lanka, and Taiwan. All seven exemptions were renewed on December 7, 2012, for another 180 days. 17 Text of letter from Senators Mark Kirk and Robert Menendez to Secretary Geithner. January 19, 2012. Announcements by the Department of State. March 20, 2012, June 11, 2012, and June 28, 2012. 19 “Statement on Iran” by Secretary of State Clinton. September 14, 2012. 18 Congressional Research Service 18 Iran Sanctions • On June 28, 2012, the Administration granted exemptions to China and Singapore, two remaining major Iran oil customers, with China the single largest buyer (about 550,000 barrels per day in 2011). Both exemptions were renewed on December 7, 2012. The table later in this paper on major Iranian oil customers indicates cuts made by major customers compared to 2011 levels. Seventeen EU countries have not been granted exemptions. Some of them were not customers for Iran’s oil and cannot therefore “significantly reduce” their buys from Iran any further. Therefore, banks of these countries could potentially be sanctioned for any transactions with Iran’s Central Bank. Some of these countries say that the sanctions provision amounts to a de facto U.S. effort to enforce a total ban on EU trade with Iran. Other early opposition from EU and other countries to the concept of Earlier EU opposition to sanctioning Iran’s Central Bank was based on humanitarian grounds. One of the Central Bank’s roles is to keep Iran’s currency, the rial, stable. It does so by using hard currency to buy rials to raise the currency value, or to sell rials to bring the value down. An unstable currency could harm Iran’s ability to import some needed foodstuffs and medical products, according to those opposing that sanction. P.L. 112-158 Impedes Repatriation of Hard Currency to Iran The ability of Iran to acquire hard currency is further impeded by a provision of the Iran Threat Reduction and Syria Human Rights Act (P.L. 112-158), which went into effect 180 days after enactment (February 6, 2013). Section 504 amends P.L. 112-81 to require that any funds owed to Iran as a result of permitted or exempted transactions (for oil sales, for example) be credited to an account located in the country with primary jurisdiction over the foreign bank making the transaction. This has the net effect of preventing Iran from bringing earned hard currency back to Iran, and will likely cause Iran to buy the products of the country where the funds are acquired. Under that section, this sanction goes into effect 180 days after enactment (February 6, 2013). 18 19 Announcements by the Department of State. March 20, 2012, June 11, 2012, and June 28, 2012. “Statement on Iran” by Secretary of State Clinton. September 14, 2012. Congressional Research Service 19 Iran Sanctions Related Measures Imposed by FY2013 National Defense Authorization Bill (H.R. 4310, earned hard currency back to Iran and compelling it to buy the products of the oil customer countries. Expanded Sanctions on Trade with Iran Imposed by FY2013 National Defense Authorization Bill (P.L. 112-239) At the end of 2012, Congress passed legislation expanding authorities for U.S. sanctions against foreign firms that assist Iran’s energy sector and related sectors such as shipping and shipbuilding. The legislation also imposes sanctions on certain transactions with Iran’s manufacturing sector – thereby approaching a U.S. attempt to restrict a broad range of transactions with Iran’s economy beyond those sectors (energy, financial) that have been targeted for sanctions previouslycertain key sectors of Iran’s economy. The legislation, an amendment to S. 3254, the National Defense Authorization Act for FY2013, was adopted by the Senate on 94-0 on November 30, 2012. The provision (Subtitle D) was incorporated into the conference report on the House version of that bill, H.R. 4310, passed by both chambers (December 20 and 21, 2012) and signed by President Obama on January 2, 2013. The Subtitle’s major provisions—which mostly take effect 90180 days after enactment (April 1July 2, 2013) and include waiver provisions—are the following: • Section 1244 blocks property and . Several provisions impose ISA sanctions but do not amend ISA itself. • Section 1244 blocks U.S.-based property and U.S.-based banking activity, and imposes at least five ISA sanctions, on entities that provide goods or services to the energy, shipbuilding, and shipping sectors of Iran, or to port operations there—or which provide insurance for such transactions. The Section also blocks U.S. banking activity of a foreign bank that facilitates financial transactions for supply of these goods or services. These sanctions in the section do not transactions. The sanctions do not apply when such transactions involve purchases of Iranian oil by countries that have active exemptions under P.L. 112-81 (FY2012 National Defense Authorization Act). • The provisions of Section 1244 And the sanctions do not apply to the purchase of natural gas from from Iran or to most transactions related to such gas purchases from Iran. Congressional Research Service 19 Iran Sanctions • Section 1245 imposes at least five ISA sanctions on any entity that provides precious metals to Iran (such as gold), or semi-finished metals or software for integrating industrial processes. There is no exception for to this sanction for countries exempted under P.L. 112-81. • Section 1246 imposes at least five ISA sanctions on any entity that provides underwriting services, insurance, or reinsurance for a broad range of transactions with Iran, including those related to shipping oil, gasoline, or other goods for the energy, shipping, or shipbuilding sectors in Iran. • Section 1248 sanctions Iran’s state broadcasting establishment (Islamic Republic of Iran Broadcasting) as a human rights abuser, triggering sanctions discussed above (Section 105 of CISADA). • Section 1249 amends CISADA by imposing sanctions (U.S. visa ban, U.S.-based property blocked) on Iranian persons government that are engaged in corruption or “diversion of goods”—such as cornering the market for certain imports, including advanced medicines. Congressional Research Service 20 Iran Sanctions Ban on U.S. Trade and Investment Withwith Iran A comprehensive ban on U.S. trade with and investment in Iran was imposed on May 6, 1995, by President Clinton, through Executive Order 12959, under the authority primarily of the International Emergency Economic Powers Act (IEEPA, 50 U.S.C. 1701 et seq.).20 IEEPA gives the President wide powers to regulate commerce with a foreign country when a state of emergency is declared in relations with that country. Executive Order 12959 followed an earlier March 1995 executive order barring U.S. investment in Iran’s energy sector, which was imposed when President Clinton that month declared that a state of emergency exists with respect to Iran. A subsequent Executive Orderexecutive order, 13059 (August 19, 1997) prevented U.S. companies from knowingly exporting goods to a third country for incorporation into products destined for Iran. The trade 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, the U.S. Administration has renewed a declaration of a state of emergency that triggers the President’s trade regulation authority under IEEPA. The operation of the trade regulations is stipulated in Section 560 of the Code of Federal Regulations (Iranian Transactions Regulations, ITR’sITRs). Some relaxations to the trade ban during 1999-2010 account for the fact that there is some trade between the United States and Iran, although it is minimal. Through October 2012 (latest tally available), U.S. exporters sold about $225 million in goods to Iran, mostly grain sales. That is up about 25% from the same period in 2011. CISADA, signed in July 2012, restored the strict ban on trade with Iran expanded during that period. In April 2000, the trade ban was eased to allow U.S. importation of Iranian nuts, fruit products (such as pomegranate juice), carpets, and caviar. Trade financing was permitted for U.S. importers of these goods. 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 imports of many Iranian products. CISADA, signed in July 2012, restored the strict ban on imports from Iran as of September 29, 2010, explaining why U.S. imports from Iran since that time have been negligible (primarily licensing of imports such as artwork for exhibits). Major Provisions of the Trade and Investment Ban: What is a total of about $2 million for all of 2012). The U.S. imports 20 The executive order was issued not only under the authority of IEEPA but also: the National Emergencies Act (50 U.S.C. 1601 et seq.; §505 of the International Security and Development Cooperation Act of 1985 (22 U.S.C. 2349aa9) and §301 of Title 3, United States Code. Congressional Research Service 20 Iran Sanctions from Iran consist primarily of artwork for exhibitions around the United States (and count as imports even though the works eventually return to Iran after the exhibitions conclude). For all of 2012, U.S. exporters sold about $250 million in goods to Iran, mostly grain sales. That is up about 10% from 2011. Major Provisions of the Trade and Investment Ban: What Is Allowed or Prohibited The following conditions and modifications, as administered by the Office of Foreign Assets Control (OFAC) of the Treasury Department, apply to the operation of the trade ban (“Iran Transaction Regulations,” ITRs): • Oil Dealings. The 1995 trade ban greatly expanded a 1987 ban on imports from Iran under Executive Order 12613 (October 29, 1987). That 1987 ban was imposed under authorities provided in Section 505 of the International Security and Development Cooperation Act of 1985 (22 U.S.C. 2349aa-9). The import ban barred U.S. oil companies from importing Iranian oil but did not ban them from buying Iranian oil and trading it overseas. The 1995 ban prohibits such trading of Iranian oil overseas. The 1995 trade ban does allow U.S. companies to apply for licenses to conduct “swaps” of Caspian Sea oil with Iran. However, these swaps have been prohibited in practice; a Mobil Corporation application to do so was denied in April 1999, and no known applications were submitted subsequent to that first attempt. 20 The executive order was issued not only under the authority of IEEPA but also: the National Emergencies Act (50 U.S.C. 1601 et seq.; §505 of the International Security and Development Cooperation Act of 1985 (22 U.S.C. 2349aa9) and §301 of Title 3, United States Code. Congressional Research Service 21 Iran Sanctions 21since. • Civilian Airline Parts. Goods related to the safe operation of civilian aircraft may be licensed for export to Iran (§560.528 of Title 31, C.F.R.). In 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). An Obama Administration intent to sell Iran data to repair certain GE engines for its legacy American-made aircraft, in order to ensure safe operation, was notified to Congress on March 16, 2011. On June 23, 2011, the Administration sanctioned Iran Air as a proliferation entity under Executive Order 13382, rendering any future licensing of parts or repairs for Iran Air unclear. • Personal Communications and Remittances. The ban does not apply to personal communications (phone calls, e-mails), or to personal remittances. In February 2012, OFAC clarified guidance for personal remittances to relatives in Iran. According to that guidance, U.S. banks can process remittances to family members resident in Iran as long as the remittance is routed through a third country bank and the receiving Iranian bank has not been sanctioned by the United Statesis not under U.S. sanction. • Food and Medical Exports. 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. On October 22, 2012, OFAC attempted to facilitate medical sales by issuing a list of medical products, sucsuch as scapels, prosethetics, canes, burn dressings, and other products that could be sold to Iran under “general license”—no advanced permission required. OFAC regulations have a specific definition of “food” that can be sold to Iran on a licensing basis, and that list definition does not include alcohol, cigarettes, gum, or fertilizer.21 According to According to OFAC, 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. • Export Financing. As far as financing of approved U.S. sales to 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 December 2004, the trade ban was further modified to allow Americans to freely engage in ordinary publishing activities with entities in Iran (and Cuba and Sudan). • Import Ban. In April 2000, the trade ban was further eased to allow U.S. importation of Iranian nuts, fruit products (such as pomegranate juice), carpets, and caviar. Trade financing was permitted for U.S. importers of these goods. 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 http://www.treasury.gov/resource-center/sanctions/Programs/Documents/gl_food_exports.pdf Congressional Research Service 22 Iran Sanctions dampened imports of many Iranian products. As discussed above, CISADA ended approval of such imports as of October 1, 2010. Implementation OFAC generally declines to discuss export licenses approved, and a press account on December 24, 2010,22 discussed that, at that time, OFAC had approved exports to Iran of such condiments as medical training in Iran. Congressional Research Service 21 Iran Sanctions OFAC regulations now have a specific definition of “food” that can be licensed for sale to Iran, and that definition excludes alcohol, cigarettes, gum, or fertilizer.21 This definition might have been a reaction to a press account on December 24, 2010,22 that said that OFAC had approved exports to Iran of such condiments as ice cream sprinkles, chewing gum, food additives, hot sauces, body-building supplements, and other goods that appear to have uses other than those that are purely humanitarian or nutritive. U.S. exporters widely mentioned include Mars Co. (candy manufacturer); Kraft Foods; Wrigley’s (gum); and McCormick and Co. (spices). Some previously licensed U.S. goods have been sold sold through a Revolutionary Guard-owned chain of stores in Iran called Qods; as well as a government-owned Shahrvand store and a chain called Refah. OFAC officials indicated in the press accounts that such licenses were not in contradiction with U.S. law or policy, although there might have been less than full scrutiny of some Iranian end users and that such scrutiny would be increased in future licensing decisions. However, the 2011 clarification of the Iran trade regulations, stipulating that cigarettes and gum are not foodstuffs, have likely cut down on licensing of some of these products. Non-Application to Refined Oil With increased in future licensing decisions. • Export Financing. As far as financing of approved U.S. sales to 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. Title IX of the FY2001 agriculture appropriations law (P.L. 106-387)23 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 December 2004, the trade ban was further modified to allow Americans to freely engage in ordinary publishing activities with entities in Iran (and Cuba and Sudan). Non-Application to Refined Oil with Iranian Content The ban on trade with Iran operates largely on items produced in and originating from Iran itself. In the case of crude oil, the United States, as noted, cannot import or trade overseas any Iranian crude oil. Existing regulations do not ban the importation, from foreign refiners, of gasoline or other energy products in which Iranian oil is contained and mixed with oil from other producers. The product of a specific refinery is considered a product of the country where that refinery is located, and not a product of Iran, even if the product has some Iran-origin content. Some experts say that it is feasible to exclude Iranian content from any refinery, if there were a decision to ban U.S. imports of products with any Iranian content at all. Much of the Iranian oil that is mixed and imported into the United States was imported from EU countries, such as the Netherlands, which has major refineries in Rotterdam, in particular. However, the EU ban on purchases of Iranian oil has largely mooted this issue, since no EU refineries are importing any Iranian oil as of July 1, 2012. Only a few other refineries worldwide 21 http://www.treasury.gov/resource-center/sanctions/Programs/Documents/gl_food_exports.pdf The information in this bullet is taken from: Becker, Jo. “With U.S. Leave, Companies Skirt Iran Sanctions.” New York Times, December 24, 2010. 23 The title is called the “Trade Sanctions Reform and Export Enhancement Act of 2000. 22 Congressional Research Service 22 Iran Sanctions both continue to receive Iranian oil and export gasoline to the United States—and U.S. gasoline imports from those refineries are minor. Application to Humanitarian Donations and Support Earthquakes and various events in Iran frequentlyother disasters in Iran sometimes raise questions about how the U.S. trade regulations on Iran apply to humanitarian relief and donations. According to OFAC guidance, U.S. non-governmental organizations (NGOs) require a specific license to operate in Iran, but some of these NGOs say the licensing requirements are too onerous to make work in Iran practical. For example, there are restrictions on how a U.S. NGO may expend funds in Iran, for example to hire Iranian nationals. 22 The information in this bullet is taken from: Becker, Jo. “With U.S. Leave, Companies Skirt Iran Sanctions.” New York Times, December 24, 2010. Congressional Research Service 23 Iran Sanctions As far as private donations by U.S. As far as private donations by U.S. officials, donations to Iranian victims of natural disasters (such as mailed packages of food, toys, clothes, etc.) are not prohibited. However, financial donations to relief organizations, because such transfers generally require use of the international banking system, does require a specific license. Similarly, NGOs that want to perform relief efforts in Iran require a specific license to do so. Selected Exceptions so. According to OFAC guidance, U.S. non-governmental organizations (NGOs) require a specific license to operate in Iran, but some of these NGOs say the licensing requirements are too onerous to make work in Iran practical. For example, there are restrictions on how a U.S. NGO may expend funds in Iran, for example to hire Iranian nationals. In some cases, such as the earthquake in Bam in 2003 and the earthquake in northwestern Iran in August 2012, OFAC has issued blanket temporary general licensing for relief organizations to perform relief efforts in Iran. The latest temporary license that responded to the August 2012 earthquake in Iran was issued on August 21, 2012, for a period of 45 days (until October 5). , and then extended until November 19, 2012. Under this temporary general license, an NGO can transfer up to $300,000 for efforts in Iran under general license (no license application needed). Transferring larger amounts is possible, but would require specific license. On October 5, 2012, the blanket license was extended until November 19, 2012. In the Bam case, the blanket licensing was extended several times but expired in March 2004. In addition, provisions of CISADA and the Iran trade regulations would allow for licensing of export on an emergency basis if the President considers such exports in the national interest. Examples could include equipment to help Iran contain an oil spill or a disaster at its Bushehr nuclear plant, or to rescue earthquake victims. 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—or control by—the parent company. For legal and policy purposes, foreign subsidiaries are considered foreign persons, not U.S. persons, and are subject to the laws of the country in which the subsidiaries are incorporated. Section 218 of the Iran Threat Reduction and Syrian Human Rights Act (P.L. 112-158) applies the U.S. trade ban to foreign subsidiaries if (1) the subsidiary is more than 50% owned by the U.S. parent; (2) the parent firm holds a majority on the Board of Directors; or (3) the parent firm directs the operations of the subsidiary. However, many subsidiaries operate entirely autonomously and might not meet the criteria for sanctionability stipulated in that law. Among major foreign subsidiaries of U.S. firms that have traded with Iran are the following: • 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. • Transammonia Corp., via a Swiss-based subsidiary, is said to be conducting business with Iran to help it export ammonia, a growth export for Iran. • Press reports in early October 2011 indicated that subsidiaries of Kansas-based Koch Industries may have sold equipment to Iran to be used in petrochemical plants (making methanol) and possibly oil refineries, among other equipment. Congressional Research Service 24 Iran Sanctions However, the reports say the sales ended as of 2007, a time at which foreign firm sales of refinery equipment to Iran were not clearly sanctionable under ISA.23 Some subsidiaries of U.S. firms that have been active in Iran and which have also received U.S. government contracts, grants, loans, or loan guarantees, according to a March 7, 2010, New York Times article. Energy Related Subsidiaries. Some U.S. energy equipment and energy-related shipping firms have been in the Iranian market as late as 2010, according to their “10-K” filings with the Securities and Exchange Commission. These include Natco Group,24 Overseas Shipholding Group,25 UOP (United Oil Products, a Honeywell subsidiary based in Britain),26 Itron,27 Fluor,28 Parker Drilling, Vantage Energy Services,29 PMFG, Ceradyne, Colfax, Fuel Systems Solutions, General Maritime Company, Ameron International Corporation, and World Fuel Services Corp. UOP reportedly sells refinery gear to Iran. However, such energy sector-related sales to Iran, depending on the dollar value, are now likely sanctionable under ISA as amended by CISADA, P.L. 112-158, and Executive Order 13622. It is therefore likely that many of these companies will be exiting the Iranian market, if they have not done so already. Subsidiaries of U.S. Firms Voluntarily Exiting Iran As international sanctions against Iran have increased in recent years, many foreign subsidiaries of U.S. firms had decided that the risks of continuing to do business with Iran outweigh the benefits and exited the Iran market voluntarily. • Chemical manufacturer Huntsman announced in January 2010 its subsidiaries would halt sales to Iran. • 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 ban or the Iran Sanctions Act (ISA),30 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 no longer operating in Iran, as promised in January 2005. 23 Asjylyn Loder and David Evans. “Koch Brothers Flout Law Getting Richer With Iran Sales.” Bloomberg News, October 3, 2011. 24 Form 10-K Filed for fiscal year ended December 31, 2008. 25 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. 26 New York Times, March 7, 2010, cited previously. 27 Subsidiaries of the Registrant at December 31, 2009. http://www.sec.gov/Archives/edgar/data/780571/ 000078057110000007/ex_21-1.htm. 28 “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. 29 Form 10-K for Fiscal year ended December 31, 2007. 30 “Iran Says Halliburton Won Drilling Contract.” Washington Times, January 11, 2005. Congressional Research Service 25 Iran Sanctions • General Electric (GE). The firm announced in February 2005 that it would seek no new business in Iran, and it reportedly wound down preexisting 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. • 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.31 Ingersoll Rand, maker of air compressors and cooling systems, followed suit.32 • In April 2010, it was reported that foreign partners of several U.S. or other multinational accounting firms had cut their ties with Iran, including KPMG of the Netherlands, and local affiliates of U.S. firms PricewaterhouseCoopers and Ernst and Young.33 • Oilfield services firm Smith International said on March 1, 2010, it would stop sales to Iran by its subsidiaries. Another oil services firm, Flowserve, said its subsidiaries have voluntarily ceased new business with Iran as of 2006.34 FMC Technologies took similar action in 2009, as did Weatherford35 in 2008. Financial Sanctions: CISADA and Sanctions on Dealings with Iran’s Central Bank U.S. efforts to shut Iran out of the international banking system have gained strength as other countries have joined the effort. These efforts have been implemented by the Treasury Financial Sanctions: CISADA and Sanctions on Dealings with Iran’s Central Bank U.S. efforts to shut Iran out of the international banking system have gained strength as other countries have joined the effort. These efforts have been implemented by the Treasury Congressional Research Service 23 Iran Sanctions Department through progressively strong actions discussed below, culminatingparticularly with legislation in late 2011 to cut off Iran’s Central Bank from the international financial system. Early Efforts: Targeted Financial Measures On September 6, 2006, the Treasury Department barred U.S. banks from handling any indirect transactions (“U-turn transactions,” meaning transactions with non-Iranian foreign banks that are handling transactions on behalf of an Iranian bank) with Iran’s Bank Saderat, which the Administration accused of providing funds to Hezbollah.36 The Treasury Department extended that U-Turn restriction to all Iranian banks on November 6, 2008. 31 “Caterpillar Says Tightens ‘No-Iran’ Business Policy.” Reuters, March 1, 2010. Nixon, Ron. “2 Corporations Say Business With Tehran Will Be Curbed.” New York Times, March 11, 2010. 33 Baker, Peter. “U.S. and Foreign Companies Feeling Pressure to Sever Ties With Iran.” New York Times, April 24, 2010. 34 In September 2011, the Commerce Department fined Flowserve $2.5 million to settle 288 charges of unlicensed exports and reexports of oil industry equipment to Iran, Syria, and other countries. 35 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. 36 Kessler, Glenn. “U.S. Moves to Isolate Iranian Banks.” Washington Post, September 9, 2006. 