Order Code IB93033
CRS Issue Brief for Congress
Received through the CRS Web
Iran: Current Developments
and U.S. Policy
Updated March 12, 2002
Kenneth Katzman
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Iran’s Strategic Buildup
Conventional Weapons
Weapons of Mass Destruction (WMD)
Chemical and Biological Weapons
Missiles
Nuclear Weapons
Iranian Foreign Policy and Involvement in Terrorism
Persian Gulf
Saudi Arabia/Khobar Towers/Gulf States
Gulf Islands Dispute With UAE
Iraq
Middle East Peace Process/North Africa
Sudan
Central and South Asia/Azerbaijan
Afghanistan/Pakistan
Former Yugoslavia
Human Rights Concerns
Religious Persecution
Trial of 13 Jews
U.S. Policy and Legislation
Economic Sanctions
Terrorism/Foreign Aid
Proliferation Sanctions
Counternarcotics
Trade Ban
The Iran-