32 Congressional Research Service 26 Iran Sanctions During 2006-2010, strengthened by leverage provided in five U.N. Security Council Resolutions, then Under Secretary of the Treasury Stuart Levey and his aides presented information on Iran’s efforts to use foreign banks to fund WMD programs and funnel money to terrorist groups. The 24 The Treasury Department extended that U-Turn restriction to all Iranian banks on November 6, 2008. During 2006-2010, strengthened by leverage provided in five U.N. Security Council Resolutions, then Under Secretary of the Treasury Stuart Levey and his aides presented information on Iran’s efforts to use foreign banks to fund WMD programs and funnel money to terrorist groups. According to a GAO report of February 2013, the Treasury Department made overtures to 145 banks in 60 countries, including several visits to banks and officials in the UAE, where Iran seeks to route much of its banking. The program convinced at least 80 foreign banks to cease handling financial transactions with Iranian banks. Levey left office in April 2011 and was replaced by David Cohen. The Treasury Department also used punishments to pressure firms to cease doing business with Iran. 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. In June 2012, Dutch bank IMG agreed to pay a $619 million penalty for moving billions of dollars through the U.S. financial system, using falsified records, on behalf of Iranian and Cuban clients. Standard Chartered agreed in August 2012 to a $340 million settlement with New York State regulators for allegedly processing transactions with Iran in contravention of U.S. regulations.3725 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. The assets were seized by U.S. authorities in late 2009. Banking Provisions of CISADA The Treasury Department efforts were enhanced substantially by the authorities of Section 104 of CISADA and U.N. and EU sanctions. The binding provisions of Section 104 of CISADA require the Secretary of the Treasury to prescribe several sets of regulations to forbid U.S. banks from opening new “correspondent accounts” or “payable-through accounts”—or force the cancellation of existing such accounts—with foreign banks that process “significant transactions” with: 37 24 25 Kessler, Glenn. “U.S. Moves to Isolate Iranian Banks.” Washington Post, September 9, 2006. Jessica Silver-Greenberg. “Regulator Says Bank Helped Iran Hide Deals” New York Times, August 7, 2012. Congressional Research Service 24 Iran Sanctions • The IRGC or any of its agents or affiliates that are sanctioned under U.S. executive orders. The two executive orders that have served as the principal source of U.S. sanctions against Iranian firms and organizations are Executive Order 13224 (September 23, 2001) and 13382 (June 28, 2005), discussed elsewhere in this report. As noted above, NIOC and NITC were determined in September 2012 to be affiliates of the IRGC, and NIOC was designated as a proliferation entity under Executive Order 13382 on November 8, 2012. • Any entity that is sanctioned by U.S. executive orders. To date, several hundred entities (including individuals), almost all of them Iran-based or of Iranian origin, have been designated under executive orders relating to proliferation (13382) or terrorism activities (13224). A full list is at the end of this report. Jessica Silver-Greenberg. “Regulator Says Bank Helped Iran Hide Deals” New York Times, August 7, 2012. Congressional Research Service 27 Iran Sanctions • Any entity designated under the various U.N. Security Council resolutions adopted to impose sanctions on Iran, • Any entity that assists Iran’s Central Bank in efforts to help the IRGC acquire weapons of mass destruction or support international terrorism. Foreign banks that do not have operations in the United States typically establish correspondent accounts or payable-through accounts with U.S. banks as a means of accessing the U.S. financial system and financial industry. The provision leaves it to the Treasury Department to determine what constitutes a “significant” financial transaction. The premise of the provision is that cutting off Iran’s access to the international financial system harms Iran’s economy primarily by preventing Iranian traders from obtaining letters of credit to buy or sell goods. Related Measure Added by FY2013 National Defense Authorization Act Section 1244(d) of the FY2013 National Defense Authorization Act (P.L. 112-239, signed January 2, 2013) adapts the ) applies the CISADA sanctions on foreign banks to those foreign banks that facilitate transactions with Iran’s energy, shipping, and shipbuilding sectors, including with NIOC, NITC, and IRISL. The provision does not specifically amend CISADA, however. Sanctions Imposed On July 31, 2012, the Administration announced the first sanctions under this provisionSection 104 of CISADA. Sanctioned arewere: the Bank of Kunlun in China and the Elaf Islamic Bank in Iraq. Section 311 of the Patriot Act On November 21, 2011, the Administration took further steps to isolate Iran’s banking system and to dissuade foreign banks and countries from dealing with any Iranian bank. Secretary of the Treasury Geithner announced that day that the Administration had acted under Section 311 of the USA Patriot Act (31 U.S.C. 5318A) to identify Iran as a “jurisdiction of primary money laundering concern”3826—that its financial system, including the Central Bank, constitutes a threat to governments or financial institutions that do business with these banks. Banks that do business with the Iranian financial system were declared at risk of supporting Iran’s pursuit of nuclear 26 http://www.treasury.gov/press-center/press-releases/Pages/tg1367.aspx. Congressional Research Service 25 Iran Sanctions weapons, its support for terrorism, and its efforts to deceive financial institutions and evade sanctions. The designation carried no immediate penalty, per se, but it imposesimposed additional requirements requirements on U.S. banks to ensure against improper Iranian access to the U.S. financial system. It was also intended to cause foreign banks to cease doing business with Iranian banks system. Executive Order 13599 on Impounding Iranian Assets Possibly in part to address congressional sentiment for extensive sanctions on the Central Bank, on February 5, 2012, the President issued an Executive Orderexecutive order (13599) imposing further sanctions on the Central Bank and on other entities determined to be owned or controlled by the Iranian government. The order requires that any U.S.-based assets of the Central Bank of Iran, or of any Iranian government-controlled entity, be blocked (impounded)impounded by U.S. financial institutions. U.S. 38 http://www.treasury.gov/press-center/press-releases/Pages/tg1367.aspx. Congressional Research Service 28 Iran Sanctions persons persons are prohibited from any dealings with such entities. U.S. financial institutions previously were were required to merely refuse such transactions with the Central Bank, or return funds to it, but the order requires them to henceforth impound such assets. Several . Several designations were made under Order on July 12, 2012, as shown in Table 6 at the end of the report. Sanctions on Iran’s Central Bank in the FY2012 NDAA Sanctions against Iran’s Central Bank, enacted in the FY2012 National Defense Authorization Act (P.L. 112-81)P.L. 112-81, are discussed above in the section on energy-related sanctions. The main intent of the P.L. 112-81 sanctions was to prevent payments to Iran for crude oil. However, the P.L. 112-81 sanctions apply to transactions with Iran’s Central Bank beyond those for oil, as discussed above. on energy-related sanctions. Electronic Payments (SWIFT) Cutoff Many in Congress pressed for binding sanctions against electronic banking transfer systems, such as Brussels-based SWIFT (Society of Worldwide Interbank Financial Telecommunications), that process payments for Iranian banks. No binding sanctions have been enacted, although SWIFT cut off sanctioned Iranian banks in March 2012. Section 220 of P.L. 112-158 requires reports on electronic payments systems such as SWIFT that might be doing business with Iran, and authorizes but does not mandate sanctions against such systems. Terrorism-Related Sanctions Iran was designated a “state sponsor of terrorism” on January 23, 1984, following the October 1983 bombing of the U.S. Marine barracks in Lebanon perpetrated by elements that later became Hezbollah. This designation triggers substantial sanctions on any nation so designated. Sanctions Triggered by Terrorism List Designation: Ban on U.S. Aid, Arms Sales, Dual-Use Exports, and Certain Programs for Iran The U.S. naming of Iran as a “state sponsor of terrorism,” commonly referred to as Iran’s placement on the U.S. “terrorism list,” triggers several sanctions. Terrorism list designations are made under the authority of 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. The sanctions triggered by Iran’s continued listing are: • Restrictions on 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). Under other executive orders). Under other Congressional Research Service 26 Iran Sanctions laws, the designation bans direct U.S. financial assistance to Iran (§620A of the the Foreign Assistance Act, FAA, P.L. 87-195) and arms sales to Iran (§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 countries (§327 of the Anti-Terrorism and Effective Death Penalty Act of 1996, P.L. 104-132). Waivers are provided under these laws, but. In addition, successive foreign aid appropriations appropriations laws since the late 1980s have banned direct assistance to Iran (loans, credits, insurance, Ex-Im Bank credits) without providing for a waiver. Congressional Research Service 29 Iran Sanctions • Under the Anti-Terrorism and Effective Death Penalty Act (§§325 and 326 of P.L. 104-132), a requirement that 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. Section 321 of that act also makes it a criminal offense for U.S. persons to conduct financial transactions with terrorism list governments. Aside from the terrorism list designation, 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. For example, if an international organization spends 3% of its budget for programs in Iran, then the United States is required to withhold 3% of its contribution to that international organization. No waiver is provided for. No Ban on U.S. Official Humanitarian Aid The terrorism list designation, and other U.S. sanctions laws, do not bar disaster aid. The United States donated $125,000, through relief agencies, to help victims of two earthquakes in Iran (February and May 1997); $350,000 worth of aid to the victims of a June 22, 2002, earthquake; and $5.7 million in assistance (out of total governmental pledges of about $32 million) for the victims of the December 2003 earthquake in Bam, Iran, which killed as many as 40,000 people. The United States military flew in 68,000 kilograms of supplies to Bam. Executive Order 13224: Sanctioning Terrorism Supporting Entities 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, 2001, attacks on the United States, 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 6, which also contains the names of Iranian entities sanctioned under other orders and under United Nations resolutions. Implementation Among recent Iran-related designations under this order, on July 28, 2011, the Treasury Department designated six Iran-based members of Al Qaeda under this order for allegedly serving as financiers for Al Qaeda. On October 12, 2011, the Treasury Department designated Mahan Air, an airline operating in Iran and the Persian Gulf region, under this order, for allegedly helping the Qods Force (the arm of Iran’s Revolutionary Guard that supports pro-Iranian movements abroad) ship weapons and other gear. On March 27, 2012, the Treasury Department designated another Iranian airline, Yas Air, as well as five Iranian entities and one Nigerian entity for allegedly attempting to ship Iranian weapons to Gambia and to Syria. On September 19, 2012, the Treasury Department identified 117 Iranian aircraft (adding them to Treasury’s “Specially Designated National” list) belonging to Mahan Air, Yas Air, and Iran Air (designated under E.O. 13382 below) that are allegedly involved in flying Iranian military aid to SyriaEntities sanctioned under the order for terrorism-related assistance to Iran or Iranian entities are listed in the table at the end of this paper. Congressional Research Service 3027 Iran Sanctions Proliferation-Related U.S. Sanctions The state sponsor of terrorism designation, discussed above, bars Iran from U.S. exports of technology that can be used for weapons of mass destruction programs (WMD). Iran-specific anti-proliferation laws discussed below,3927 and Executive Order 13382 (June 28, 2005), also seek to prevent Iran from receiving advanced technology from the United States. Some of these laws and executive measures seek to penalize foreign firms and countries that provide equipment to Iran’s WMD programs. Iran-Iraq Arms Nonproliferation Act The Iran-Iraq Arms Nonproliferation Act (P.L. 102-484) imposes a number of sanctions on foreign entities that supply Iran with WMD technology or “destabilizing numbers and types of conventional weapons.” Sanctions imposed on violating entities include a ban, for two years, on U.S. government procurement from that entity, and a two-year ban on licensing U.S. exports to that entity. A sanction to ban imports to the United States from the entity is authorized. If the violator is determined to be a foreign country, sanctions to be imposed are a one-year ban on U.S. assistance to that country; a one-year requirement that the United States vote against international lending to it; a one-year suspension of U.S. co-production agreements with the country; a one-year suspension of technical exchanges with the country in military or dual use technology; and a one-year ban on sales of U.S. arms to the country. The President is also authorized to deny the country most-favored-nation trade status; and to impose a ban on U.S. trade with the country. The Iran-Iraq Arms Nonproliferation Act (§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-by-case basis, is provided for. Iran-North Korea-Syria Nonproliferation Act The Iran Nonproliferation Act (P.L. 106-178), now called the Iran-North Korea-Syria NonProliferation Act (INKSNA), 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. ItSanctions imposed include (1) a prohibition on U.S. exportation of arms and dual use items to the sanctioned entity; and, under Executive Order 12938 (of November 14, 1994), a ban on U.S. government procurement and of imports to the United States from the sanctioned entity. The law also 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.4028 (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.) Table 6 at the end of the report lists entities sanctioned under this law. 39 27 Such laws include the Atomic Energy Act of 1954 and the Energy Policy Act of 2005 (P.L. 109-58). 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. 4028 Congressional Research Service 31 Iran Sanctions 28 Iran Sanctions U.S. government through March 2009, waived this law to allow NASA to continue to use Russian vehicles to access the International Space Station.) Table 6 at the end of the report lists entities sanctioned under this law. Executive Order 13382 Executive Order 13382 (June 28, 2005) 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. As is Implementation As is the case with Executive Order 13224, this order has been used extensively to sanction Iran-related Iranrelated entities; Table 6 lists Iran-related entities sanctioned under the order. Implementation As examples of entities designated under the Orderorder, the IRGC is named as a proliferation entity. As noted above, Iran Air was named as a proliferation-supporting entity under the Order on March 27, 2012. 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. U.S. 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).4129 The concept of these sanctions is to express the view of Western and other democracies that Iran is an outcast internationally. A divestment provisions was contained in CISADA (P.L. 111-195)—in particular providing a “safe harbor” for investment managers who sell shares of firms that invest in Iran’s energy sector. Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 requires companies, in their reports to the Securities and Exchange Commission, to disclose whether it or any corporate affiliate has engaged in any sanctionable transactions with Iran under ISA, CISADA, and other applicable laws. 29 For information on the steps taken by individual states, see National Conference of State Legislatures. State Divestment Legislation. Congressional Research Service 29 Iran Sanctions U.S. Sanctions Intended to Support Democratic Change in Iran or Alter Iran’s Foreign Policy A trend in U.S. policy since the June 2009 Iran election dispute has been to quietly and gradually advance the prospects for the domestic opposition in Iran. Proposals to sanction the IRGC, discussed throughout, represent one facet of that trend. The IRGC is not only involved in Iran’s 41 For information on the steps taken by individual states, see National Conference of State Legislatures. State Divestment Legislation. Congressional Research Service 32 Iran Sanctions WMD programs but it is also the key instrument through which the regime has suppressed the pro-democracy movement. Another trend in legislation and Executive Ordersexecutive orders has been to support the ability of democracy activists in Iran to communicate, to reduce the regime’s ability to monitor or censor Internet communications, and to identify and sanction Iranian human rights abusers. Earlier legislation, the Iran Freedom Support Act (IFSA, P.L. 109-293), represented a congressional effort to promote the prospects for opponents of the regime. That law authorized “sums as may be necessary” to assist Iranians who are “dedicated” to “democratic values … and the adoption of a democratic form of government in Iran”; and “advocates the adherence by Iran to nonproliferation regimes.” Expanding Internet and Communications Freedoms Some laws and Administration action focus 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 Act (P.L. 111-84), called the “VOICE” (Victims of Iranian Censorship) Act contained 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 act authorized funds to document Iranian human rights abuses since the June 12, 2009, presidential election. Another provision (§1241) required an Administration report, not later than January 31, 2010, on U.S. enforcement of sanctions against Iran, and the effect of those sanctions on Iran. CISADA Provisions In the 111th Congress, the “Reduce Iranian Cyber-Suppression Act,” (S. 1475 and H.R. 3284) was incorporated into CISADA. The provision of CISADA (Section 106) as Section 106. The section prohibits U.S. government contracts with foreign companies that sell technology that Iran could use to monitor or control Iranian usage of the internet. Another provision of CISADA (§ Section 103(b)(2)) of that law exempts from the U.S. export ban on Iran equipment equipment to help Iranians communicate and use the Internet. The provisions were directed, in part, against firms, including a joint venture between Nokia (Finland) and Siemens (Germany), reportedly sold Internet monitoring and censorship technology to Iran in 2008.4230 March 2010 Administration Regulations: Providing Free Software to Iranians 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 30 Rhoads, Christopher. “Iran’s Web Spying Aided by Western Technology.” Wall Street Journal, June 22, 2009. Congressional Research Service 30 Iran Sanctions mass market software in order to facilitate Internet communications. The ruling appeared to incorporate the major features of a proposal in the 111th Congress, 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. 42 Rhoads, Christopher. “Iran’s Web Spying Aided by Western Technology.” Wall Street Journal, June 22, 2009. Congressional Research Service 33 Iran Sanctions The Administration took a further step on March 20, 2012, announcing a new licensing policy to promote Internet freedom in Iran. The announcement seemed to reflect President Obama’s Nowruz message that same day, saying the United States is committed to promoting Internet freedom in Iran against counter-efforts by the regime. The Treasury Department announced that several additional types of software and information technology products would be able to be exported to Iran under general license, including personal communications, personal data storage, browsers, plug-ins, document readers, and free mobile applications related to personal communications. The exports are provided the products are available at no cost to the user.4331 Executive Order 13606, P.L. 112-158, Executive Order 13628 Several Executive Ordersexecutive orders and a law seek to sanction those Iranians and firms determined to be monitoring or censoring Internet and other communication among Iranians. Executive Order 13606 On April 23, 2012, President Obama issued an Executive Orderexecutive order (13606) directly addressing the issue by sanctioning persons who commit “Grave Human Rights Abuses by the Governments of Iran and Syria Via Information Technology (GHRAVITY).” The order blocks the U.S.-based property and essentially bars U.S. entry and bans any U.S. trade with persons and entities listed in an Annex and persons or entities subsequently determined to be: • Operating any technology that allows the Iranian (or Syrian) government to disrupt, monitor, or track computer usage by citizens of those countries. • Selling to Iran or Syria any technology that enables those governments to carry out such disruptions or monitoring. • Assisting the two governments in such disruptions or monitoring. The Executive Orderexecutive order named as violators and imposed sanctions on Iran’s Ministry of Intelligence and Security (MOIS); the Islamic Revolutionary Guard Corps (IRGC); the Law Enforcement Forces (LEF); and Iranian Internet service provider Datak Telecom.44 Of these entities, similar sanctions have been imposed through other Executive Orders (relating to facilitating proliferation, terrorism, and human rights abuses) on the MOIS, the IRGC, and the LEF.32 Several of these entities had previously been sanctioned under other executive orders on proliferation, terrorism, and human rights abuses, discussed above. 31 Fact Sheet: Treasury Issues Interpretive Guidance and Statement of Licensing Policy on Internet Freedom in Iran,. March 20, 2012. 32 Department of Treasury Documents. Fact Sheet: New Executive Order Targeting Human Rights Abuses Via Information Technology. April 23, 2012. Congressional Research Service 31 Iran Sanctions P.L. 112-158 Section 403 of the Iran Threat Reduction and Syria Human Rights Act (P.L. 112-158) codifies Executive Order 13606 by imposing those same sanctions (visa ban, U.S.-based property blocked) on persons/firms determined to have engaged in censorship in Iran, limited access to media, or—for example a foreign satellite service provider—supported Iranian government jamming or frequency manipulation. 43 Fact Sheet: Treasury Issues Interpretive Guidance and Statement of Licensing Policy on Internet Freedom in Iran,. March 20, 2012. 44 Department of Treasury Documents. Fact Sheet: New Executive Order Targeting Human Rights Abuses Via Information Technology. April 23, 2012. Congressional Research Service 34 Iran Sanctions Executive Order 13628 This Executive Order, issued on October 9, 2012, and discussed above, contains a section (Section 3) that implements Section 403 of P.L. 112-158 above by blocking the property of Executive Order 13628 Executive Order 13628, issued on October 9, 2012, implements Section 403, above, by blocking the property of persons/firms determined to have committed the censorship, limitation of free expression, or assistance in jamming stipulated by P.L. 112-158. Various entities were designated under the Order order on November 8, 2012,33 and since, as presented in the table at the end of the paper paper. The order also specifies the separate authorities of the Department of State and the Department of the Treasury to impose the selected sanctions. Measures to Sanction Human Rights Abuses and Promote the Opposition Another part of the effort to help Iran’s opposition has been legislation to sanction regime officials involved in suppressing the domestic opposition in Iran. Senator John McCain introduced a stand-alone bill, S. 3022, the “Iran Human Rights Sanctions Act, and later proposed those provisions as an amendment to S. 2799 (the Senate version of what became CISADA). abusers. Section 105 of CISADA and Executive Order 13553 The provisions of S. 3022 were incorporated into CISADA as Section 105. The section bans travel and freezing assets of those Iranians determined to be human rights abusers. On September 29, 2010, the Administration implemented Section 105 of CISADA when President Obama signed an Executive Orderexecutive order (13553) providing for the CISADA sanctions against Iranians determined to be responsible for or complicit in post-2009 Iran election human rights abuses. Along with the order, an initial group of eight Iranian officials was penalized, including Mohammad Ali Jafari, the commander-in-chief of the IRGC, and several other officials who were in key security or judicial positions at the time of the June 2009 election and aftermath. Several additional officials and security force entities have been sanctioned since, as shown in Table 6 at the end of this report. Under State Department interpretations of the executive order, if an entity is designated, all members of that entity are ineligible for visas to enter the United States.4534 Similar sanctions against many of these same officials—as well as several others—have been imposed by the European Union. 33 http://www.state.gov/r/pa/prs/ps/2012/11/200338.htm. U.S. Department of the Treasury, Office of Public Affairs. Treasury Sanctions Iranian Security Forces for Human Rights Abuses, June 9, 2011. 34 Congressional Research Service 32 Iran Sanctions Provisions Added by P.L. 112-158: Sanctioning Sales of Anti-Riot Equipment Section 402 of the Iran Threat Reduction and Syria Human Rights Act of 2012 (P.L. 112-158) amends Section 105 of CISADA by adding a new provisions that sanctions (visa ban, U.S. property blocked) for any person or company that sells the Iranian government goods or technologies that it can use to commit human rights abuses against its people. Such goods include firearms, rubber bullets, police batons, chemical or pepper sprays, stun grenades, tear gas, water cannons, and like goods. Under that section, ISA sanctions are additionally to be imposed on any person determined to be selling such equipment to the IRGC. 45 U.S. Department of the Treasury, Office of Public Affairs. Treasury Sanctions Iranian Security Forces for Human Rights Abuses, June 9, 2011. Congressional Research Service 35 Iran Sanctions Provisions Added by FY2013 National Defense Authorization ActFY2013 National Defense Authorization Act: Sanctioning Iranian Broadcasting and Profiteers P.L. 112-239, the FY2013 National Defense Authorization Act, signed January 2, 2013, has has several human rights provisions. Section 1248 mandates inclusion of the Islamic Republic of Iran Broadcasting (IRIB), the state broadcasting umbrella group, as a human rights abuser, subjecting IRIB to sanctions under Section 105 of CISADA. Section 1249 amends CISADA by making sanctionable under Section 105 of CISADA any person determined to have engaged in corruption or to have diverted or misappropriated humanitarian goods or funds for such goods for the Iranian people. The measure is intended to sanction Iranian profiteers who are, for example, using official connections to corner the market for vital medicines. Executive Order 13438 and 13572: Sanctioning Iranian Involvement in the Region Some sanctions have been imposed to try to punish Iran’s attempts to exert influence in the region. On July 7, 2007, President Bush issued Executive Order 13438. The order sanctions Iranian persons who are posing a threat to Iraqi stability, presumably by providing arms or funds to Shiite militias there. Some persons sanctioned have been Qods Force officers, some have been Iraqi Shiite militia-linked figures, and some entities have been sanctioned as well. Executive Order 13572, issued on April 29, 2011, targets those responsible for human rights abuses and repression of the Syrian people. The Qods Force and a number of Iranian Qods Force officers, including its overall commander Qasem Soleimani, have been sanctioned under this Order (and under other executive orders, as shown in the table at the end). The Iranians sanctioned allegedly helped Syria commit abuses against protesters and repress its domestic opposition movement that has conducted nationwide demonstration since March 2011. In September 2011, the European Union similarly sanctioned the Qods Force for its purported assistance to Syria’s repression. Separate Visa Ban On July 8, 2011, in conjunction with Britain, the United States imposed visa restrictions on more than 50 Iranian officials for participating in political repression in Iran. The State Department announcement stated that the names of those subject to the ban would not be released because visa records are confidential. The action was taken under the authorities of Section 212(a)(3)(C) of the Immigration and Nationality Act, which renders inadmissible to the United States a foreign person whose activities could have serious consequences for the United States. Congressional Research Service 33 Iran Sanctions There are certain exemptions in the case of high level Iranian visits to attend the United Nations. Under the U.N. Participation Act (P.L. 79-264) that provides for U.S. participation in the United Nations and as host nation of U.N. headquarters in New York, visas are routinely issued to heads of state and members of their entourage attending these meetings. In September 2012, however, the State Department refused visas for 20 members of Iranian President Ahmadinejad’s traveling party on the grounds of past involvement in terrorism or human rights abuses. Still, in line with U.S. obligations under the Actact, Ahmadinejad was allowed to fly to the United States on Iran Air, even though Iran Air is a U.S.-sanctioned entity, and his plane reportedly was allowed to stay at Andrews Air Force base for the duration of his visit. Congressional Research Service 36 Iran Sanctions 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. 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. A reported $400 million in proceeds from the resale of that equipment was placed in a DOD FMS account and may remain in this escrow account, although DoD has not provided CRS with a precise balance. Additionally, according to the Treasury Department “Terrorist Assets report” for 2010, about $48 million in Iranian diplomatic property and accounts remains blocked—this amount includes proceeds from rents received on the former Iranian embassy in Washington, DC, and 10 other properties in several states, along with 6 related bank accounts.4635 Other past 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 paid Iran $61.8 million in compensation ($300,000 per wage earning victim, $150,000 per nonwage earner) for the 248 Iranians killed. The United States did not compensate Iran for the airplane itself, although officials involved in the negotiations told CRS in November 2012 that the United States might have later provided a substitute, used aircraft to Iran. In another case, there are reportedly about $2 billion in securities-related assets held by Citigroup, deposited there by Luxembourg-based Clearstream Banking SA, a payments-clearing organization. The assets reputedly belong to Iran and have been frozen and held against terrorism judgments against Iran, although it is not clear whether such assets fall under existing authorities to impound Iranian assets to pay terrorism or other judgments against Iran. Iran’s Central Bank reportedly plans to file a motion in U.S. court to unfreeze the assets. Pending legislation in the 112th Congress, discussed below, would consider those assets to be Iranian assets subject to seizure and use to pay judgments against Iran in various terrorism-related cases. In a recent judgement, on July 6, 2012, a U.S. federal judge ordered Iran to pay $813 million to the families of the 241 U.S. soldiers killed in the October 23, 1983, bombing of the U.S. Marine barracks in Beirut. That brings to $8.8 billion the total amount awarded, in eight judgments against Iran, for that bombing, which was perpetrated by Islamist elements that ultimately became Lebanese Hezbollah. 35 http://www.treasury.gov/resource-center/sanctions/Documents/tar2010.pdf. Congressional Research Service 34 Iran Sanctions U.N. Sanctions U.N. sanctions apply to all U.N. member states, and therefore have tended, in other cases, to be more effective than unilateral sanctions. There is increasing convergence among all these varying sets of sanctions. 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. In addition, Resolution 1747 imposed a ban on Iran’s exportation of weaponry outside Iran’s borders. After failed negotiations with Iran during 2009, 46 http://www.treasury.gov/resource-center/sanctions/Documents/tar2010.pdf. Congressional Research Service 37 Iran Sanctions Resolution 1929 was adopted on June 9, 2010, by a vote of 12-2 (Turkey and Brazil), with one abstention (Lebanon). (Iranian entities and persons under U.N. sanctions are in Table 6.) Resolution 1929:4736 • added several firms affiliated with the Revolutionary Guard firms to the list of sanctioned entities, and made mandatory a ban on travel for Iranian persons named in it, and in previous resolutions—including those Iranians for whom there was a nonbinding travel ban in previous resolutions. • gave countries the authorization to inspect any shipments—and to dispose of its cargo—if the shipments are suspected to carry contraband items. However, inspections on the high seas are subject to concurrence by the country that owns that ship. This provision is modeled after a similar provision imposed on North Korea, which did cause that country to reverse some of its shipments. • prohibited countries from allowing Iran to invest in uranium mining and related nuclear technologies, or nuclear-capable ballistic missile technology. • banned sales to Iran of most categories of heavy arms to Iran and requests restraint in sales of light arms, but does not bar sales of missiles not on the “U.N. Registry of Conventional Arms.” • required countries to insist that their companies refrain from doing business with Iran if there is reason to believe doing so could further Iran’s WMD programs. • requested that countries prohibit Iranian banks to open in their countries, or for their banks to open in Iran, if doing so could contribute to Iran’s WMD activities. • did not mandate a ban on shipping insurance for shipments to Iran; international investment in Iran’s energy sector; the provision of trade credits to Iran; or all financial dealings with Iranian banks. 36 Text of the resolution is at http://www.isis-online.org/uploads/isis-reports/documents/ Draft_resolution_on_Iran_annexes.pdf. Congressional Research Service 35 Iran Sanctions Table 1. Summary of Provisions of U.N. Resolutions on Iran Nuclear Program (1737, 1747, 1803, and 1929) Freeze the assets of over 80 named Iranian persons and entities, including Bank Sepah, and several corporate affiliates of the Revolutionary Guard. (Entities named in annexes to each of the resolutions.) Prohibit transfer to Iran of nuclear, missile, and dual use items to Iran, except for use in light-water reactors Prohibit Iran from exporting arms or WMD-useful technology Prohibit Iran from investing abroad in uranium mining, related nuclear technologies or nuclear capable ballistic missile technology (1929) Require Iran to suspend uranium enrichment, and to refrain from any development of ballistic missiles that are nuclear capable (1929) Require that countries ban the travel of over 40 named Iranians Mandates that countries not export major combat systems to Iran (1929) Calls for “vigilance” (a nonbinding call to cut off business) with respect to all Iranian banks, particularly Bank Melli and Bank Saderat. 47 Text of the resolution is at http://www.isis-online.org/uploads/isis-reports/documents/ Draft_resolution_on_Iran_annexes.pdf. Congressional Research Service 38 Iran Sanctions Freeze the assets of over 80 named Iranian persons and entities, including Bank Sepah, and several corporate affiliates of the Revolutionary Guard. (Entities named in annexes to each of the resolutions.) Calls for vigilance (voluntary restraint) with respect to providing international lending to Iran and providing trade credits and other financing and financial interactions. Calls on countries to inspect cargoes carried by Iran Air Cargo and Islamic Republic of Iran Shipping Lines—or by any ships in national or international waters—if there are indications they carry cargo banned for carriage to Iran. Searches in international waters would require concurrence of the country where the ship is registered. (1929) A Sanctions Committee, composed of the 15 members of the Security Council, monitors implementation of all Iran sanctions and collects and disseminates information on Iranian violations and other entities involved in banned activities. A “panel of experts” is empowered by 1929 to assist the U.N. sanctions committee in implementing the Resolution and previous Iran resolutions, and to suggest ways of more effective implementation. Source: Text of U.N. Security Council resolutions 1737, 1747, 1803, and 1929. http://www.un.org. More information on specific provisions of each of these resolutions and the nuclear negotiations with Iran is in CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth Katzman. International Implementation and Compliance48Compliance37 Since 2010, converging international views on Iran hashave produced an unprecedented degree of global cooperation in pressuring Iran with sanctions. And, increasingly,Increasingly, even Iran’s neighbors—always reluctant to antagonize the large power by cooperating with international sanctionsIran—are joining the effort. Some European and Asian countries have joined the burgeoning sanctions regime not necessarily out of conviction of the efficacy of sanctions but belief in sanctions’ efficacy but rather as a means of perhaps heading off unwanted military action by the United States or Israel against Iran’s nuclear facilities. A comparison between U.S., U.N., and EU sanctions against Iran is contained in Table 3 below, although noting that there are differing legal bases and authorities for these sanctions. To increase international compliance with all applicable sanctions, on May 1, 2012, President Obama issued an Executive Orderexecutive order (13608) giving the Treasury Department the ability to identify and sanction (cutting them off from the U.S. market) foreign persons who help Iran or Syria evade U.S. and multilateral sanctions. evade U.S. and multilateral sanctions. 37 Note: CRS has no mandate or capability to “judge” compliance or cooperation of any country with U.S., multilateral, or international sanctions against Iran. This section is intended to analyze some of the major themes discussed by experts in assessing the degree to which other countries are helping U.S. policy toward Iran, and bearing in mind there are many other issues and considerations in U.S. relations with the countries discussed here. Congressional Research Service 36 Iran Sanctions Iran Evasion Attempts Iran has sought to evade the international sanctions, particularly by using the loose regulations and traditional mechanisms common to its neighbors. For example, on January 10, 2013, the Treasury Department’s Office of Foreign Assets Control issued an Advisory to highlight Iran’s use of hawalas (traditional informal banking and money exchanges) in the Middle East and South Asia region to circumvent the sanctions against financial transactions with Iran. U.S. and other banks sometimes process transactions with the hawalas that involve Iranian entities because the hawalas are able to conceal the Iranian involvement. As noted below, Iran has attempted to use mechanisms in neighboring Iraq and Afghanistan to acquire dollars and conduct other transactions. Press reports indicate that Iran has also attempted to set up front companies in Europe, UAE, and elsewhere to try to buy banned technology or sell more oil. Iran’s regional and international efforts to avoid the sanctions regime are discussed in the sections on international compliance below. European Union U.S. and European approaches have converged on Iran since 2002, when the nuclear issue came to the fore. Previously, European and other countries had appeared less concerned than is the United States about Iran’s support for militant movements in the Middle East or Iran’s strategic power in the Persian Gulf and were reluctant to sanction Iran to address those issues. After the passage of Resolution 1929 in June 2010, European Union (EU) sanctions on Iran have become nearly as extensive as those of the United States. On November 21, 2011, in a concerted action with those taken by the U.S. Treasury Department (see above under §311 of the Patriot Act), Britain and Canada announced they would no longer do business with Iran’s financial institutions, including Iran’s Central Bank. Iran’s parliament subsequently voted to downgrade 48 Note: CRS has no mandate or capability to “judge” compliance or cooperation of any country with U.S., multilateral, or international sanctions against Iran. This section is intended to analyze some of the major themes discussed by experts in assessing the degree to which other countries are helping U.S. policy toward Iran, and bearing in mind there are many other issues and considerations in U.S. relations with the countries discussed here. Congressional Research Service 39 Iran Sanctions relations with Britain, a move that, on November 29, 2011, contributed to the overrunning of the British Embassy in Tehran by pro-government students, with at least the partial apparent complicity of regime security forces. That attack prompted Britain to give all Iranian diplomats 48 hours to leave Britain. Canada followed suit by closingclosed its embassy in Tehran in September 2012 2012. Europe has offered some opportunity for illicit Iranian commerce. The Islamic Republic of Iran Shipping Lines (IRISL) has reportedly sought to use the port facilities of Malta and Hamburg, Germany in support of proliferation activities. EU Oil Embargo and Central Bank of Iran Cutoff In joining U.S. efforts to cut Iran’s oil export lifeline, on January 23, 2012, the EU decided to: • Refrain from new contracts to purchase Iranian oil and to wind down existing contracts by July 1, 2012, after which all EU purchases of Iranian oil were to cease. Collectively, the EU bought about 600,000 barrels per day of Iranian oil in 2011, about a quarter of Iran’s total oil exports. A planned review on May 1, 2012, was not held because of an EU consensus to proceed with the embargo, despite the effect of the move on the EU’s vulnerable economies, such as Spain, Italy, and Greece. Those three countries each bought more than 10% of their imported oil from Iran. Britain and Germany only got about 1% of their oil from Congressional Research Service 37 Iran Sanctions Iran, and France about 4%. Saudi Arabia and other suppliers, such as Libya, Iraq, and UAE, are reportedly stepping in as alternative suppliers. • Ban insurance for shipping oil or petrochemicals from Iran. Even before this took full effect on July 1, 2012, some EU-based insurers reportedly closed their offices in Iran. • Stop all trade with Iran in gold, precious metals, diamonds, and petrochemical products. • Freeze the assets of Iran’s Central Bank, although transactions would still be permitted for approved legitimate trade. • Freeze the assets of several Iranian firms involved in shipping arms to Syria or which support shipping by IRISL, and cease doing business with port operator Tidewater (see above). As discussed above, partly as a consequence of the EU decision, 10 EU countries have been granted exemptions from any U.S. sanctions imposed under the P.L. 112-81 Central Bank sanctions. Even though the EU countries have adopted the oil embargo, some EU countries criticize aspects of the U.S. sanctions against Iran’s Central Bank as a de-facto ban on even all civilian trade with Iran, such as in automobiles. This is because financing is often needed to facilitate trade, and the blocking of financing and payments mechanisms limits the capability to trade with Iran. Subsequent EU Steps SWIFT Cutoff. The Belgium-based SWIFT organization (Society for Worldwide International Financial Transfers) announced in February 2012 that it would adopt any EU decision to end transactions with Iranian banks blacklisted by the EU (about 18 Iranian banks that meet that criteria are members of the network). As of March 17, 2012, based on EU authorization, SWIFT ended transactions with these Iranian banks. Congressional Research Service 40 Iran Sanctions However, some experts report that Iranian banks are still able to conduct transactions with the European Central Bank via an electronic payments system called “Target II.” Additional EU Sanctions Adopted October 15, 2012. In response to a lack of progress in nuclear negotiations with Iran, the EU adopted the following additional measures: • A ban on transactions between European and all Iranian banks, unless specifically authorized. • A ban on provision of short-term export credits, guarantees, and insurance. • A ban on imports of natural gas from Iran, although volumes are small, going mainly to Bulgaria and Greece, via Turkey. This sanction is intended to stall Iran’s attempt to position itself as a gas exporter to Europe. • A ban on exports of graphite, semi-finished metals such as aluminum and steel, and industrial software, all of which could be used in Iran’s nuclear or missile programs. • A ban on providing shipbuilding technology, oil storage capabilities, and flagging or classification services for Iranian tankers and cargo vessels. These sanctions are likely to stall Iran’s attempt to position itself as a gas exporter to Europe. The Obama Administration, like its predecessors, takes the view that Iran be excluded from gas pipeline projects to Europe, even though the projects might make Europe less dependent on Russian gas supplies. Congressional Research Service 38 Iran Sanctions Table 2. Top Energy Buyers From Iran and Reductions (amounts in barrels per day, bpd) Country/Bloc 2011 End of 2012 (est.)Current European Union (particularly Italy, Spain, and Greece) 600,000 Negligible China 550,000 400380,000 Japan 325,000 200180,000 India 320,000 280260,000 South Korea 230,000 200180,000 Turkey 200,000 150140,000 South Africa 80,000 0 Malaysia 55,000 30,000 Sri Lanka 35,000 20,000 Taiwan 35,000 20,000 Singapore 20,000 15,000 Other 55,000 25,000 Total 2.5 mbd 1.3425 mbd Source: International Energy Agency, and rough estimates based on CRS conversations with foreign diplomats and press reports. The 2012 figures reflect import reductions pledged by the named customer in order to receive Section 1245 exemptions and press reports. Actual volumes might differ and import volumes may fluctuate dramatically over short periods periods of time as actual tanker deliveries occur. Congressional Research Service 41 Iran Sanctions Japan and South Korea Japan and South Korea have joined the international coalition that is pressuring Iran, not only to maintain their close relations with the United States but also to pressure Iran. In September 2010, Japan and South Korea announced trade, banking, and energy Iran sanctions similar to those of the EU. On December 16, 2011, South Korea announced new sanctions to align policy with the November 2011 U.S. decision to sanction sales to Iran of energy sector equipment. The cooperation of Japan and South Korea is considered by U.S. officials essential to overall U.S. strategy of cutting Iran’s exports of oil substantially. Both countries have sharply Both countries have reduced oil imports from Iran and, as a result, both have been issued sanctions exemptions under P.L. 112-81. Japan’s exemption was extended on September 14, 2012, for another 180 days and South Korea’s exemption was renewed on December 7, 2012. Both sanctions exemptions (and subsequent renewals of those exemptions) under P.L. 112-81. Both countries were concerned about the effects of the EU ban on insuring ships carrying Iranian oil, but they worked around that by setting up new insurance mechanisms. As a result, some energy groups say that imports of imports of Iranian oil by Japan and South Korea may have rebounded somewhat in late 2012 from late summer levels.rebounded somewhat in late 2012 from late summer levels. The February 6, 2013, triggering of the requirement that oil buyers pay Iran in local accounts might not affect Japan and South Korea’s trading patterns with Iran significantly. South Korea pays Iran’s Central Bank through local currency accounts at its Industrial Bank of Korea and Woori Bank, and its main exports to Iran have been iron and steel, as well as consumer electronics and appliances made by companies such as Samsung and LG. Japan exports to Iran significant amounts of chemical and rubber products, as well as consumer electronics. These exports are likely to continue using local currency accounts. Congressional Research Service 39 Iran Sanctions India India is implementing U.N. sanctions against Iran but its cultural, economic, and historic ties—as well as its strategic need for access to Afghanistan—have made India hesitant to adopt all aspects of U.S. and EU sanctions on Iran. India first signaled greater support for sanctioning Iran in late 2012 when its central bank ceased using a Tehran-based regional body, the Asian Clearing Union, to handle transactions with Iran. There had been allegations that Iran was using the Clearing Union to avoid European banking sanctions. With India’s purchases of about 320,000 barrels per day of Iranian oil (2011 average) made difficult by the move, in February 2011, India and Iran agreed to use an Iranian bank, Europaisch-Iranische Handelsbank (EIH), to clear the payments. When the EU named EIH and about 100 other entities as Iran proliferation-related activities in May 2011, India and Iran eventually turned to Turkey’s Halkbank as an acceptable processor. The U.S. law sanctioning dealings with Iran’s Central Bank (Section 1245 of P.L. 112-81) led Halkbank in January 2012 to withdraw from the arrangement, and the foreign currency account was subsequently handled by UCO Bank in India. India took advantage of that new difficulty to force concessions from Iran, including an Iranian agreement in March 2012 to accept payment for about 45% of the oil sales in rupees, India’s local currency, which is not convertible. Rupee Rupee accounts facilitate the settlement of payments for oil in the form of barter trade, and India does not have to use hard currency to pay Iran for the oil it buyssuch as sales to Iran by Indian companies of wheat, pharmaceuticals, rice, sugar, soybeans, and other products, and India does not have to use hard currency to pay Iran for the oil it buys. The hard currency account at UCO Bank reportedly has been exhausted as of March 2013. The February 6, 2013, requirement that Iran be paid in local accounts therefore might not affect India-Iran trade substantially. Apparently perceiving international sentiment for tightening sanctions on Iran, India has been reducing its dependence on Iranian oil. Since 2008, India has reduced its imports of Iranian oil by volume and as a percentage of India’s total oil imports, to the point where, by the end of 2012, Iran was only supplying about 10% of India’s oil imports, down from over 16% in 2008. Despite requiring significant investment to switch over refineries that handle Iranian crude, Deputy Oil Minister R.P.N. Singh told India’s parliament on May 15, 2012, that India would cut Iranian imports by another 11% from May 2012 until the end of India’s fiscal year in March 2013. The Obama Administration welcomed the pledge, and India received an exemption from P.L. 112-81 sanctions on June 11, 2012. Indian refiners have cut buys from Iran largely in line with the government’s requests, although some months might show fluctuations as batches of oil shipments arrive. India’s exemption was renewed on December 7, 2012. Congressional Research Service 42 Iran Sanctions The use of rupee-based trade might lead to an expansion of India-Iran trade in purely civilian goods, because any balances owed Iran for oil need to be settled with rupee-demoninated goods. India sent a large trade delegation to Iran (March 10-14, 2012) to discuss increased exports to Iran of staple goods such as sugar and wheat—commodities not subject to international sanctions. An Iranian trade delegation visited India in May 2012As India continued cutting its Iran oil buys, the exemption was renewed on December 7, 2012. On January 17, 2013, India’s oil secretary, G.C. Chaturvedi, announced that India planned to cut its oil imports from Iran by a further 17% beginning in April 2013. Indian officials say some of their major companies, including the Tata conglomerate, have ended or reduced their business with Iran. India appears to be distancing itself from participation inalso has dissociated itself from the Iran-Pakistan gas pipeline project discussed below. India reportedly has been concerned pulled out of the project in 2009 over concerns about the 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. If Iran resolves its disputes with the international community, India may envision an alternative to the pipeline project as a means of tapping into Iran’s vast gas resources. Iran of the gas to be sold. During high-level economic talks in early July 2010, Iranian and Indian officials reportedly raised the issue of constructing an underwater natural gas pipeline, which would avoid going through Pakistani territory. However, such a route would presumably be much more expensive to construct than would be an overland route. Congressional Research Service 40 Iran Sanctions Pakistan A test of Pakistan’s compliance with sanctions is a pipeline project intended to carry Iranian gas to Pakistan. TheAgreement on the $7 billion project was finalized on June 12, 2010. Energy experts49 say Iran has largely completed the pipeline extension from its network to the Pakistan border. Pakistan reportedly is moving forward with construction on its side of the border, but the extent of work completed, if any, is unclear. Potentially complicating the project is that Chinese banks reportedly withdrew commitments to provide about $1 billion in financing for the Pakistan construction. Iran and Pakistan had said it is to become operational by mid-2014. During the Bush Administration, Secretary of State Rice on several occasions “expressed U.S. concern” about the pipeline deal or called it “unacceptable.” During some of his trips to Pakistan, the late Ambassador Richard Holbrooke, the Administration Special Representative on Pakistan and Afghanistan, raised the possibility that the project could be sanctioned if it is undertaken, citing enactment of and construction was formally inaugurated formally in a ceremony attended by the presidents of both countries on March 11, 2013. With an intended completion date of mid-2014, Iran reportedly has already completed the pipeline on its side of the border. Potentially complicating the construction on the Pakistani side of the border is that Pakistan has had difficulty arranging about $1 billion in financing for the project. The day of the ceremony, the State Department expressed serious concerns about the project, building on prior comments during the Bush and Obama Administrations that the project might be sanctioned under the Iran Sanctions Act, as amended by CISADA. China and Russia The position of Russia, China, and several other countries—that they will impose only those sanctions specifically required by U.N. Security Council resolutions—has been of concern to several Members of Congress. Russia is an oil exporter itself and a need to preserve oil imports from Iran is therefore not a factor in its Iran policy calculations. However, Russia has earned hard currency from large projects in Iran, such as the Bushehr nuclear reactor, and it also seeks not to provoke Iran into supporting Islamist movements in the Muslim regions of Russia and the Central Asian states. China Like India, China appears to be seeking to take advantage of the sanctions for its own purposes, and in so doing signaling to Iran that it disapproves of its behavior. China had said in early 2012 49 For example, Bijan Kajehpour of Atieh Consulting. Presentation at CSIS, October 4, 2011. Congressional Research Service 43 Iran Sanctions that it would not reduce its oil purchases from their 2011 average level of about 550,000 barrels per day, despite the threat of the U.S. sanctions. Administration officials said on June 11, 2012, that there was dialogue with China intended to persuade it to cut its oil buys from Iran and China subsequently pledgedHowever, U.S.-China negotiations in mid-2012 led to an agreement for China to cut Iranian oil purchases by about 18% (to about 450,000 barrels per day). For that pledge, it per day). China received a P.L. 112-81 sanctions exemption on June 28, 2012. Some analysts questioned whether the exemption should be extended in, which was renewed on December 2012, but energy analysts say China’s purchases from Iran have fallen sharply, as shown in the table above. The exemption was renewed on December 7, 2012. And, as noted 7, 2012. Still, China remains Iran’s largest single oil customer. As noted earlier, Administration officials say they are not seeing a large move by Chinese firms to “backfill” Iran energy projects that Western majors have abandoned; China has put most of its investments in Iran’s energy sector “on hold,” as discussed in Table 4. A sustained, continual reduction of China’s oil buys from Iran is considered crucial to U.S. strategy of reducing Iranian oil exports. China is still Iran’s largest single customer. And, U.S. officials want China to continue as discussed in Table 4. Well before the February 6, 2013, U.S. requirement that Iran be paid in local accounts, China had begun to settle its trade balance with Iran in local currency or with additional Chinese exports of goods, in order to further deprive Iran of hard currency. Some of the payments due Iran are reportedly settled in gold goods. As an example, two Chinese companies, Geelran and Chery, reportedly are increasing their production of cars in Iran, although Iranian buyers consider them inferior to European or other Asian brands. The February 6, 2013 requirement could mean that Iran will need to purchase even more of its imports from China in order to equalize the Iran-China balance of trade, which cannot (at the risk of violating U.S. sanctions) be settled in hard currency. An even more significant concern is that China may be refusing or failing to prevent Iran from acquiring weapons and WMD technology. Secretary of State Clinton singled out China on January 19, 2011, as not enforcing all aspects of international sanctions that bar sales of most nuclear-related equipment to Iran; the comment came of the eve of the state visit to the United States by President Hu Jintao. On March 9, 2011, State Department Special Adviser for NonProliferationNon- Congressional Research Service 41 Iran Sanctions Proliferation and Arms Control, Robert Einhorn, said Iran may be working with Chinese firms to obtain sensitive technology useful for nuclear weapons development. A press report of February 14, 2013 (Washington Post), stated that Iran had attempted to order sophisticated material for centrifuges from China, although it is not clear that the attempted buy was completed. In some . In some cases, Iran has been able, according to some reports, to obtain sophisticated technology from U.S. firms.5038 Turkey/CaucususCaucasus Turkey is a large buyer of Iranian oil; in 2011, it averaged 196nearly 200,000 bpd. In March 2012, Turkey Turkey said it would cut its buys from Iran by 10%-20% and, as an apparent result, Turkey got a P.L. 112-81 Turkey received a P.L. 112-81 sanctions exemption on June 11, 2012. It was renewed on December 7, 2012. Turkey reportedly is’s Halkbank had reportedly been arranging for settling much of itsTurkey’s Iran oil bill from Iran with shipments to Iran of gold, perhaps to improve its own balance of payments. That form of payment by Turkey was not sanctionable under U.S. laws but will be sanctionable as of April 2013 when P.L. 112-239 sanctions take effect (see above). Turkey also buys natural gas from Iran through their mutual pipeline and has said that its understanding of U.S. sanctions laws means that it does not face penalty for continuing to do so. That opinion generally comports with the provisions of U.S. sanctions laws, although that analysis might depend on how Turkey arranges to pay Iran for the gas. Prior to the EU decision on October 15, 2012, to bar sales of Iranian gas to Europe, Turkey was also the main conduit for Iranian gas exports to Europe (primarily Bulgaria and Greece). Turkey said in December 2012Turkey is constructing a second Iran-Turkey gas pipeline. The work is being performed by 50 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. Congressional Research Service 44 Iran Sanctions Som Petrol. This project might test Turkey’s compliance with ISA as well as the U.S. willingness to sanction a key ally for such projects.51 sanctionable under Executive Order 13622 (see above), although no U.S. sanctions have been imposed on any Turkish firms under that Order. Payments with gold will also be sanctionable as of July 2013 when P.L. 112-239 sanctions take effect. In anticipation of the effective date of that provision, some reports say Turkey—and Halbank in particular—is scaling back its gold payments to Iran. Turkey buys not only oil but also natural gas from Iran, through the mutual pipeline discussed above. Provisions of U.S. laws barring dealings with Iran’s energy sector (P.L. 112-239, for example) contain exclusions for or do not otherwise sanction purchasing natural gas from Iran. Turkey said in December 2012 that it is constructing a second Iran-Turkey gas pipeline (the work is being performed by Som Petrol), although, as noted above, U.S. policy considers constructing pipelines to and from Iran as sanctionable activity.39 Prior to the EU decision on October 15, 2012, to bar sales of Iranian gas to Europe, Turkey was also the main conduit for Iranian gas exports to Europe (primarily Bulgaria and Greece). Turkey has, on several occasions, blocked or impounded Iranian arms and other contraband shipments bound for Syria or Lebanese Hezbollah. This was discussed in the June 12, 2012, report on sanctions implementation by the U.N. panel of experts chartered by Resolution 1929. Armenia Press reports say Iran is looking to neighboring Armenia, with which it has extensive trade relations and a natural gas pipeline linkage, as a possible ally to circumvent international sanctions on Iran’s financial industry. Armenia has said its banking controls are strong and that Iran is unable to process transactions illicitly through Armenia’s banks.52 Persian Gulf and Other Regional States The Persian Gulf countries are, themselves, oil exporters, and their role is evaluated for their potential to compensate for reduction in other country purchases of oil from Iran. Those Gulf 40 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. 39 Information provided to the author by the New York State government. July 2012. 40 Louis Charbonneau. “Iran Looks to Armenia to Skirt Banking Sanctions.” Reuters, August 21, 2012. Congressional Research Service 42 Iran Sanctions Persian Gulf and Iraq The Persian Gulf countries are oil exporters, and their cooperation is judged largely by the degree to which they are compensating for reductions in other countries’ purchases of oil from Iran. Those Gulf states with spare capacity, particularly Saudi Arabia, have been willing to fully supply the market, and their cooperation with other U.S. sanctions against Iran, such as on preventing the the market, which has helped keep world prices steady despite the drop in Iranian oil exports. The Gulf states also have generally sought to prevent the reexportation to Iran of U.S. technology, and halting banking relationships with and gasoline sales to Iran, is improving. This is a departure from the recent past, in which the Gulf states appeared hesitant to provoke Iran’s wrath by siding with U.S.-led sanctions. CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth Katzman, discusses the relations between Iran curtailed banking relationships with Iran. On the other hand, some reports say that oil refiners in the Gulf are selling Iran gasoline and Gulf-based shipping companies such as United Arab Shipping Company are paying port loading fees to such IRGC-controlled port operators as Tidewater.41 CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth Katzman, discusses the relations between Iran and other Middle Eastern states. The UAE is particularly closely watched by U.S. officials because of its historic extensive business dealings with Iran. U.S. officials offered substantial praise for the decision announced March 1, 2012, by Dubai-based Noor Islamic Bank to end transactions with Iran. Iran reportedly used the bank to process a substantial portion of its oil payments. UAE representatives say that Iranian banks still operating in UAE conduct transactions only in cash, leaving them virtually inactive, but that ordering them closed outright would provoke Iran unnecessarily. Iran and Kuwait have held 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.5342 There are also discussions reported between Iran and Iraq on constructing pipelines to facilitate oil and gas swaps between the two. No firm movement on any of these projects is evident. Afghanistan Some reports say that Iranian currency traders are using Afghanistan to acquire dollars that are in short supply in Iran. In Afghanistan, where donor spending is high, the dollar operates as a second 51 Information provided to the author by the New York State government. July 2012. Louis Charbonneau. “Iran Looks to Armenia to Skirt Banking Sanctions.” Reuters, August 21, 2012. 53 http://www.kuwaittimes.net/read_news.php?newsid=NDQ0OTY1NTU4; http://english.farsnews.com/newstext.php? nn=8901181055. 52 Congressional Research Service 45 Iran Sanctions national currency. Iranian traders—acting on behalf of wealthy Iranians seeking to preserve the value of their savings—are said to be carrying local currency to Afghanistan to buy up some of the dollars available there. There are also allegations that Iran is using an Iran-owned bank in Afghanistan, Arian Bank, to move funds in an out of Afghanistan. The Treasury Department has warned Afghan traders not to process dollar transactions for Iran. Iran has sought to use its close relations with Iraq to evade banking and energy sanctions. As noted above, the United States has sanctioned an Iraqi bank that has cooperated with Iran’s efforts. Some allege that Iraq’s Kurdish region has exported sanctionable amounts of gasoline to Iran, although Kurdish representatives have told CRS that Iran has been sold fuel oil, the sale of which is not sanctionable under any U.S. or other sanctions provisions. Afghanistan Some reports say that Iranian currency traders are using Afghanistan to acquire dollars that are in short supply in Iran. In Afghanistan, where donor spending is high, the dollar operates as a second national currency. Iranian traders—acting on behalf of wealthy Iranians seeking to preserve the value of their savings—are said to be carrying local currency to Afghanistan to buy up some of the dollars available there. There are also allegations that Iran is using an Iran-owned bank in Afghanistan, Arian Bank, to move funds in an out of Afghanistan. The Treasury Department has warned Afghan traders not to process dollar transactions for Iran. The Special Inspector General for Afghanistan Reconstruction reported in late January 2013 that Afghan security forces might be using some of the U.S. funding for them to purchase fuel from Iran. 41 Mark Wallace. “Closing U.S. Ports to Iran-Tainted Shipping. Op-ed. Wall Street Journal, March 15, 2013. http://www.kuwaittimes.net/read_news.php?newsid=NDQ0OTY1NTU4; http://english.farsnews.com/newstext.php? nn=8901181055. 42 Congressional Research Service 43 Iran Sanctions Latin America Iran is looking to several Latin American countries, including Venezuela, Cuba, Ecuador, Nicaragua, and Bolivia, to try to reduce the effects of international sanctions. Iran believes that these and other Latin American countries might be willing, in part because of their own differences with the United States, to conduct certain transactions with Iran that might be sanctionable. As noted earlier and in the tables at the end of the paper, several Venezuelan firms have been sanctioned for dealings with Iran. For the most part, however, Iran’s trade and other business dealings with Latin America remain modest and likely to reduce the effect of sanctions on Iran only marginally. And Iran has lost a key Latin American ally with the March 2013 death of Venezuelan President Hugo Chavez. Africa As noted above, countries in Africa are not major customers for Iranian oil, with the exception of South Africa. However, U.S. officials are concerned that Iran might increasingly look to countries in Africa to help it circumvent international sanctions. In June 2012, Kenya contracted to buy about 30 million barrels of Iranian oil, but cancelled the contract the following month after the United States warned that going ahead with the purchase could hurt U.S.-Kenya relations. In late June 2012, then Representative Howard Berman sent a letter to Tanzania’s president warning that Tanzania could face aid cuts or other punishments if it continued to “re-flag” Iranian oil tankers.5443 Tanzania has re-flagged about 6-10 Iranian tankers. Perhaps fearing similar criticism, in September 2012 Sierra Leone removed nine vessels from its shipping register after determining they belonged to IRISL. Contrast Withwith Previous Periods The emerging consensus on Iran sanctions differs from early periods when there was far more disagreement. Reflecting the traditional European preference for providing incentives rather than enacting economic punishments, during 2002-2005, there were active negotiations between the European Union and Iran on a “Trade and Cooperation Agreement” (TCA). Such an agreement would have lowered the tariffs or increased quotas for Iranian exports to the EU countries.5544 However, negotiations were discontinued after the election of Ahmadinejad in June 2005, at which time Iran’s position on its nuclear program hardened. 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. 54On 22 occasions after that, representatives of 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. 43 “Tanzania Must Stop Re-Flagging Iran Tankers: U.S. Lawmaker.” Reuters, June 29, 2012. 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. 5544 Congressional Research Service 46 Iran Sanctions On 22 occasions after that, representatives of 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. 44 Iran Sanctions Earlier, during the 1990s, 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 July 27, 2010, EU measures narrowed substantially the prior differences between the EU and the United States over international lending to Iran. As noted above, the United States representative to international financial institutions is required to vote against international lending, but that vote, although weighted, is not sufficient to block international lending. 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 FY1994-FY1996 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. (In the 111th Congress, a provision of H.R. 6296—Title VII—cut off U.S. contributions to the World Bank, International Finance Corp., and the Multilateral Investment Guarantee Corp. if the World Bank approves a new Country Assistance Strategy for Iran or makes a loan 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. Congressional Research Service 4745 Iran Sanctions Table 3. Comparison Between U.S., U.N., and EU and Allied Country Sanctions U.S. Sanctions General Observation: Most sweeping sanctions on Iran of virtually any country in the world U.N. Sanctions Increasingly sweeping, but still intended to primarily target Iran’s nuclear and other WMD programs. No mandatory sanctions on Iran’s energy sector. Implementation by EU and Some Allied Countries EU abides by all U.N. sanctions on Iran, and new sanctions imposed by EU countries since July 27, 2010, closely aligns EU sanctions with those of the U.S. Japan and South Korean sanctions also increasingly extensive. Ban on U.S. Trade with and Investment in Iran: Executive Order 12959 bans (with limited exceptions) U.S. firms from exporting to Iran, importing from Iran, or investing in Iran. U.N. sanctions do not ban civilian trade with Iran or general civilian sector investment in Iran. Nor do U.N. sanctions mandate restrictions on provision of trade financing or financing guarantees by national export credit guarantee agencies. There is an exemption for sales to Iran of food and medical products, but no trade financing or financing guarantees are permitted. Sanctions on Foreign Firms that Do Business Withwith Iran’s Energy Sector: The Iran Sanctions Act, P.L. 104-172, CISADA, several Executive Orders, and H.R. 1905 mandate sanctions on firms that conduct virtually any type and subsequent laws and executive orders, discussed throughout the paper, mandate sanctions on virtually any type of transaction with/in Iran’s energy sector. Exemptions are energy sector. Some exemptions are permitted for firms of countries that have have “significantly reduced” purchases of Iranian oil each 180 days. Ban on Foreign Assistance: U.S. foreign assistance to Iran— other than purely humanitarian aid— is banned under §620A of the Foreign Assistance Act. That section bans , which bans U.S. assistance to countries on the the U.S. list of “state sponsors of terrorism.” Iran has been on this “terrorism list” since January 1984. Iran is also routinely denied direct U.S. foreign aid under the annual foreign operations appropriations appropriations acts (most recently in §7007 of division H of P.L. 111-8). Congressional Research Service No general EU ban on trade in civilian goods with Iran but, as a consequence of EU oil embargo from Iran and other decisions, EU sanctions are now nearly as extensive as the United States. All trade credits and credit guarantees now banned as result of October 15, 2012, EU announcement. Japan and South Korea have banned medium- and long-term trade financing and financing guarantees. Short-term credit still allowed. No U.N. equivalent exists. However, preambular language in Resolution 1929 “not[es] the potential connection between Iran’s revenues derived from its energy sector and the funding of Iran’s proliferationsensitive nuclear activities.” This wording is interpreted by most observers as providing U.N. support for countries who want to ban their companies from investing in Iran’s energy sector. EU now bans almost all dealings with Iran’s energy sector, including purchases of Iranian oil and gas, shipping insurance, and sales of energy sector equipment. No U.N. equivalent EU measures of July 27, 2010, ban grants, aid, and concessional loans to Iran. Also prohibit financing of enterprises involved in Iran’s energy sector. Japanese and South Korean measures ban new energy projects in Iran and call for restraint on ongoing projects. South Korea in December 2011 cautioned its firms not to sell energy or petrochemical equipment to Iran. No ban on oil buys, but both are cutting such purchasesBoth have cut oil purchases from Iran sharply. Japan and South Korea measures do not specifically ban aid or lending to Iran, but no such lending by these countries is under way. 4846 Iran Sanctions U.S. Sanctions Ban on Arms Exports to Iran: Because Iran is on the “terrorism list,” it is ineligible for U.S. arms exports pursuant to §40 of the Arms Export Control Act (AECA, P.L. 9592). The International Trafficking in Arms Regulations (ITAR, 22 CFR Part 126.1) also cite the President’s authority to control arms exports and to comply with U.N. Security Council Resolutions. Iran is ineligible for U.S. arms exports under several laws, as discussed in the report. Restriction on Exports to Iran of “Dual Use Items”: Primarily under §6(j) of the Export Administration Act (P.L. 96-72) and §38 of the Arms Export Control Act, there is a denial of license applications to sell Iran goods that could have military applications. Sanctions Against International Lending to Iran: Under §1621 of the International Financial Institutions Act (P.L. 95118), U.S. representatives to international financial institutions, such as the World Bank, are required to vote against loans to Iran by those institutions. Sanctions Against Foreign Firms that Sell Weapons of Mass Destruction-Related Technology to Iran: Several laws and regulations, including the Iran-Syria North Korea Nonproliferation Act (P.L. 106-178), the Iran-Iraq Arms Nonproliferation Act (P.L. 102-484) and Executive Order 13382 provide for sanctions As discussed in this report, several laws and regulations provide for sanctions against entities, Iranian or otherwise, that are determined to be involved in or supplying Iran’s WMD programs programs (asset freezing, ban on transaction with the entity) transaction with the entity). Ban on Transactions with Terrorism Supporting Entities: Executive Order 13224 bans transactions with entities determined by the Administration to be supporting international terrorism. Numerous entities, including some of Iranian origin, have been so designated. Congressional Research Service U.N. Sanctions Implementation by EU and Some Allied Countries Resolution 1929 (operative paragraph 8) bans all U.N. member states from selling or supplying to Iran major weapons systems, including tanks, armored vehicles, combat aircraft, warships, and most missile systems, or related spare parts or advisory services for such weapons systems. EU sanctions include a comprehensive ban on sale to Iran of all types of military equipment, not just major combat systems. The U.N. Resolutions on Iran, cumulatively, ban the export of almost all dual-use items to Iran. EU bans the sales of dual use items to Iran, in line with U.N. resolutions. Oct. 2012 measures ban graphite and finished metal sales to Iran. No similar Japan and South Korean measures announced, but neither has exported arms to Iran. Japan announced full adherence to strict export control regimes when evaluating sales to Iran. South Korea has adopted similar policies. Resolution 1747 (oper. paragraph 7) requests, but does not mandate, that countries and international financial institutions refrain from making grants or loans to Iran, except for development and humanitarian purposes. The July 27, 2010, measures prohibit EU members from providing grants, aid, and concessional loans to Iran, including through international financial institutions. Resolution 1737 (oper. paragraph 12) imposes a worldwide freeze on the assets and property of Iranian entities named in an Annex to the Resolution. Each subsequent Resolution has expanded the list of Iranian entities subject to these sanctions. The EU measures imposed July 27, 2010, commit the EU to freezing the assets of entities named in the U.N. resolutions, as well as numerous other named Iranian entities. No specific similar Japan or South Korea measures announced. Japan and South Korea froze assets of U.N.-sanctioned entities. 49 Iran Sanctions U.S. Sanctions Ban on Transactions With Terrorism Supporting Entities: Executive Order 13224 bans transactions with entities determined by the Administration to be supporting international terrorism. Numerous entities, including some of Iranian origin, have been so designated. Travel Ban on Named Iranians: CISADA and H.R. 1905 provide for a prohibition on travel to the U.S., blocking of U.S.-based property, and ban on transactions with Iranians determined to be involved in serious human rights abuses against Iranians since the June 12, 2009, presidential election there, or with persons selling Iran equipment to commit such abuses. Restrictions on Iranian Shipping: Under Executive Order 13382, the U.S. Treasury Department has named Islamic Republic of Iran Shipping Lines and several affiliated entities as entities whose U.S.-based property is to be frozen. Congressional Research Service U.N. Sanctions Implementation by EU and Some Allied Countries No direct equivalent, but Resolution 1747 (oper. paragraph 5) bans Iran from exporting any arms—a provision widely interpreted as trying to reduce Iran’s material support to groups such as Lebanese Hizbollah, Hamas, Shiite militias in Iraq, and insurgents in Afghanistan. No direct equivalent, but many of the Iranian entities named as blocked by the EU, Japan, and South Korea overlap or complement Iranian entities named as terrorism supporting by the United States. No specific similar Japan or South Korea measures announced. Japan and South Korea froze assets of U.N.-sanctioned entities. 47 Iran Sanctions U.S. Sanctions Travel Ban on Named Iranians: U.N. Sanctions Implementation by EU and Some Allied Countries Resolution 1803 imposed a binding ban on international travel by several Iranians named in an Annex to the Resolution. Resolution 1929 extended that ban to additional Iranians, and forty Iranians are now subject to the ban. However, the Iranians subject to the travel ban are so subjected because of their involvement in Iran’s WMD programs, not because of involvement in human rights abuses. The EU sanctions announced July 27, 2010, contains an Annex of named Iranians subject to a ban on travel to the EU countries. An additional 60+ Iranians involved in human rights abuses were subjected to EU sanctions since. Resolution 1803 and 1929 authorize countries to inspect cargoes carried by Iran Air and Islamic Republic of Iran Shipping Lines (IRISL)—or any ships in national or international waters—if there is an indication that the shipments include goods whose export to Iran is banned. The EU measures announced July 27, 2010, bans Iran Air Cargo from access to EU airports. The measures also freeze the EU-based assets of IRISL and its affiliates. Insurance and re-insurance for Iranian firms is banned. Japan and South Korea have announced bans on named Iranians. Japan and South Korean measures took similar actions against IRISL and Iran Air. 50 Iran Sanctions U.S. Sanctions U.N. Sanctions Banking Sanctions: No direct equivalent During 2006-2011, several Iranian banks have been named as proliferation or terrorism supporting entities under Executive Orders 13382 and 13224, respectively (see Table 6 at end of report). However, two Iranian banks are named as sanctioned entities under the U.N. Security Council resolutions. The EU freeze onfroze Iran Central Bank assets announced January 23, 2012, and October 15, 2012, ban on all transactions with Iranian banks unless authorized, closely align EU sanctions on this issue with those of the United States. November 21, 2011: Britain and Canada bar their banks from any transactions with Iran Central Bank. CISADA prohibits banking relationships with U.S. banks for any foreign bank that conducts transactions with Iran’s Revolutionary Guard or with Iranian entities sanctioned under the various U.N. resolutions. March 2012: Brussels-based SWIFT says expelled sanctioned Iranian banks from the electronic payment transfer system. November 21, 2011: Treasury Department names Iranian financial sector as a jurisdiction of primary money laundering concern. January 23, 2012, and banned all transactions with Iranian banks unless authorized on October 15, 2012. . CISADA and H.R. 1905 provide for a prohibition on travel to the U.S., blocking of U.S.-based property, and ban on transactions with Iranians determined to be involved in serious human rights abuses against Iranians since the June 12, 2009, presidential election there, or with persons selling Iran equipment to commit such abuses. Restrictions on Iranian Shipping: Under Executive Order 13382, the U.S. Treasury Department has named Islamic Republic of Iran Shipping Lines and several affiliated entities as entities whose U.S.-based property is to be frozen. March 2012: Brussels-based SWIFT says expelled sanctioned Iranian banks from the electronic payment transfer system. Japan and South Korea measures similar to the 2010 EU sanctions, with South Korea adhering to the same 40,000 Euro authorization requirement. Japan and S. Korea froze the assets of 15 Iranian banks; South Korea targeted Bank Mellat for freeze. December 31, 2011: President Obama signedFY2012 Defense Authorization (P.L. 112-81) preventing U.S. accounts with foreign banks that process transactions with Iran’s Central Bank. (with specified exemptions). Congressional Research Service Japan and South Korean measures took similar actions against IRISL and Iran Air. November 21, 2011: Britain and Canada bar their banks from any transactions with Iran Central Bank. CISADA prohibits banking relationships with U.S. banks for any foreign bank that conducts transactions with Iran’s Revolutionary Guard or with Iranian entities sanctioned under the various U.N. resolutions. No direct equivalent, although, as discussed above, U.S. proliferations laws provide for sanctions against foreign entities that help Iran with its nuclear and ballistic missile programs. Implementation by EU and Some Allied CountriesJapan and South Korea have announced bans on named Iranians. Resolution 1929 (oper. paragraph 7) prohibits Iran from acquiring an interest in any country involving uranium mining, production, or use of nuclear materials, or technology related to nuclear-capable ballistic missiles. EU measures on July 27, 2010, require adherence to this provision of Resolution 1929. Paragraph 9 of Resolution 1929 prohibits Iran from undertaking “any activity” related to ballistic missiles capable of delivering a nuclear weapon. Paragraph 9 prohibits Iran from undertaking “any activity” related to ballistic missiles capable of delivering a nuclear weapon. EU measures on July 27, 2010, require adherence to this provision of Resolution 1929. 48 Iran Sanctions Effectiveness of Sanctions on Iran Assessing the effectiveness of U.S. and international sanctions depends upon which goals are being examined. The following sections examine the effectiveness of sanctions according to a variety of criteria. Congressional Research Service 51 Iran Sanctions Effect on Iran’s Nuclear Program Decisions and Capabilities There is a consensus that U.S. and U.N. sanctions have not, to date, accomplished their core strategic objective of compelling Iran to verifiably limit its nuclear development to purely peaceful purposes. By all accounts—the United States, the P5+1, the United Nations, the International Atomic Energy Agency (IAEA)—Iran has not complied with the applicable provisions of the U.N. Security Council resolutions requiring that outcome. This assessment might be altered depending on the outcome of a process of nuclear talks with Iran that resumed, after more than one year, in Istanbul during April 13-14, 2012, and continued in Baghdad on May 23-24, 2012, and in Moscow during June 18-19, 2012. The 2012 talks discussed specific proposals – centered around Iran’s suspension of enrichment to 20%—that might build confidence for eventual resolution of the nuclear issue. However, Iran is demanding an early lifting of the EU oil embargo and other sanctions – requests that the P5+1 have, to date, not offered. If talks resume later in January 2013, as expected, the P5+1 reportedly might offer a graduated but substantial easing of sanctions in exchange for verified steps – including those affecting Iran’s enrichment of uranium to the much lower 5% level – that would ensure that Iran’s nuclear program could only be used for civilian purposes. The Administration argues that Iran’s expressed willingness to bargain seriously indicates that sanctions are affecting leadership calculations, but others, particularly senior leaders in Israel, see Iran as using talks to play for time to further develop its nuclear program, but centered around demands that Iran suspension enrichment of uranium to 20%. Iran has demanded, in exchange, a lifting of recent oil export-related sanctions—demands that the P5+1 have not offered. Talks resumed on February 26-27, 2013, in Almaty, Kazakhstan and further talks are to be held there on April 5-6, 2013. The issue is discussed in detail in CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by Kenneth Katzman. Counter-Proliferation Effects A related issue is whether the cumulative sanctions have directly set back Iran’s nuclear efforts by making it difficult for Iran to import needed materials or skills. In a speech on November 22, 2011, National Security Adviser Tom Donilon said: The effect of these sanctions has been clear. CoupledSome U.S. officials say that, coupled with mistakes and difficulties in Iran, they sanctions have slowed Iran’s nuclear efforts. Sanctions and export control efforts have made it by making it more difficult and costly for Iran to acquire key materials and equipment for its enrichment program, including items that Iran cannot produce itself.56 Others, however, say that there is not clear evidence that sanctions are slowing Iran’s program. International Atomic Energy Agency (IAEA) reports, including one released November 16, 2012, have consistently said that Iran’s stockpile of low-enriched uranium—and its capacity to enrich uranium at its hardened site at Fordow, near Qom—continues to expand, as do its holdings of 20% enriched uranium. There is discussion of whether sanctions have slowed Iran’s ballistic missile program. This is discussed in detail in CRS Report R42849, Iran’s Ballistic Missile and Space Launch Programs, by Steven A. Hildreth. 56 Speech by National Security Adviser Tom Donilon at the Brookings Institution. November 22, 2011. Congressional Research Service 52 Iran Sanctions enrichment program.45 On the other hand, International Atomic Energy Agency (IAEA) reports have consistently said that Iran’s capacity to enrich uranium more rapidly continues to expand. Director of National Intelligence James Clapper testified on March 12, 2013 that Iran “is expanding the scale, reach, and sophistication of its ballistic missile arsenal. Effects on Iran’s Regional Political and Military Influence In and of themselves, sanctions against Iran do not appear to have reduced Iran’s influence or strategic capabilities in the Middle East. Iran continues to financially and militarily support militant movements in the Middle East, including the exportation of arms to some of these movements, and to Syria, according to numerous sources. Some of Iran’s relationships with these movements, and Iran’s overall influence, appear to have suffered during 2012 but due mainly to factors other than sanctions. These issues are discussed in CRS Report RL32048, Iran: U.S. press reports, quoting the U.N. panel of experts, say Iran has been exporting arms to factions in Yemen and Somalia, in 45 Speech by National Security Adviser Tom Donilon at the Brookings Institution. November 22, 2011. Congressional Research Service 49 Iran Sanctions contravention of Resolution 1747 that bans Iran’s exportation of arms.46 These issues are discussed in CRS Report RL32048, Iran: U.S. Concerns and Policy Responses. A Defense Department report of April 2012, required by P.L. 111-84, called into question the expectations that sanctions would erode Iran’s conventional military capabilities. The report discusses Iran’s increasing capabilities in short range ballistic missiles and other weaponry, as well as acquisition of new ships and submarines.5747 It is not clear if any country violated Resolution 1929 by selling Iran heavy systems, whether such shipments were made before the Resolution took effect in June 2012, or whether Iran made these systems itself. The report also discusses Iran’s continued development of medium range ballistic missiles, the development of which might not require as much foreign help as do Iran’s longer range missile programs. General Political Effects The United States has hoped that international sanctions might cause dissension within the senior Iranian leadership. There has been a split since early 2011 between President Ahmadinejad and Supreme Leader Ali Khamene’i, but the rift was driven primarily by longstanding differences over the future direction of the Islamic revolution, not by international sanctions. As sanctions have visibly weakened Iran’s economy, most Iranian politicians have blamed Ahmadinejad for mismanagement that has aggravated the effects of sanctions. One U.S. intelligence official told journalists in January 2012 that the Administration believes sanctions could also be used to undermine the Iranian regime outright, although that is not the stated goal of U.S. and international sanctions.58 The October 3, 2012, street demonstrations protesting a currency collapse mostly blamed the regime, and particularly Ahmadinejad. Subsequently, 94 Iranian parliamentarians (more than the 74 needed) signed onto a formal request that Ahmadinejad appear before the Majles (parliament) to answer questions about the currency crisis. The Supreme Leader subsequently quashed that parliamentary challenge in the name of preserving unity in the face of confrontation with the international community. Earlier evidence of economic frustration came in the form of a riot in the town of Nishapur—formerly a bastion of support for Ahmadinejad—in late July 2012 because the price of chicken, a staple of many Iranian dishes, had escalated beyond the reach of many families. These street actions were not sustained, suggesting that economic conditions are not inherently producing a burgeoning uprising against the regime. Iran’s population, whether opposed to or supportive of the government now, have lived through deprivation during the 1980-1988 Iran-Iraq War. 57 Department of Defense. Annual Report of Military Power of Iran. April 2012. Karen DeYoung and Scott Wilson. “Public Ire Is One Goal of Sanctions Against Iran, U.S. Official Says.” Washington Post, January 11, 2012. 58 Congressional Research Service 53 Iran Sanctions The regime also long-standing differences over the future direction of the Islamic revolution, not by international sanctions. These tensions are escalating as Iran enters the period preceding its June 14, 2013 presidential election. There were anecdotal reports of labor unrest in 2011, and many workers have become unemployed since as a result of the sanctions-induced downturn, but these strikes did not appear to have overtly political objectives. During 2012, there were some isolated protests over escalating food prices and the dramatic fall of the value of Iran’s currency. In early 2013, some farmers in Esfahan attacked government vehicles because of a water shortage. However, these actions have not led to sustained unrest, suggesting that economic conditions are not likely—by themselves—to produce an uprising. Iran’s population, whether opposed to or supportive of the government now, have lived through deprivation during the 1980-1988 Iran-Iraq War. The regime closely watches the attitudes and opinions of Iran’s influential merchant class (“bazaaris”). The bazaaris’ shift against the former shah of Iran was key to his downfall. The bazaaris have tended to support the current regime as a provider of economic stability, but they closed their shops in Tehran on October 3, 2012, to protest the currency collapse. However, the shutdown was not sustained beyond one day and no organized opposition seems to be emanating from this constituency. Labor is also a key interest group. Labor strikes, particularly in the oil sector, were also key to the 1979 downfall of the shah’s rule. There were anecdotal reports of labor unrest in 2011, including strikes for overdue pay, but these strikes did not appear to have overtly political objectives. Human Rights-Related Effects U.S. and international sanctions have not, to date, had a measurable effect on human rights practices in Iran. Executions have increased in recent years, but that is likely a result of increased opposition activity stimulated by the 2009 uprising in Iran, and not specifically because the regime is trying to prevent criticism of its handling of sanctions. Nor has the regime’s ability to monitor and censor use of the Internet and other media been materially affected to date. Still, the sanctions have caused several major firms have stop selling Iran equipment that it might use to assist Iran’s repression of its people—a trend that could benefit media freedom in Iran over the longer term. For example, German telecommunications firm Siemens (accused of selling 46 47 Louis Charbonneau. “U.N. Monitors See Arms Reaching Somalia From Yemen, Iran.” Reuters, February 10, 2013. Department of Defense. Annual Report of Military Power of Iran. April 2012. Congressional Research Service 50 Iran Sanctions technology that Iran used to monitor the Internet) announced on January 27, 2010, that it would stop signing new business deals in Iran as of mid-2010.5948 On October 11, 2012, Eutelsat, a significant provider of satellite service to Iran’s state broadcasting establishment, ended that relationship. The move followed the EU sanctioning in March 2012 of the head of the Islamic Republic of Iran Broadcasting (IRIB) Ezzatollah Zarghami. A GAO report to Congress of February 25, 2013 did not identify any foreign firms that exported technology to Iran for monitoring, filtering, or disrupting information and communications flow from June 2011December 15, 2012.49 A large Chinese firm, Huawei, long accused by activists of selling Iran Internet monitoring or censorship gear as part of its work in Iran’s communications industry announced in December 2011 that it was no longer seeking new business in Iran and was withdrawing its sales staff there. A South African firm, MTN Group, owns 49% of Irancell and a private cellular phone network, Irancell, and was accused by some groups of helping the Iranian government shut down some social network services during times of protest in Iran.60 On50 However, on August 8, 2012, MTN announced it is in talks with U.S. officials about how plans to move its assets out of Iran—an apparent attempt to reduce its involvement in the Iran market. Still, several major telecommunications firms are said to still be active in Iran, including Deutsche Telekom, Ericsson, Emirates Telecom, LG Group, NEC Corporation, and Asiasat. In mid-October 2012, Israeli news sources asserted that Sweden opposed additional sanctions against Iran in order to preserve a pending deal for Ericsson to help build a network for Irancell. Economic Effects/Currency Collapse The accumulation of international, bilateral, and multilateral sanctions is beginning to take a dramatic toll on Iran’s economy – trend increasingly admitted by Iranian leaders. At a press 59 60 End, Aurelia. “Siemens Quits Iran Amid Mounting Diplomatic Tensions.” Agence France Press, January 27, 2010. http://www.examiner.com/article/obama-adviser-plouffe-received-100-000-from-iranian-associated-firm Congressional Research Service 54 Iran Sanctions conference on October 2, 2012, Ahmadinejad attributed the currency collapse over the preceeding days to international sanctions, although he might have been trying to deflect blame of economic mismanagement. Earlier, Ahmadinejad had acknowledged to the Majles in late December 2011 that Iran is shut out of the international banking system, and he stated on July 3, 2012, that the sanctions (as of the July 1 EU oil embargo) were the most onerous in Iran’s history. The early October currency collapse—which saw the value on unofficial markets fall in one week from about 28,000 to one U.S. dollar to nearly 40,000 to one dollar—shocked the leadership and the public. Earlier, the rial had fallen from about 13,000 to the dollar in late September 2011 to about 28,000 to the dollar as of mid-September 2012—including a significant decline from about 23,000 to the dollar to the 28,000 to the dollar level in the first two weeks of September 2012. The collapse appeared to reflect a perception that Iran’s hard currency reserves are being depleted by the sharp fall in Iran’s oil sales. Oil sales account for about 80% of Iran’s foreign currency earnings, and the proceeds are controlled by the government (Central Bank), not the private sector. The collapse indicated that the government was trying to conserve its supply of dollars by refusing to make them available to the unofficial currency exchangers that operate in Tehran and the large cities – leaving hard currency available for needed imports of food and medicine. The collapse rendered less credible Supreme Leader Ali Khamene’i’s assertion on July 11, 2012, that decades of sanctions had “vaccinated” Iran from the effects of sanctions because Iran has developed self-sufficiency. The indicators of the effect of sanctions and mismanagement on Iran’s economy include: 61 • The EU oil embargo and the restrictions on transactions with Iran’s Central Bank have dramatically reduced Iran’s oil sales – a fact acknowledged by Oil Minister Rostam Qasemi to the Majles on January 7, 2013. He indicated sales had fallen 40% from the average of 2.5 million barrels per day (mbd) in 2011 (see chart above on Iran oil buyers). This is close to the estimates of energy analysts, which put Iran’s sales at the end of 2012 in a range of 1 mbd to 1.5 mbd. Reducing Iran’s sales further might depend on whether U.S. officials are able to persuade China, in particular, to further cut buys from Iran—and to sustain those cuts. • Iran has been storing some unsold oil on tankers in the Persian Gulf, and it is building new storage tanks on shore. Iran has stored excess oil (21 million barrels, according to Citigroup Global Markets) to try to keep production levels up—shutting down wells risks harming them and it is costly and time consuming to resume production at a well that has been shut. However, since July 2012, Iran reportedly has been forced to shut down some wells, and overall oil production has fallen to about 2.6 million barrels per day from the level of nearly 4.0 mbd at the end of 2011.61 • The oil sales losses Iran is experiencing are likely to produce over $50 billion in hard currency revenue losses in a one-year period at current oil prices. The IMF estimated Iran’s hard currency reserves to be $106 billion as of the end of 2011, and some economists say that figure may have fallen to about $80 billion as of November 2012. Analysts at one outside group, the Foundation for the Defense of Democracies, believe Iran’s hard currency reserves might be exhausted Rick Gladstone. “Data on Iran Dims Outlook for Economy.” New York Times, October 13, 2012. Congressional Research Service 55 Iran Sanctions entirely by July 2014 at current rates of depletion.62 Compounding the loss of oil sales by volume is that many of its oil transactions reportedly are now conducted on a barter basis—or in exchange for gold, which is hard currency but harder to use than cash. And, the February 6, 2013, imposition of sanctions on Iran’s ability to repatriate hard currency could cause the depletion rate to increase. 62 • To try to stretch its hard currency reserve, on October 15, 2012, Iran said it would not supply hard currency for purchases of luxury goods such as cars or cellphones (the last 2 of the government’s 10 categories of imports, ranked by their importance). The government is still supplying hard currency for essential and other key imports. Importers for essential goods can obtain dollars at the official rate of 12,260 to the dollar, and importers of other key categories of goods can obtain dollars at a new rate of 28,500 to the dollar. The regime has also threatened to arrest the unofficial currency traders who sell dollars at less than the rate of about 28,500 to the dollar. The few unofficial traders that remain active are said to be trading at approximately that rate so as not to risk arrest. • Some Iranians and outside economists worry that hyper-inflation might result. The Iranian Central Bank estimated on January 9, 2013 that the inflation rate is about 27%—the highest rate ever acknowledged by the Bank—but many economists believe the actual rate is between 50% and 70%. This has caused Iranian merchants to withhold goods or shut down entirely because they are unable to set accurate prices. Almost all Iranian factories depend on imports and the currency collapse has made it difficult for Iranian manufacturing to operate. • Beyond the issue of the cost of imported goods, the Treasury Department’s designations of affiliates and ships belong to Islamic Republic of Iran Shipping Lines (IRISL) reportedly are harming Iran’s ability to ship goods at all, and have further raised the prices of goods to Iranian import-export dealers. Some ships have been impounded by various countries for nonpayment of debts due on them. • Suggesting Iran’s operating budget is already struggling, some reports say the government has fallen behind in its payments to military personnel and other government workers. Others say the government has begun “means testing” in order to reduce social spending payments to some of the less needy families. In late 2012, it also postponed phase two of an effort to wean the population off subsidies, in exchange for cash payments of about $40 per month to 60 million Iranians. Phase one of that program began in December 2010 after several years of debate and delay, and was praised for rationalizing gasoline prices. Gasoline prices now run on a tiered system in which a small increment is available at the subsidized price of about $1.60 per gallon, but amounts above that threshold are available only at a price of about $2.60 per gallon, close to the world price. Before the subsidy phase out, gasoline was sold for about 40 cents per gallon. • Press reports indicate that sanctions have caused Iran’s production of automobiles to fall by about 40% from 2011 levels. Iran produces cars for the domestic market, such as the Khodro, based on licenses from European auto makers such as Renault and Peugeot. Foundation for the Defense of Democracies conversation with the author. November 16, 2012. Congressional Research Service 56 Iran Sanctions • The currency collapse has largely overtaken the findings of an IMF forecast, released in October 2012, that Iran would return to economic growth in 2013, after a small decline in 2012. An Economist Intelligence Unit assessment published in late 2012 indicates Iran’s Gross Domestic Product (GDP) likely contracted about 3% in 2012 and will contract an additional 1.2% in 2013. (“Oil Sanctions on Iran: Cracking Under Pressure.”)63 • Mitigating some of the effects are that some private funds are going into the Tehran stock exchange and hard assets, such as property. However, this trend generally benefits the urban elite. Foreign Companies Exiting the Iran Market The sanctions have caused Iran to be viewed by international firms as “radioactive,” causing many international firms to exit the Iranian market even if doing so (for non-U.S. firms) is not required by any U.N. sanction. Many experts believe that, over time, the efficiency and output of Iran’s economy will decline as foreign expertise departs and Iran attracts alternative investment from or imports goods from less capable foreign companies. On the other hand, travelers to Iran say many foreign products, including U.S. products such as Apple iPhones, are readily available in Iran, suggesting that such products are being reexported to Iran from neighboring countries. Examples —trend increasingly admitted by Iranian leaders. On February 24, 2013, Ahmadinejad presented his proposed 2013-2014 budget and said that “This was a very difficult year for our economy.”51 The indicators of the effect of sanctions and mismanagement on Iran’s economy include • Oil Export Declines. Oil sales account for about 80% of Iran’s foreign currency earnings, and the proceeds are controlled by the government (Central Bank), not the private sector. The EU oil embargo and the restrictions on transactions with Iran’s Central Bank have dramatically reduced Iran’s oil sales. In 2011, Iran exported an average of about 2.5 million barrels per day (mbd). In early March 2013, the Energy Information Agency reported that Iran’s sales in February 2013 were about 1.28 mbd—roughly half the 2011 level. If sustained, this drop will likely deprive the Iranian government of about $50 billion for all of 2013. • Falling Oil Production. To try to adjust to lost oil sales, Iran began storing some unsold oil on tankers in the Persian Gulf, and it is building new storage tanks on shore. Iran stored about 20 million barrels to try to keep production levels up— shutting down wells risks harming them and it is costly and time consuming to resume production at a shut well. However, that strategy was unsuccessful and 48 End, Aurelia. “Siemens Quits Iran Amid Mounting Diplomatic Tensions.” Agence France Press, January 27, 2010. GAO-13-344R Iran, February 25, 2013. 50 http://www.examiner.com/article/obama-adviser-plouffe-received-100-000-from-iranian-associated-firm 51 http://www.israelnationalnews.com/news/news.aspx/165555 49 Congressional Research Service 51 Iran Sanctions Iran overall oil production has fallen to about 2.6 million barrels per day from the level of nearly 4.0 mbd at the end of 2011.52 • GDP Decline. The sanctions, and particularly the drop in oil exports, have caused Iran to suffer its first gross domestic product contraction in two decades. According to a GAO study on the effect on Iran of sanctions since 2010, Iran’s GDP likely contracted in 2012 by about 1.4%.53 Other sources predict that it will contract an additional 1.2% in 2013.54 • Hard Currency Depletion. The IMF estimated Iran’s hard currency reserves to be about $101 billion as of the end of 2011, and the reserves are estimated to have fallen to $90 billion at the end of 2012. A further decline to about $85 billion is expected by the end of 2013.55 And the February 6, 2013, imposition of sanctions on Iran’s ability to repatriate hard currency will likely cause the depletion rate to increase as Iran is virtually forced to conduct trade through barter arrangements. Analysts at one outside group, the Foundation for the Defense of Democracies, believe Iran’s hard currency reserves might be exhausted entirely by July 2014 at current rates of depletion.56 • Currency Collapse. The regime has been working to contain the effects of a currency collapse. The value of the rial fell on unofficial markets from about 28,000 to one U.S. dollar to nearly 40,000 to one dollar in one week in early October 2012. Earlier, the rial had fallen from about 13,000 to the dollar in late September 2011 to about 28,000 to the dollar as of mid-September 2012— including a significant decline from about 23,000 to the dollar to the 28,000 to the dollar level in the first two weeks of September 2012. To try to stretch its hard currency reserve, on October 15, 2012, Iran said it would not supply hard currency for purchases of luxury goods such as cars or cellphones (the last 2 of the government’s 10 categories of imports, ranked by their importance). The government is still supplying hard currency for essential and other key imports. Importers for essential goods can obtain dollars at the official rate of 12,260 to the dollar, and importers of other key categories of goods can obtain dollars at a new “reference rate” of 28,500 to the dollar. The regime also threatened to arrest the unofficial currency traders who sell dollars at less than the rate of about 28,500 to the dollar. However, unofficial trading moved offshore to the emirate of Dubai, and observers say the market rate there is about 39,000 to the dollar in mid-February 2013. • Inflation. Some Iranians and outside economists worry that hyper-inflation might result from the currency collapse. The Iranian Central Bank estimated on January 9, 2013, that the inflation rate is about 27%—the highest rate ever acknowledged by the Bank—but many economists believe the actual rate is between 50% and 52 Rick Gladstone. “Data on Iran Dims Outlook for Economy.” New York Times, October 13, 2012. GAO. “U.S. and International Sanctions Have Adversely Affected the Iranian Economy.” GAO-13-326. February 2013. 54 http://www.eiu.com/Handlers/WhitepaperHandler.ashx?fi=Iran_Oil_Sanctions_WEB.pdf&mode=wp&campaignid= IranOil2012 53 55 56 GAO study of February 2013, op.cit. p. 35-6. Foundation for the Defense of Democracies conversation with the author. November 16, 2012. Congressional Research Service 52 Iran Sanctions 70%. This has caused Iranian merchants to withhold goods or shut down entirely because they are unable to set accurate prices. Almost all Iranian factories depend on imports and the currency collapse has made it difficult for Iranian manufacturing to operate. In order to keep the prices of pistachio nuts down, in February 2013 the government placed a moratorium on exports of that product. Observers say that, to try to deflect the effect of sanctions, some Iranian importers of foreign goods have shifted to exporting goods from Iran— benefitting from the fall of the value of Iran’s currency. And many Iranians have accelerated their consumer purchases for fear of further price increases ahead— causing a notable increase in business, according to many Iranian merchants.57 • Shipping Difficulties. Beyond the issue of the cost of imported goods, the Treasury Department’s designations of affiliates and ships belong to Islamic Republic of Iran Shipping Lines (IRISL) reportedly are harming Iran’s ability to ship goods at all, and have further raised the prices of goods to Iranian importexport dealers. Some ships have been impounded by various countries for nonpayment of debts due on them. • Domestic Payments Difficulties. Suggesting Iran’s operating budget is already struggling, some reports say the government has fallen behind in its payments to military personnel and other government workers. Others say the government has begun “means testing” in order to reduce social spending payments to some of the less needy families. In late 2012, it also postponed phase two of an effort to wean the population off subsidies, in exchange for cash payments of about $40 per month to 60 million Iranians. Phase one of that program began in December 2010 after several years of debate and delay, and was praised for rationalizing gasoline prices. Gasoline prices now run on a tiered system in which a small increment is available at the subsidized price of about $1.60 per gallon, but amounts above that threshold are available only at a price of about $2.60 per gallon, close to the world price. Before the subsidy phase out, gasoline was sold for about 40 cents per gallon. • Auto Production. Press reports indicate that sanctions have caused Iran’s production of automobiles to fall, as of early 2013, by about 40% from 2011 levels. Iran produces cars for the domestic market, such as the Khodro, based on licenses from European auto makers such as Renault and Peugeot. • Flights Curtailed. Because of the decline in Iran’s trade with European countries, KLM and Austria Airlines announced in January 2013 that they would be ending flights to Iran later in 2013. Lufthansa, some other European airlines, and most airlines in the Persian Gulf, Middle East, and South Asia region still fly to Iran regularly. • Mitigation Attempts. Mitigating some of the effects are that some private funds are going into the Tehran stock exchange and hard assets, such as property. However, this trend generally benefits the urban elite. 57 Thomas Erdbink and David Sanger. “U.S. Ratchets Up An Economic War Against Tehran.” New York Times, February 7, 2013. Congressional Research Service 53 Iran Sanctions Foreign Companies Exiting the Iran Market The sanctions have caused Iran to be viewed by international firms as a “controversial market,” causing them to exit the Iranian market even if doing so (for non-U.S. firms) is not required by any U.N. sanction. Many experts believe that, over time, the efficiency and output of Iran’s economy will decline as foreign expertise departs and Iran attracts alternative investment from or imports goods from less capable foreign companies. On the other hand, travelers to Iran say many foreign products, including U.S. products such as Apple iPhones, are readily available in Iran, suggesting that such products are being reexported to Iran from neighboring countries. Examples of major non-U.S. companies discontinuing business with Iran include the following: • ABB of Switzerland said in January 2010 it would cease doing business with Iran. • Siemens of Germany was active in the Iran telecommunications infrastructure market, but announced in February 2010 that it would cease pursuing business in Iran. Finemeccanica, a defense and transportation conglomerate of Italy, followed suit, as did Thyssen-Krupp, a German steelmaker. • Germany’s Daimler (Mercedes-Benz maker) said in April 2010 it would freeze planned exports to Iran of cars and trucks and Porsche reportedly has suspended its sales in Iran as well. Italian carmaker Fiat reportedly has pulled out of the Iran market. • Finnish mobile phone maker Nokia reportedly has stopped selling phones in Iran. • French carmaker Peugeot, which produces cars locally in partnership with Iran’s Khodro Group, has said it suspended operations in Iran as of July 1, 2012. Peugeot is 7% owned by General Motors, but GM is not known to have any involvement in or to supply any GM content to the Peugeot Iran activities. • In August-September 2010, Japan and South Korea announced that their automakers Toyota, Hyundai, and Kia Motors would cease selling automobiles to Iran. However, it is unclear whether all South Korean car sales to Iran ceased—in June 2012, South Korean trade officials said exports to Iran, including Samsung mobile phones and Hyundai cars, would only be approved if their payment 63 http://www.eiu.com/Handlers/WhitepaperHandler.ashx?fi=Iran_Oil_Sanctions_WEB.pdf&mode=wp&campaignid=Ira nOil2012 Congressional Research Service 57 Iran Sanctions period were 180 days or less. This restriction is to protect against Iranian payments defaults because of the severe economic pressure Iran is under. • Attorneys for BNP Paribas of France told the author in July 2011 that, as of 2007, the firm was pursuing no new business in Iran, although it was fulfilling existing obligations in that market. • On June 30, 2011, according to press reports, the Danish shipping giant Maersk told Iran that it would no longer operate out of Iran’s three largest ports. The firm’s decision reportedly was based on the U.S. announcement on June 23, 2011, that it was sanctioning the operator of those ports, Tidewater Middle East Co., as a proliferation entity under Executive Order 13382. The pullout of Maersk will likely further raise shipping costs. • The State Department reported on September 30, 2010, that Hong Kong company NYK Line Ltd. had ended shipping business with Iran (on any goods). • Persuading oil services firms to exit Iran was the intent of Executive Order 13590 of November 21, 2011, which makes such activity sanctionable. Well before the order was issued, one large oil services firmCongressional Research Service 54 Iran Sanctions • Well before Executive Order 13590 was issued (see above), one large oil services firm, Schlumberger, which in incorporated in the Netherlands Antilles, said it will would wind down its business with Iran. However, press reports citing company documents say all contracts with Iran might not be terminated until at least 2013.64 • As discussed above, Indian diplomats told the author in April 2012 that the large conglomerate Tata is ending its business in Iran. Foreign Firms Reportedly Remaining in the Iran Market Still, many major firms continue to run the financial risk of doing business with Iran. Some of the well-known firms that continue to do so include Alcatel-Lucent of France; Bank of TokyoMitsubishi UFJ; Bosch of Germany; Canon of Japan; ING Group of the Netherlands; Mercedes of Germany; Renault of France; Samsung of South Korea; Sony of Japan; Volkswagen of Germany; Volvo of Sweden; and numerous others. Some of the foreign firms that trade with Iran, such as Mitsui and Co. of Japan, Alstom of France, and Schneider Electric of France, are discussed in a 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. Other firms that work in Iran’s telecommunications sector are discussed in the section above on sanctions to hinder Iran’s ability to monitor the Internet. Other questions have arisen over how U.S. sanctions might apply to businesses with foreign firms in which Iran might acquire a full or partial interest. Such firms include Daewoo Electronics of South Korea, where an Iranian firm—Entekhab Industrial Corp.—bid to take over that firm. In January 2013, Daewoo was purchased by another South Korean firm, in part because Entekhab could not obtain financing for the deal. Another example is Adabank of Turkey, which reportedly might be sold to Iran. 64 Stockman, Farah. “Oil Firm Says It Will Withdraw From Iran.” Boston Globe, November 12, 2010. Congressional Research Service 58 Iran Sanctions 58 • As discussed above, Indian firm Tata is ending its business in Iran. Foreign Subsidiaries of U.S. Firms That Have Exited the Iran Market Even before their activities became sanctionable as a consequence of post-2010 legislation and executive orders, many foreign subsidiaries of U.S. firms had exited the Iran market voluntarily. • Chemical manufacturer Huntsman announced in January 2010 its subsidiaries would halt sales to Iran. • 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 ban or the Iran Sanctions Act (ISA),59 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 no longer operating in Iran, as promised in January 2005. • General Electric (GE). The firm announced in February 2005 that it would seek no new business in Iran, and it reportedly wound down preexisting 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. • 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.60 Ingersoll Rand, maker of air compressors and cooling systems, followed suit.61 • In April 2010, it was reported that foreign partners of several U.S. or other multinational accounting firms had cut their ties with Iran, including KPMG of the Netherlands, and local affiliates of U.S. firms PricewaterhouseCoopers and Ernst and Young.62 • Oilfield services firm Smith International said on March 1, 2010, it would stop sales to Iran by its subsidiaries. Another oil services firm, Flowserve, said its 58 Stockman, Farah. “Oil Firm Says It Will Withdraw From Iran.” Boston Globe, November 12, 2010. “Iran Says Halliburton Won Drilling Contract.” Washington Times, January 11, 2005. 60 “Caterpillar Says Tightens ‘No-Iran’ Business Policy.” Reuters, March 1, 2010. 61 Nixon, Ron. “2 Corporations Say Business With Tehran Will Be Curbed.” New York Times, March 11, 2010. 62 Baker, Peter. “U.S. and Foreign Companies Feeling Pressure to Sever Ties With Iran.” New York Times, April 24, 2010. 59 Congressional Research Service 55 Iran Sanctions subsidiaries have voluntarily ceased new business with Iran as of 2006.63 FMC Technologies took similar action in 2009, as did Weatherford64 in 2008. Foreign Firms Reportedly Remaining in the Iran Market Still, many major firms continue to run the financial risk of doing business with Iran. Some of the well-known firms that continue to do so include Alcatel-Lucent of France; Bank of TokyoMitsubishi UFJ; Bosch of Germany; Canon of Japan; ING Group of the Netherlands; Mercedes of Germany; Renault of France; Samsung of South Korea; Sony of Japan; Volkswagen of Germany; Volvo of Sweden; and numerous others. Some of the foreign firms that trade with Iran, such as Mitsui and Co. of Japan, Alstom of France, and Schneider Electric of France, are discussed in a 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. Other firms that work in Iran’s telecommunications sector are discussed in the section above on sanctions to hinder Iran’s ability to monitor the Internet. Other questions have arisen over how U.S. sanctions might apply to businesses with foreign firms in which Iran might acquire a full or partial interest. Such firms include Daewoo Electronics of South Korea, where an Iranian firm—Entekhab Industrial Corp.—bid to take over that firm. In January 2013, Daewoo was purchased by another South Korean firm, in part because Entekhab could not obtain financing for the deal. Another example is Adabank of Turkey, which reportedly might be sold to Iran. Foreign Subsidiaries of U.S. Firms Still in the Iran Market Some foreign subsidiaries of U.S. firms reportedly still trade with Iran. Some of them also received U.S. government contracts, grants, loans, or loan guarantees, according to a March 7, 2010, New York Times article. The subsidiaries believed still involved in Iran include • An Irish subsidiary of the Coca Cola Company, which 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. • Transammonia Corp. which, via a Swiss-based subsidiary, conducts business with Iran to help it export ammonia, a growth export for Iran. • Press reports in early October 2011 indicated that subsidiaries of Kansas-based Koch Industries may have sold equipment to Iran to be used in petrochemical plants (making methanol) and possibly oil refineries, among other equipment. However, the reports say the sales ended as of 2007, a time at which foreign firm sales of refinery equipment to Iran were not clearly sanctionable under ISA.65 63 In September 2011, the Commerce Department fined Flowserve $2.5 million to settle 288 charges of unlicensed exports and reexports of oil industry equipment to Iran, Syria, and other countries. 64 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. 65 Asjylyn Loder and David Evans. “Koch Brothers Flout Law Getting Richer With Iran Sales.” Bloomberg News, October 3, 2011. Congressional Research Service 56 Iran Sanctions • Some U.S. energy equipment and energy-related shipping firms have been in the Iranian market as late as 2010, according to their “10-K” filings with the Securities and Exchange Commission. However, such energy sector-related sales to Iran, depending on the dollar value, are now sanctionable under ISA and other provisions discussed above, and it is therefore likely that many of these companies will be exiting the Iranian market, or have already done so. Those still in the Iran market as of 2001 include Natco Group,66 Overseas Shipholding Group,67 UOP (United Oil Products, a Honeywell subsidiary based in Britain),68 Itron,69 Fluor,70 Parker Drilling, Vantage Energy Services,71 PMFG, Ceradyne, Colfax, Fuel Systems Solutions, General Maritime Company, Ameron International Corporation, and World Fuel Services Corp. UOP reportedly has sold refinery gear to Iran. Effect on Energy Sector Long-Term Development As noted throughout, the U.S. objective has been to focus sanctions against Iran’s energy sector, considered the engine of Iran’s economy currently and in the future. Sanctions enacted since 2010 have been intended to affect the current operations of Iran’s energy sector. The earlier sanctions were primarily intended to deprive Iran of the foreign help it needs to develop the sector. Even before any sanctions provisions took effect, Iran was having trouble maintaining production at a level of 4 mbd. Without foreign help, Iranian energy firms are unable to derive maximum yield from existing fields or efficiently and effectively develop new fields. U.S. officials in 2011 said that Iran has lost $60 billion in investment as numerous major firms have either announced pullouts from some of their Iran projects, declined to make further investments, or resold their investments to other companies. It is therefore highly unlikely that Iran will attract the $145 billion in new investment by 2018 that Iran’s deputy Oil Minister said in November 2008 that Iran needs. Similar estimates come from independent Iranian energy experts, who say that the sector needs $130 billion in investment from 2011 until 2020.6572 Observers at key energy fields in Iran say there is little evidence of foreign investment activity and little new development activity sighted, as discussed in Table 4. On the other hand, Table 3 shows that some international firms remain invested in Iran’s energy sector. Some of them have not been determined to have violated ISA and may still be under investigation by the State Department. As discussed above, some firms have been sanctioned, and others have avoided sanctions either through Administration waivers or invocation of the “special rule.” 66 Form 10-K Filed for fiscal year ended December 31, 2008. 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. 68 New York Times, March 7, 2010, cited previously. 69 Subsidiaries of the Registrant at December 31, 2009. http://www.sec.gov/Archives/edgar/data/780571/ 000078057110000007/ex_21-1.htm. 70 “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. 71 Form 10-K for Fiscal year ended December 31, 2007. 72 Khajehpour presentation at CSIS. Op. cit. 67 Congressional Research Service 57 Iran Sanctions Others maintain that Iran’s gas sector can compensate for declining oil exports, although Iran has used its gas development primarily to reinject into its oil fields rather than to export. Iran exports about 3.6 trillion cubic feet of gas, primarily to Turkey and Armenia. On the other hand, sanctions have rendered Iran unable to develop a liquefied natural gas (LNG) export business. Among projects not listed in Table 4, the EU sanctions apparently have also derailed a BP-NIOC joint venture in the Rhum gas field, 200 miles off the coast of Scotland. BP announced in November 2010 that it would stop production there to ensure compliance with the EU sanctions. In addition, partners in the Trans-Adriatic Pipeline (TAP) said in September 2010 that the pipeline would not be used to transport Iranian gas to Europe. Concerns About “Backfill” There has been a concern that some of the investment void might be “backfilled,” at least partly, by Asian firms such as those from China, Malaysia, Vietnam, and countries in Eastern Europe. However, as shown in Table 4, many such “backfilled” deals remain in preliminary stages or themselves stalled as investors reconsidered whether to risk U.S. sanctions. And, most of the companies that might backfill abandoned projects are perceived as not being as technically capable as those that have withdrawn from Iran. 65 Khajehpour presentation at CSIS. Op. cit. Congressional Research Service 59 Iran Sanctions Much of the backfill that has proceeded has been conducted by domestic companies, particularly those controlled or linked to the Revolutionary Guard (IRGC). These firms have nowhere near the technical capabilities of most major international energy firms. And, foreign firms are reluctant reluctant to partner with IRGC firms as international sanctions have increasingly targeted the ITGC. In July 2010, in an effort to attract some foreign investment, the IRGC’s main construction affiliate, Khatem ol-Anbiya, announced it had withdrawn from developing Phases 15 and 16 of South South Pars—a project worth $2 billion.6673 Khatem ol-Anbiya took over that project in 2006 when Norway’s Kvaerner pulled out of it. 73 “Iran Revolutionary Guards Pull Out of Gas Deal Over Sanctions.” Platts, July 19, 2010. Congressional Research Service 58 Iran Sanctions Table 4. Post-1999 Major Investments/Major Development Projects in Iran’s Energy Sector Date Feb. 1999 Field/Project Doroud (oil) Company(ies)/Status (If Known) Value Output/Goal Total (France)/ENI (Italy) $1 billion 205,000 bpd Total/ Bow Valley (Canada)/ENI $300 million 40,000 bpd Royal Dutch Shell (Netherlands)/Japex (Japan) $800 million 190,000 bpd Norsk Hydro and Statoil (Norway) and Gazprom and Lukoil (Russia) No production to date; Statoil and Norsk have left project. $105 million 65,000 Phase 4 and 5, South Pars (gas) ENI $1.9 billion (Petroleum Economist, December 1, 2004.) Gas onstream as of Dec. 2004 2 billion cu. ft./day (cfd) $225 million NAGVA Consultants (Sweden) $225 million NA Darkhovin (oil) ENI $1 billion 100,000 bpd (“Darkhovin Production Doubles.” Gulf Daily News, May 1, 2008.) ENI told CRS in April 2010 it would close out all Iran operations by 2013. Field in production $80 million 25,000 bpd (Energy Information Agency, Department of Energy, August 2006.) Total and ENI exempted from sanctions on September 30 because of pledge to exit Iran market April 1999 Balal (oil) Nov. 1999 Soroush and Nowruz (oil) (“Balal Field Development in Iran Completed,” World Market Research Centre, May 17, 2004.) (“News in Brief: Iran.” Middle East Economic Digest, (MEED) January 24, 2003.) Royal Dutch exempted from sanctions on 9/30 because of pledge to exit Iran market April 2000 Anaran bloc (oil) (MEED Special Report, December 16, 2005, pp. 48-50.) July 2000 ENI exempted 9/30 based on pledge to exit Iran market March 2001 Caspian Sea oil exploration— construction of submersible drilling rig for Iranian partner GVA Consultants (Sweden) (IPR Strategic Business Information Database, March 11, 2001.) 66 “Iran Revolutionary Guards Pull Out of Gas Deal Over Sanctions.” Platts, July 19, 2010. Congressional Research Service 60 Iran Sanctions Date June 2001 Field/Project Company(ies)/Status (If Known) Darkhovin (oil) ENI (“Darkhovin Production Doubles.” Gulf Daily News, May 1, 2008.) ENI told CRS in April 2010 it would close out all Iran operations by 2013. Field in production Value Output/Goal $1 billion 100,000 bpd Sheer Energy (Canada)/China National Petroleum Company (CNPC). Local partner is Naftgaran Engineering $80 million 25,000 bpd June 2001 ENI exempted from sanctions on 9/30, as discussed above May 2002 Masjid-e-Soleyman (oil) (“CNPC Gains Upstream Foothold.” MEED, September 3, 2004.) Congressional Research Service Sheer Energy (Canada)/China National Petroleum Company (CNPC). Local partner is Naftgaran Engineering 59 Iran Sanctions Date Sept. 2002 Field/Project Phase 9 + 10, South Pars (gas) (“OIEC Surpasses South Korean Company in South Pars.” IPR Strategic Business Information Database, November 15, 2004.) October 2002 Phase 6, 7, 8, South Pars (gas) Company(ies)/Status (If Known) LG Engineering and Construction Corp. (now known as GS Engineering and Construction Corp., South Korea) Value Output/Goal $1.6 billion 2 billion cfd Statoil (Norway) $750 million 3 billion cfd Inpex (Japan) 10% stake. CNPC agreed to develop “north Azadegan” in Jan. 2009 $200 million (Inpex stake); China $1.76 billion 260,000 bpd Petrobras (Brazil) $178 million No production Sinopec (China), deal finalized Dec. 9, 2007 $2 billion 300,000 bpd ENI exempted from sanctions on 9/30, as discussed above May 2002 Masjid-e-Soleyman (oil) (“CNPC Gains Upstream Foothold.” MEED, September 3, 2004.) Sept. 2002 Phase 9 + 10, South Pars (gas) (“OIEC Surpasses South Korean Company in South Pars.” IPR Strategic Business Information Database, November 15, 2004.) October 2002 Phase 6, 7, 8, South Pars (gas)PTT (Thailand) ? ? Sinopec (China) $20 million ? Sinopec (China); JGC (Japan). Work may have been taken over or $959 million (major initial expansion; Expansion to produce On stream as of early 2009 (Source: Statoil, May 2011) Field began producing late 2008; operational control handed to NIOC in 2009. Statoil exempted from sanctions on 9/30/2010 after pledge to exit Iran market. January 2004 Azadegan (oil) (“Japan Mulls Azadegan Options.” APS Review Oil Market Trends, November 27, 2006.) October 15, 2010: Inpex announced it would exit the project by selling its stake; “special rule” exempting it from ISA investigation invoked November 17, 2010. August 2004 Tusan Block October 2004 Yadavaran (oil) 2005 Saveh bloc (oil) Oil found in block in Feb. 2009, but not in commercial quantity, according to the firm. (“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.) Formal start of development of the field delayed. (“China Curbs Iran Energy Congressional Research Service 61 Iran Sanctions Date Field/Project Company(ies)/Status (If Known) Value Output/Goal Work,” Reuters, September 2, 2011) 2005 Saveh bloc (oil) PTT (Thailand) ? ? Sinopec (China) $20 million ? Sinopec (China); JGC (Japan). Work may have been taken over or continued by Hyundai Heavy Industries (S. Korea) $959 million (major initial expansion; extent of Hyundai work unknown) Expansion to produce 250,000 bpd Norsk Hydro and Statoil (Norway). $49 million ? China National Offshore Oil Co. $16 billion 3.6 billion cfd Daelim (S. Korea) $320 million 200,000 ton capacity Royal Dutch Shell, Repsol (Spain) $4.3 billion ? Work,” Reuters, September 2, 2011) GAO report, cited below June 2006 Garmsar bloc (oil) 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.) July 2006 Arak Refinery expansion Sept. 2006 Khorramabad block (oil) Dec. 2006 (GAO reports; Fimco FZE Machinery website; http://www.fimco.org/index.php? option=com_content&task=view&id=70& Itemid=78.) (GAO reports; Fimco FZE Machinery Congressional Research Service 60 Iran Sanctions Date Sept. 2006 Dec. 2006 Field/Project Company(ies)/Status (If Known) Value Output/Goal website; http://www.fimco.org/index.php? option=com_content&task=view&id=70& Itemid=78.) continued by Hyundai Heavy Industries (S. Korea) extent of Hyundai work unknown) 250,000 bpd Khorramabad block (oil) Norsk Hydro and Statoil (Norway). $49 million ? China National Offshore Oil Co. $16 billion 3.6 billion cfd Daelim (S. Korea) $320 million 200,000 ton capacity Royal Dutch Shell, Repsol (Spain) $4.3 billion ? Seismic data gathered, but no production is planned. (Statoil factsheet, May 2011) North Pars Gas Field (offshore gas). Includes gas purchases Work crews reportedly pulled from the project in early-mid 2011. (“China Curbs Iran Energy Work” Reuters, September 2, 2011) Feb. 2007 LNG Tanks at Tombak Port Contract to build three LNG tanks at Tombak, 30 miles north of Assaluyeh Port. (May not constitute “investment” as defined in pre-2010 version of ISA, because that definition did not specify LNG as “petroleum resource” of Iran.) “Central Bank Approves $900 Million for Iran LNG Project.” Tehran Times, June 13, 2009. Feb. 2007 Phase 13, 14—South Pars (gas) 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.) State Department said on September 30, 2010, that Royal Dutch Shell and Repsol will not pursue this project any further Congressional Research Service 62 Iran Sanctions Date Field/Project March 2007 Esfahan refinery upgrade July 2007 Phase 22, 23, 24—South Pars (gas) Dec. 2007 Golshan and Ferdowsi onshore and offshore gas and oil fields and LNG plant Company(ies)/Status (If Known) Value Daelim (S. Korea) Output/Goal NA (“Daelim, Others to Upgrade Iran’s Esfahan Refinery.” Chemical News and Intelligence, March 19, 2007.) Pipeline to transport Iranian gas to Turkey, and on to Europe and building three power plants in Iran. Contract not finalized to date. Turkish Petroleum Company (TPAO) $12. billion 2 billion cfd Petrofield Subsidiary of SKS Ventures (Malaysia) $15 billion 3.4 billion cfd of gas/250,000 bpd of oil contract modified but reaffirmed December 2008 (GAO report; Oil Daily, January 14, Congressional Research Service 61 Iran Sanctions Date Field/Project Company(ies)/Status (If Known) Value Output/Goal 2008.) 2007 (unspec.) 2008 Jofeir Field (oil) GAO report cited below. Belarusneft, a subsidiary of Belneftekhim, sanctioned under ISA on March 29, 2011. Naftiran sanctioned on September 29, 2010, for this and other activities. Dayyer Bloc (Persian Gulf, offshore, oil) Belarusneft (Belarus) under contract to Naftiran. $500 million 40,000 bpd Edison (Italy) $44 million ? PGNiG (Polish Oil and Gas Company, Poland) $2 billion Petro Vietnam Exploration and Production Co. (Vietnam) ? ? Oman (co-financing of project) $7 billion 1 billion cfd INA (Croatia) $40-$140 million (dispute over size) ? contract modified but reaffirmed December 2008 (GAO report; Oil Daily, January 14, 2008.) 2007 (unspec.) 2008 Jofeir Field (oil) GAO report cited below. Belarusneft, a subsidiary of Belneftekhim, sanctioned under ISA on March 29, 2011. Naftiran sanctioned on September 29, 2010, for this and other activities. Dayyer Bloc (Persian Gulf, offshore, oil) No production to date GAO report cited below Feb. 2008 Lavan field (offshore natural gas) March 2008 Danan Field (on-shore oil) April 2008 GAO report cited below invested. PGNiG invested, but delays caused Iran to void PGNiG contract in December 2011. Project to be implemented by Iranian firms. (Fars News, December 20, 2011) “PVEP Wins Bid to Develop Danan Field.” Iran Press TV, March 11, 2008 Iran’s Kish gas field Includes pipeline from Iran to Oman (http://www.presstv.ir/detail.aspx?id= 112062&sectionid=351020103.) April 2008 Moghan 2 (onshore oil and gas, Ardebil province) GAO report cited below - Kermanshah petrochemical plant (new construction) Congressional Research Service Uhde (Germany) 300,000 metric tons/yr 63 Iran Sanctions Date Field/Project Company(ies)/Status (If Known) Value Output/Goal GAO report cited below June 2008 Resalat Oilfield (Fars News Agency, June 16, 2008) Status of work unclear January 2009 “North Azadegan” January 2009 Bushehr Polymer Plants Amona (Malaysia). Joined in June 2009 by CNOOC and another China firm, COSL. $1.5 billion 47,000 bpd CNPC (China) $1.75 billion 75,000 bpd Sasol (South Africa) ? Capacity is 1 million tons per year. Products are exported from Iran. (Chinadaily.com. “CNPC to Develop Azadegan Oilfield,” http://www.chinadaily.com.cn/bizchina/ 2009-01/16/content_7403699.htm.) Production of polyethelene at two polymer plants in Bushehr Province. Sasol reported by GAO in December 2012 to be divesting the venture. Congressional Research Service 62 Iran Sanctions Date March 2009 Field/Project Phase 12 South Pars (gas)—Incl. LNG terminal construction and Farsi Block gas field/Farzad-B bloc. Project stalled due to sanctions; Indian firms have told GAO that no agreements were reached and no work is being pursued. Company(ies)/Status (If Known) Value Output/Goal Taken over by Indian firms (ONGC Videsh, Oil India Ltd., India Oil Corp. Ltd. in 2007); may also include minor stakes by Sonanagol (Angola) and PDVSA (Venezuela).. $8 billion from Indian firms/$1.5 billion Sonangol/$780 million PDVSA 20 million tonnes of LNG annually by 2012 Sinopec up to $6 billion if new refinery is built G and S Engineering and Construction (South Korea) $1.4 billion Daelim (S. Korea)— Part 2; Tecnimont (Italy)—Part 3 $4 billion ($2 bn each part) CNPC (China) $4.7 billion (Chinadaily.com. “CNPC to Develop Azadegan Oilfield,” http://www.chinadaily.com.cn/bizchina/ 2009-01/16/content_7403699.htm.) Production of polyethelene at two polymer plants in Bushehr Province. Sasol reported by GAO in December 2012 to be divesting the venture. March 2009 Phase 12 South Pars (gas)—Incl. LNG terminal construction and Farsi Block gas field/Farzad-B bloc. Project stalled due to sanctions; Indian firms have told GAO that no agreements were reached and no work is being pursued. (“Noose Tightens Around Iran Oil.” Washington Post, March 6, 2012; GAO-13173R Iran Energy Sector.) August 2009 October 2009 Abadan refinery Upgrade and expansion; building a new refinery at Hormuz on the Persian Gulf coast South Pars Gas Field—Phases 6-8, Gas Sweetening Plant CRS conversation with Embassy of S. Korea in Washington, D.C, July 2010 Contract signed but then abrogated by S. Korean firm Nov. 2009 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.) Feb. 2010 South Pars: Phase 11 Drilling was to begin in March 2010, but CNPC pulled out in October 2012. (Economist Intelligence Unit “Oil Congressional Research Service 64 Iran Sanctions Date Field/Project Company(ies)/Status (If Known) Value Output/Goal Sanctions on Iran: Cracking Under Pressure.” 2012) 2011 Azar Gas Field Gazprom (Russia) Gazprom contract voided in late 2011 by Iran due to Gazprom’s unspecified failure to fulfill its commitments. Dec. 2011 Zagheh Oil Field Tatneft (Russia) Preliminary deal signed December 18, 2011 Tatneft (Russia) $1 billion 55,000 barrels per day within five years (Associated Press, December 18, 2011) Sources: As noted in table, as well as CRS conversations with officials of the State Department Bureau of Economics, and officials of embassies of the parent government of some of the listed companies (2005-2009). Some information comes from various GAO reports, the latest of which was updated on December 7, 2012, in GAO-13-173R. “Iran Energy Sector” Note: CRS has neither the mandate, 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 Congressional Research Service 63 Iran Sanctions 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. Reported $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. Effect on Gasoline Availability and Importation In March 2010, well before the enactment of CISADA on July 1, 2010, several gas suppliers to Iran, anticipating this legislation, announced that they had stopped or would stop supplying gasoline to Iran.6774 Others have ceased since the enactment of CISADA. Some observers say that gasoline deliveries to Iran fell from about 120,000 barrels per day before CISADA to about 30,000 barrels per day immediately thereafter,6875 although importation recovered to about 80,000 barrels per day by September 2011 and has remained roughly around that level since. Some gasoline sellers, possibly including some already sanctioned for this activity (see above), appear to to be selling to Iran. The phaseout of gasoline subsidies discussed above has reduced demand for gasoline. Iran has also increased domestic production by converting at least two petrochemical plants to gasoline production, through a generally inferior process that initially produces benzene, leading to a large increase in air pollution in Tehran. Iran also says it has accelerated renovations and other improvements to existing gasoline refineries, allocating $2.2 billion for that purpose. Even before the subsidy reduction, there had not been significant gasoline shortages or gasoline rationing. Building new refining capacity appears to be Iran’s long term effort to reduce its vulnerability to gasoline supply reductions. Iran’s deputy oil minister said in July 2010 Iran would try to invest 67 Information in this section derived from, Blas, Javier. “Traders Cut Iran Petrol Line.” Financial Times, March 8, 2010. 68 Information provided at Foundation for Defense of Democracies conference on Iran. December 9, 2010. Congressional Research Service 65 Iran Sanctions $46 billion to upgrade its nine refineries and build seven new ones, a far larger amount than Iran had previously allocated for this purpose. Given Iran’s economic difficulties as of mid-2012, it is doubtful Iran has the resources to invest at that level for this purpose. The main suppliers to Iran prior to the CISADA sanctions, according to the GAO, are listed below, and most have stopped such sales, although some reports say that partners or affiliates of these firms may still sell to Iran in cases where the corporate headquarters have announced a halt. As noted in a New York Times report of March 7, 2010,6976 and a Government Accountability Office study released September 3, 2010,7077 some firms that have supplied Iran have received U.S. credit guarantees or contracts. 74 Information in this section derived from, Blas, Javier. “Traders Cut Iran Petrol Line.” Financial Times, March 8, 2010. 75 Information provided at Foundation for Defense of Democracies conference on Iran. December 9, 2010. 76 Becker, Jo and Ron Nixon. “U.S. Enriches Companies Defying Its Policy on Iran.” New York Times, March 7, 2010. 77 GAO-10-967R. Exporters of Refined Petroleum Products to Iran. September 3, 2010. Congressional Research Service 64 Iran Sanctions Table 5. Firms That Sold or Are Selling Gasoline to Iran Vitol of Switzerland (notified GAO it stopped selling to Iran in early 2010) Trafigura of Switzerland (notified GAO it stopped selling to Iran in November 2009) Glencore of Switzerland (notified GAO it stopped selling in September 2009) Total of France (notified GAO it stopped sales to Iran in May 2010) Reliance Industries of India (notified GAO it stopped sales to Iran in May 2009) Petronas of Malaysia (said on April 15, 2010, it had stopped sales to Iran)7178 Lukoil of Russia (reported to have ended sales to Iran in April 2010,7279 although some reports continue that Lukoil affiliates are supplying Iran) Royal Dutch Shell of the Netherlands (notified GAO it stopped sales in October 2009) Kuwait’s Independent Petroleum Group (told U.S. officials it stopped selling gasoline to Iran as of September 2010)7380 Tupras of Turkey (stopped selling to Iran as of May 2011, according to the State Department) British Petroleum of United Kingdom, Shell, Q8, Total, and OMV are no longer selling aviation fuel to Iran Air, according to U.S. State Department officials on May 24, 2011 A UAE firm, Golden Crown Petroleum FZE, told the author in April 2011 that, as of June 29, 2010, it no longer leases vessels for the purpose of shipping petroleum products from or through Iran Munich Re, Allianz, Hannover Re (Germany) were providing insurance and re-insurance for gasoline shipments to Iran. However, they reportedly have exited the market for insuring gasoline shipments for Iran74Iran81 Lloyd’s (Britain). The major insurer had been the main company insuring Iranian gas (and other) shipping, but reportedly ended that business in July 2010. According to the State Department, key shipping associations have created clauses in their contracts that enable ship owners to refuse to deliver gasoline to Iran. According to the State Department on May 24, 2011, Linde of Germany has said it had stopped supplying gas liquefaction technology to Iran, contributing to Iran’s decision to suspend its LNG program. 69 Becker, Jo and Ron Nixon. “U.S. Enriches Companies Defying Its Policy on Iran.” New York Times, March 7, 2010. GAO-10-967R. Exporters of Refined Petroleum Products to Iran. September 3, 2010. 71 http://www.ft.com/cms/s/0/009370f0-486e-11df-9a5d-00144feab49a.html. 72 http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105. 73 http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105. 74 http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105. 70 Congressional Research Service 66 Iran Sanctions Some of the firms sanctioned by the Administration on May 24, 2011 (discussed above), may still be providing service to Iran, including: PCCI (Jersey/Iran); Associated Shipbroking (Monaco); and Petroleos de Venezuela (Venezuela). Tanker Pacific representatives told the author in January 2013 that the firm had stopped dealing with Iran in April 2010 but may have been deceived by IRISL into a transaction with Iran after that time. Zhuhai Zhenrong, Unipec, and China Oil of China. Zhuhai Zhenrong may still be selling gasoline to Iran despite being sanctioned, according to the GAO report of December 7, 2012. (GAO-13-173R Iran Energy Sector/ Emirates National Oil Company of UAE has been reported by GAO to still be selling to Iran. Three other UAE energy traders, FAL, Royal Oyster Group, and Speedy Ship (UAE/Iran) may still be selling even though they were sanctioned as discussed above. Hin Leong Trading of Singapore may still be selling gasoline to Iran, as might Kuo Oil of Singapore even though it was sanctioned for doing so on January 12, 2012. Some refiners in Bahrain reportedly may still be selling gasoline to Iran. Source: CRS conversations with various firms, GAO reports, various press reports. 78 http://www.ft.com/cms/s/0/009370f0-486e-11df-9a5d-00144feab49a.html. http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105. 80 http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105. 81 http://www.defenddemocracy.org/index.php?option=com_content&task=view&id=11788115&Itemid=105. 79 Congressional Research Service 65 Iran Sanctions Humanitarian Effects/Air Safety The effects of sanctions on the population’s living standards was discussed above. Some Iranian pilots have begun to complain publicly and stridently that U.S. sanctions are causing Iran’s passenger airline fleet to deteriorate to the point of jeopardizing safety. Since the U.S. trade ban was imposed in 1995, 1,700 passengers and crew of Iranian aircraft have been killed in air accidents, although it is not clear how many of the crashes, if any, were due specifically to the difficultly in providing U.S. spare parts to Iran’s fleet.7582 Some reports in early January 2013 indicate that Iran’s domestic airlines were compelled to cancel flights because fuel suppliers began demanding cash rather than credit – —although this development is not necessarily a threat to air safety. Other reports say that pollution in Tehran and other big cities has worsened because Iran is making gasoline itself with methods that cause more impurities than imported gasoline. Press reports have mounted since mid-2012 that sanctions are hurting the population’s ability to obtain Western-made medicines, such as expensive chemo-therapy medicines, and other critical goods. Some of the scarcity is caused by banks’ refusal to finance such sales, even though doing so is technically allowed under all applicable sanctions. Some believe that a proliferation of press reports about such deprivations is changing the focus about Iran sanctions from Iran’s noncompliance to the suffering of the Iranian public, and thereby causing growing opposition in Europe and elsewhere to increasing sanctions on Iran. Iran’s only female minister, Minister of Health Marzieh Vahid Dastjerdi, was dismissed in December 2012 for openly criticizing the government for failing to provide her ministry with sufficient hard currency to buy needed medicines abroad. Some observers say the Iranian Some observers say the Iranian government is exaggerating reports of medicine shortages to generate opposition to the sanctions. Iran’s only female minister, Minister of Health Marzieh Vahid Dastjerdi, was dismissed in December 2012 for openly criticizing the government for failing to provide her ministry with sufficient hard currency to buy needed medicines abroad. Possible Additional Sanctions Even though international sanctions are now comprehensive, some experts believe that additional pressure is needed to convince Iranian leaders that they must negotiate curbs on Iran’s nuclear enrichment program. 75 Thomas Erdbink. “Iran’s Aging Airliner Fleet Seen As Faltering Under U.S. Sanctions.” July 14, 2012. Congressional Research Service 67 Iran Sanctions U.S. Legislative Initiatives in 2012 Many in the 112th Congress believed that the cumulative effects of U.S. and international sanctions were insufficient to accomplish key U.S. policy goals and that additional sanctions legislation is needed. This belief led to the passage of significant Iran sanctions legislation in the 112th Congress, including (as discussed above): The Iran Threat Reduction and Syria Human Rights Act of 2012 (P.L. 112-158); and the Iran sanctions provisions of the FY2012 and the FY2013 National Defense Authorization Acts (P.L. 112-81 of August 10, 2012 and P.L. 112-239, of January 2, 2013, respectively). Still, in each of these cases the Administration at least initially preferred taking its own action—which it can calibrate to account for the views of U.S. partner countries—rather than be bound by specific congressional requirements. Not adopted in the 112th Congress was a bill, H.R. 4317, that would require sanctions against any foreign firm that conducts any transaction with Iran’s energy sector, including oil purchasing, or H.R. 4070, that would freeze Iranian assets held by a clearing corporation (such as the Clearstream account discussed above) and use the funds to pay judgments against Iran for acts of terrorism. Another idea not passed was to apply sanctions on foreign banks under the CISADA law to dealings with all Iranian banks, not just the ones that are already sanctioned (as is the current situation under CISADA). Possible Additional U.S. or International Sanctions There are a number of other possible sanctions that might possibly receive consideration—either in a global or multilateral framework – or by the 113th Congress in regard to additional unilateral U.S. sanctions. • Sanctioning All Trade With generate opposition to the sanctions. Other accounts say that Iranians, particularly those with connections to the government, are taking advantage of medicine shortages by cornering the market for importing key medicines. Some human rights and other groups are attempting to formulate potential solutions that would ease the medicine import situation. Possible Additional Sanctions Even though international sanctions are now comprehensive, some experts believe that additional pressure is needed to convince Iranian leaders that they must negotiate curbs on Iran’s nuclear enrichment program. The Iran sanctions legislation and executive orders during the 112th Congress were discussed above. Not adopted in the 112th Congress was a bill, H.R. 4317, that would require sanctions against any foreign firm that conducts any transaction with Iran’s energy sector, including oil purchasing, or H.R. 4070, that would freeze Iranian assets held by a clearing corporation (such as the Clearstream account discussed above) and use the funds to pay judgments against Iran for acts of terrorism. Another idea not passed was to apply sanctions on foreign banks under the CISADA law to dealings with all Iranian banks, not just the ones that are already sanctioned (as is the current situation under CISADA). 82 Thomas Erdbink. “Iran’s Aging Airliner Fleet Seen As Faltering Under U.S. Sanctions.” July 14, 2012. Congressional Research Service 66 Iran Sanctions H.R. 850 On February 27, 2013, a major Iran sanctions bill, H.R. 850, was introduced by the Chairman and Ranking Member of the House Foreign Affairs Committee. The major provision is an authorization, but not a mandate, for the President to sanction any foreign person that has conducted a financial transaction with Iran’s Central Bank or other sanctioned Iranian banks for trade with Iran in any goods (with the exception of oil or petroleum products, trade in which is addressed by other U.S. sanctions, as discussed above). The bill contains a requirement for the Administration to determine whether the Revolutionary Guard should be named a Foreign Terrorist Organization, and a “sense of Congress” that the Administration restrict Iran’s ability to use the euro currency, including through payment systems of the European Central Bank. Other Possible U.S. and International Sanctions There are a number of other possible sanctions that might possibly receive consideration—either in a global or multilateral framework—or by the 113th Congress. • Sanctioning All Trade with Iran. Some organizations, such as United Against Nuclear Iran, advocate sanctions against virtually all trade with Iran, with exceptions for food and medical products. The concept of a global trade ban on Iran has virtually no support in the United Nations Security Council, and U.S. allies strongly oppose U.S. measures that would compel allied firms to end commerce with Iran in purely civilian, non-strategic goods. Some critics viewed provisions of P.L. 112-239 as a U.S. attempt to impose a global trade ban on Iran, but the provisions of that law are limited to several strategic sectors. • Comprehensive Ban on Energy Transactions Withwith Iran. Many experts believe that a highly effective sanction would be a U.N.-mandated, worldwide embargo on the purchase of Iranian crude oil. There are no indications that such a concept has enough support in the U.N. Security Council to achieve adoption. However, Executive Order 13622 and P.L. 112-158 come close to constituting a U.S. unilateral move to compel a ban on Iranian oil buys. And, as noted, on October 15, 2012, the EU adopted a ban on gas imports from Iran. A related possibility is to make worldwide the U.S. and EU bans on sales of energy equipment or services to Iran. During the 1990s, U.N. sanctions against Libya for the Pan Am 103 bombing banned the sale of energy equipment to Libya. Some advocate a U.N. Security Council ban on investment so that countries such as China would be compelled to end all investment in that Iranian sector. • Iran Oil Free Zone. Prior to the EU oil embargo on Iran, there was discussion of forcing a similar result by closing the loophole in the U.S. trade ban under which Congressional Research Service 68 Iran Sanctions Iranian crude oil, when mixed with other countries’ oils at foreign refineries in Europe and elsewhere, can be imported as refined product. Such a ban would likely cause EU and other major refiners to stop buying Iranian oil, likely forcing down the price received by Iran for its oil, although without raising the world price of oil significantly. Some argue this concept has been mooted by the EU oil embargo, while others say the step still has value in making sure the EU oil embargo on Iran is not lifted or modified. • Mandating Reductions in Diplomatic Exchanges with Iran or Prohibiting Travel by Iranian Officials. Some have suggested a worldwide ban on travel by Iranian civilian officials, such as those involved in suppressing democracy activists. The United States and the EU, as noted, have subjected numerous Iranian officials to Congressional Research Service 67 Iran Sanctions a visa ban. Some have called on countries to reduce their diplomatic presence in Iran, or to expel some Iranian diplomats from Iranian embassies in their territories. However, the EU came one step closer to this option after the November 29 attack on the British Embassy in Tehran. Canada closed its embassy in Tehran in September 2012. • Barring Iran from International Sporting Events. A further option is to limit sports or cultural exchanges with Iran, such as Iran’s participation in the World Cup soccer tournament. However, many experts oppose using sporting events to accomplish political goals. • Sanctioning Iranian Profiteers and Corruption. Some experts believe that, despite the provision of P.L. 112-239 discussed earlier, the United States and international community has not effectively targeted for sanctions Iranians who are exercising special rights, monopolies, or political contacts for personal gain, and depriving average Iranians of economic opportunity and of goods at reasonable prices. • Banning Passenger Flights to and from Iran. Bans on flights to and from Libya were imposed on that country in response to the finding that its agents were responsible for the December 21, 1988, bombing of Pan Am 103 (now lifted). There are no indications that a passenger aircraft flight ban is under consideration among the P5+1. A variation of this idea could be the imposition of sanctions against airlines that are in joint ventures or codeshare arrangements with Iranian airlines. • Limiting Lending to Iran by International Financial Institutions. Resolution 1747 calls for restraint on but does not outright ban international lending to Iran. An option is to make a ban on such lending mandatory. Some U.S. groups have called for the International Monetary Fund (IMF) to withdraw all its holdings in Iran’s Central Bank and suspend Iran’s membership in the body. • Banning Trade Financing or Official Insurance for Trade Financing. Another option is to mandate a worldwide ban on official trade credit guarantees. This was not mandated by Resolution 1929, but several countries imposed this sanction subsequently. In discussions that led to Resolution 1929, a ban on investment in Iranian bonds reportedly was considered but deleted to attract China and Russia’s support. • Restricting Operations of and Insurance for Iranian Shipping. One option, reportedly long under consideration, has been a worldwide ban on provision of Congressional Research Service 69 Iran Sanctions insurance or reinsurance for any shipping to or from Iran. A call for restraint is in Resolution 1929, but is not mandatory. As of July 1, 2012, the EU has banned such insurance, and many of the world’s major insurers are in Europe. • Imposing a Worldwide Ban on Sales of Arms to Iran. Resolution 1929 imposes a ban on sales of major weapons systems to Iran, but another option is to extend that ban to all lethal equipment. Sanctions Easing/Incentives Some believe that the United States and its international partners need to prepare for possibly easing sanctions as part of a nuclear agreement with Iran. During the rounds of talks with Iran in Congressional Research Service 68 Iran Sanctions 2012 the P5+1 have offered more modest steps as “reciprocity” for any agreement with Iran. Steps offered included civilian aircraft parts, civilian assistance to Iran’s nuclear reactor that is used to produce medical isotopes, safety upgrades for the civilian reactor at Bushehr, and possibly technical assistance to Iran’s energy sector. The negotiating group has also reportedly considered to withdraw the EU ban on shipping insurance to Iranian oil tankers that went into effect July 1, 2012, in concert with the EU oil purchase embargo. Iran is widely perceived as insisting that the EU oil embargo be lifted in exchange for a nuclear deal, and many believe there will be no Iranian agreement unless that is offered. Some observers believe Congress, in legislation, should spell out specific sanctions laws that would be altered if Iran were to meet international nuclear demands. Other observers believe that the international community should offer incentives—such as promises of aid, investment, trade preferences, and other benefits—if Iran were to completely abandon uranium enrichment in Iran or were there to be a new regime formed in Iran. Congressional Research Service 7069 Iran Sanctions Table 6. 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) Gen. Mohammad Baqr Zolqadr (IRGC officer serving as deputy Interior Minister Congressional Research Service 7170 Iran Sanctions 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. Bans travel for five named Iranians. 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 Added by Resolution 1929 Over 40 entities added; makes mandatory a previously nonbinding travel ban on most named Iranians of previous resolutions. Adds one individual banned for travel—AEIO head Javad Rahiqi Amin Industrial Complex Armament Industries Group Defense Technology and Science Research Center (owned or controlled by Ministry of Defense)……. Doostan International Company Farasakht Industries First East Export Bank, PLC (only bank added by Resolution 1929) Kaveh Cutting Tools Company M. Babaie Industries Congressional Research Service 7271 Iran Sanctions Malek Ashtar University (subordinate of Defense Technology and Science Research Center, above) Ministry of Defense Logistics Export (sells Iranian made arms to customers worldwide) Mizan Machinery Manufacturing Modern Industries Technique Company Nuclear Research Center for Agriculture and Medicine (research component of the AEIO) Pejman Industrial Services Corp. Sabalan Company Sahand Aluminum Parts Industrial Company Shahid Karrazi Industries Shahid Sattari Industries Shahid Sayyade Shirazi Industries (acts on behalf of the DIO) Special Industries Group (another subordinate of DIO) Tiz Pars (cover name for SHIG) Yazd Metallurgy Industries The following Revolutionary Guard affiliated firms (several are subsidiaries of Khatam ol-Anbiya, the main Guard construction affiliate): Fater Institute; Garaghe Sazendegi Ghaem; Gorb Karbala; Gorb Nooh ; Hara Company; Imensazan Consultant Engineers Institute; Khatam ol-Anbiya; Makin; Omran Sahel; Oriental Oil Kish; Rah Sahel; Rahab Engineering Institute; Sahel Consultant Engineers; Sepanir; Sepasad Engineering Company The following entities owned or controlled by Islamic Republic of Iran Shipping Lines (IRISL): Irano Hind Shipping Company; IRISL Benelux; and South Shipping Line Iran 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) and 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 Import/Export Corp. June 2006 Sanam Industrial Group (Iran) and Ya Mahdi Industries Group (Iran) July 2006 Bank Sepah (Iran) January 2007 Defense Industries Organization (Iran) March 2007 June 2007 Pars Trash (Iran, nuclear program) Farayand Technique (Iran, nuclear program) Fajr Industries Group (Iran, missile program) Mizan Machine Manufacturing Group (Iran, missile prog.) Aerospace Industries Organization (AIO) (Iran) September 2007 Korea Mining and Development Corp. (N. Korea) September 2007 Congressional Research Service 7372 Iran Sanctions October 21, 2007 Islamic Revolutionary Guard Corps (IRGC) Ministry of Defense and Armed Forces Logistics Bank Melli (Iran’s largest bank, widely used by Guard); Bank Melli Iran Zao (Moscow); Melli Bank PC (U.K.) Bank Kargoshaee Arian Bank (joint venture between Melli and Bank Saderat). Based in Afghanistan Bank Mellat (provides banking services to Iran’s nuclear sector); Mellat Bank SB CJSC (Armenia). Reportedly has $1.4 billion in assets in UAE Persia International Bank PLC (U.K.) Khatam ol Anbiya Gharargah Sazendegi Nooh (main IRGC construction and contracting arm, with $7 billion in oil, gas deals) Oriental Oil Kish (Iranian oil exploration firm) Ghorb Karbala; Ghorb Nooh (synonymous with Khatam ol Anbiya) Sepasad Engineering Company (Guard construction affiliate) Omran Sahel (Guard construction affiliate) Sahel Consultant Engineering (Guard construction affiliate) Hara Company Gharargahe Sazandegi Ghaem Bahmanyar Morteza Bahmanyar (AIO, Iran missile official, see above under Resolution 1737) Ahmad Vahid Dastjerdi (AIO head, Iran missile program) Reza Gholi Esmaeli (AIO, see under Resolution 1737) Morteza Reza’i (deputy commander, IRGC) See also Resolution 1747 Mohammad Hejazi (Basij commander). Also, Resolution 1747 Ali Akbar Ahmadian (Chief of IRGC Joint Staff). Resolution 1747 Hosein Salimi (IRGC Air Force commander). Resolution 1737 Qasem Soleimani (Qods Force commander). Resolution 1747 Future Bank (Bahrain-based but allegedly controlled by Bank Melli) Congressional Research Service March 12, 2008 74 Iran Sanctions July 8, 2008: Yahya Rahim Safavi (former IRGC Commander in Chief); Mohsen Fakrizadeh-Mahabadi (senior Defense Ministry scientist) Dawood Agha-Jani (head of Natanz enrichment site) Mohsen Hojati (head of Fajr Industries, involved in missile program) Mehrdada Akhlaghi Ketabachi (heads Shahid Bakeri Industrial Group) Naser Maliki (heads Shahid Hemmat Industrial Group) Tamas Company (involved in uranium enrichment) Shahid Sattari Industries (makes equipment for Shahid Bakeri) 7th of Tir (involved in developing centrifuge technology) Ammunition and Metallurgy Industries Group (partner of 7th of Tir) Parchin Chemical Industries (deals in chemicals used in ballistic missile programs) August 12, 2008: Congressional Research Service 73 Iran Sanctions August 12, 2008 Karaj Nuclear Research Center Esfahan Nuclear Fuel Research and Production Center (NFRPC) Jabber Ibn Hayyan (reports to Atomic Energy Org. of Iran, AEIO) Safety Equipment Procurement Company Joza Industrial Company (front company for Shahid Hemmat Industrial Group, SHIG) September 10, 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 17, 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 October 22, 2008 Export Development Bank of Iran. Provides financial services to Iran’s Ministry of Defense and Armed Forces Logistics Banco Internacional de Desarollo, C.A., Venezuelan-based Iranian bank, sanctioned as an affiliate of the Export Development Bank. Assa Corporation (alleged front for Bank Melli involved in managing property in New York City on behalf of Iran) December 17, 2008 March 3, 2009 11 Entities Tied to Bank Melli: Bank Melli Iran Investment (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 Congressional Research Service 75 Iran Sanctions February 10, 2010: IRGC General Rostam Qasemi, head of Khatem ol-Anbiya Construction Headquarters (main IRGC corporate arm) Fater Engineering Institute (linked to Khatem ol-Anbiya) Imensazen Consultant Engineers Institute (linked to Khatem ol-Anbiya) Makin Institute (linked to Khatem ol-Anbiya) Rahab Institute (linked to Khatem on-Anbiya) June 16, 2010 - Post Bank of Iran - IRGC Air Force - IRGC Missile Command - Rah Sahel and Sepanir Oil and Gas Engineering (for ties to Khatem ol-Anibya IRGC construction affiliate) - Mohammad Ali Jafari—IRGC Commander-in-Chief since September 2007 - Mohammad Reza Naqdi—Head of the IRGC’s Basij militia force that suppresses dissent (since October 2009) - Ahmad Vahedi—Defense Minister - Javedan Mehr Toos, Javad Karimi Sabet (procurement brokers or atomic energy managers) - Naval Defense Missile Industry Group (controlled by the Aircraft Industries Org that manages Iran’s missile programs) Congressional Research Service 74 Iran Sanctions - Five front companies for IRISL: Hafiz Darya Shipping Co.; Soroush Sarzamin Asatir Ship Management Co.; Safiran Payam Darya; and Hong Kong-based Seibow Limited and Seibow Logistics. Also identified on June 16 were 27 vessels linked to IRISKL and 71 new names of already designated IRISL ships. Several Iranian entities were also designated as owned or controlled by Iran for purposes of the ban on U.S. trade with Iran. November 30, 2010 - Pearl Energy Company (formed by First East Export Bank, a subsidiary of Bank Mellat - Pearl Energy Services, SA - Ali Afzali (high official of First East Export Bank) - IRISL front companies: Ashtead Shipping, Byfleet Shipping, Cobham Shipping, Dorking Shipping, Effingham Shipping, Farnham Shipping, Gomshall Shipping, and Horsham Shipping (all located in the Isle of Man). - IRISL and affiliate officials: Mohammad Hosein Dajmar, Gholamhossein Golpavar, Hassan Jalil Zadeh, and Mohammad Haji Pajand. December 21, 2010: - Bonyad (foundation) Taavon Sepah, for providing services to the IRGC - Ansar Bank (for providing financial services to the IRGC) - Mehr Bank (same justification as above) - Moallem Insurance Company (for providing marine insurance to IRISL, Islamic Republic of Iran Shipping Lines) - Bank of Industry and Mine (BIM) May 17, 2011 - Tidewater Middle East Company June 23, 2011 - Iran Air - Mehr-e Eqtesad Iranian Investment Co. March 28, 2012: Congressional Research Service 76 Iran Sanctions Iran Maritime Industrial Company SADRA (owned by IRGC engineering firm Khatem-ol-Anbiya, has offices in Venezuela) Deep Offshore Technology PJS (subsidiary of the above) Malship Shipping Agency and Modality Ltd (both Malta-based affiliates of IRISL) Seyed Alaeddin Sadat Rasool (IRISL legal adviser) Ali Ezati (IRISL strategic planning and public affairs manager) July 12, 2012: - Electronic Components Industries Co. (ECI) and Information Systems Iran (ISIRAN) - Advanced Information and Communication Technology Center (AICTC) and Hamid Reza Rabiee (software engineer for AICTC) - Digital Medial Lab (DML) and Value Laboratory (owned or controlled by Rabiee or AICTC) - Ministry of Defense Logistics Export (MODLEX) Daniel Frosh (Austria) and International General Resourcing FZE)—person and his UAE-based firm allegedly supply Iran’s missile industry. November 8, 2012: - National Iranian Oil Company -Tehran Gostaresh, company owned by Bonyad Taavon Sepah - Imam Hossein University, owned by IRGC Congressional Research Service 75 Iran Sanctions -Baghyatollah Medical Sciences University, owned by IRGC or providing services to it. December 13, 2012: Atomic Energy Organization of Iran (AEOI) chief Fereidoun Abbasi Davain Seyed Jaber Safdari of Novin Energy, a designated affiliate of AEOI Morteza Ahmadi Behazad, provider of services to AEOI (centrifuges) Pouya Control – —provides goods and services for uranium enrichment Iran Pooya – —provides materials for manufacture of IR-1 and IR-2 centrifuges Aria Nikan Marine Industry – —source of goods for Iranian nuclear program Amir Hossein Rahimyar – —procurer for Iran nuclear program Mohammad Reza Rezvanianzadeh – —involved in various aspects of nuclear program Faratech – —involved in Iran heavy water reactor project Neda Industrial Group – —manufacturer of equipment for Natanz enrichment facility Tarh O Palayesh – —designer of elements of heavy water research reator Towlid Abzar Boreshi Iran – —manufacturer for entities affiliated with the nuclear program. December 21, 2012: SAD Import Export Company (also designated by U.N. Sanctions Committee a few days earlier for violating Resolution 1747 ban on Iran arms exports, along with Yas Air) for shipping arms and other goods to Syria’s armed forces Marine Industries Organization – —designated for affiliation with Iran Ministry of Defense and Armed Forces Logistics Mustafa Esbati – —acts on behalf of Marine Industries Chemical Industries and Development of Materials Group – —designated as affiliate of Defense Industries Org. Doostan International Company – —designated for providing services to Iran Aerospace Industries Org, which oversees Iran missile industries. Congressional Research Service 77 Iran Sanctions Iran-Related Entities Sanctioned Under Executive Order 13224 (Terrorism Entities) July 25, 2007: Martyr’s Foundation (Bonyad Shahid), a major Iranian foundation (bonyad)—for providing financial support to Hezbollah and PIJ Goodwill Charitable Organization, a Martyr’s Foundation office in Dearborn, Michigan Al Qard Al Hassan—part of Hezbollah’s financial infrastructure (and associated with previously designated Hezbollah entities Husayn al-Shami, Bayt al-Mal, and Yousser Company for Finance and Investment. Qasem Aliq—Hezbollah official, director of Martyr’s Foundation Lebanon branch, and head of Jihad al-Bina, a previously designated Lebanese construction company run by Hezbollah. Ahmad al-Shami—financial liaison between Hezbollah in Lebanon and Martyf’s Foundation chapter in Michigan Qods Force and 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 alBahtiyti; Alis Saleh Husain January 16, 2009 Congressional Research Service 76 Iran Sanctions August 3, 2010 Qods Force senior officers: Hushang Allahdad, Hossein Musavi,Hasan Mortezavi, and Mohammad Reza Zahedi Iranian Committee for the Reconstruction of Lebanon, and its director Hesam Khoshnevis, for supporting Lebanese Hizballah Imam Khomeini Relief Committee Lebanon branch, and its director Ali Zuraik, for providing support to Hizballah Razi Musavi, a Syrian based Iranian official allegedly providing support to Hizballah Liner Transport Kish (for providing shipping services to transport weapons to Lebanese Hizballah) December 21, 2010 For alleged plot against Saudi Ambassador to the U.S.: October 11, 2011 Qasem Soleimani (Qods Force commander) Hamid Abdollahi (Qods force) Abdul Reza Shahlai (Qods Force) Ali Gholam Shakuri (Qods Force) Manssor Arbabsiar (alleged plotter) Mahan Air (for transportation services to Qods Force) October 12, 2011 Ministry of Intelligence and Security of Iran (MOIS) February 16, 2012 Yas Air (successor to Pars Air) March 27, 2012 Behineh Air (Iranian trading company) Ali Abbas Usman Jega (Nigerian shipping agent) Qods Force officers: Esmail Ghani, Sayyid Ali Tabatabaei, and Hosein Aghajani Entities and persons sanctioned for weapons shipments to Syria and an October 2011 shipment bound for Gambia, intercepted in Nigeria. Entities Sanctioned Under the Iran North Korea Syria Non-Proliferation Act or Executive Order 12938 The designations are under the Iran, North Korea, Syria Non-Proliferation Act (INKSNA) unless specified. These designations expire after two years, unless re-designated Baltic State Technical University and Glavkosmos, both of Russia Congressional Research Service July 30, 1998 (E.O. 12938). 78 Iran Sanctions Both removed in 2010—Baltic on January 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 Congressional Research Service 77 Iran Sanctions 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 (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 (see below for Rosobornexport removal) 9 entities. Rosobornexport, Tula Design, and Komna Design Office of Machine Building, and Alexei Safonov (Russia); Zibo Chemical, China National Aerotechnology, and China National Electrical (China). Korean Mining and Industrial Development (North Korea) for WMD or 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 Non-Ferrous 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. 16 entities: Belarus: Belarusian Optical Mechanical Association; Beltech Export; China: Karl Lee; Dalian Sunny Industries; Dalian Zhongbang Chemical Industries Co.; Xian Junyun Electronic; Iran: Milad Jafari; DIO; IRISL; Qods Force; SAD Import-Export; SBIG; North Korea: Tangun Trading; Syria: Industrial Establishment of Defense; Scientific Studies and Research Center; Venezuela: CAVIM. May 23, 2011 Mohammad Minai, senior Qods Force member involved in Iraq; Karim Muhsin alGhanimi, leader of Kata’ib Hezbollah (KH) militia in Iraq; Sayiid Salah Hantush al- November 8, 2012 Congressional Research Service 79 Iran Sanctions MaksusialMaksusi, senior KH member; and Riyad Jasim al-Hamidawi, Iran based KH member November 8, 2012 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 Congressional Research Service 78 Iran Sanctions Abu Mahdi al-Muhandis July 2, 2009 Iranians Sanctioned Under September 29, 2010, Executive Order 13553 on Human Rights Abusers 1. IRGC Commander Mohammad Ali Jafari September 29, 2010 2. Minister of Interior at time of June 2009 elections Sadeq Mahsouli 3. Minister of Intelligence at time of elections Qolam Hossein Mohseni-Ejei 4. Tehran Prosecutor General at time of elections Saeed Mortazavi 5. Minister of Intelligence Heydar Moslehi 6. Former Defense Minister Mostafa Mohammad Najjar 7. Deputy National Police Chief Ahmad Reza Radan 8. Basij (security militia) Commander at time of elections Hossein Taeb 9. Tehran Prosecutor General Abbas Dowlatabadi (appointed August 2009). Has indicted large numbers of Green movement protesters. February 23, 2011 10. Basij forces commander (since October 2009) Mohammad Reza Naqdi (was head of Basij intelligence during post 2009 election crackdown) 11. Islamic Revolutionary Guard Corps (IRGC) June 9, 2011. 12. Basij Resistance Force 13. Law Enforcement Forces (LEF) 14. LEF Commander Ismail Ahmad Moghadam 15. Ministry of Intelligence and Security of Iran (MOIS) February 16, 2012 Iranians Sanctioned Under Executive Order 13572 (April 29, 2011) for Repression of the Syrian People Revolutionary Guard—Qods Force April 29, 2011 Qasem Soleimani (Qods Force Commander) May 18, 2011 Mohsen Chizari (Commander of Qods Force operations and training) Same as above Congressional Research Service 80 Iran Sanctions Iranian Entities Sanctioned Under Executive Order 13606 Targeting Human Rights Abuses Via Information Technology (April 23, 2012) - Ministry of Intelligence and Security (MOIS) - The IRGC (Guard Cyber Defense Command) - Law Enforcement Forces - Datak Telecom Entities Names as Iranian Government Entities Under Executive Order 13599 Designations made July 12, 2012: - Petro Suisse Intertrade Company (Switzerland) -Hong Kong Intertrade Company (Hong Kong) - Noor Energy (Malaysia) - Petro Energy Intertrade (Dubai, UAE) (all four named as front companies for NIOV, Naftiran Intertrade Company, Ltd (NICO), or NICO Sarl) - 20 Iranian financial institutions (names not released but available from Treasury Dept.) - 58 vessels of National Iranian Tanker Company (NITC) Congressional Research Service 79 Iran Sanctions Entities Designated as Human Rights Abusers or Limiting Free Expression Under Executive Order 13628 (Exec. order pursuant to Iran Threat Reduction and Syria Human Rights Act) Designations made on November 8, 2012: - Ali Fazli, deputy commander of the Basij - Reza Taghipour, Minister of Communications and Information Technology - LEF Commander Moghaddam (see above) - Center to Investigate Organized Crime (established by the IRGC to protect the government from cyber attacks - Press Supervisory Board, established in 1986 to issue licenses to publications and oversee news agencies - Ministry of Culture and Islamic Guidance - Rasool Jalili, active in assisting the government’s Internet censorship activities. - Anm Afzar Goster-e-Sharif, company owned by Jalili, above, to provide web monitoring and censorship gear. - PekyAsa, another company owned by Jalili, to develop telecom software. Designations made on February 6, 2013: - Islamic Republic of Iran Broadcasting (IRIB) and Ezzatollah Zarghami (director and head of IRIB) - Iranian Cyber Police (filters websites and hacks email accounts of political activists) - Communications Regulatory Authority (filters Internet content) - Iran Electronics Industries (producer of electronic systems and products including those for jamming, eavesdropping Author Contact Information Kenneth Katzman Specialist in Middle Eastern Affairs kkatzman@crs.loc.gov, 7-7612 Congressional Research Service 8180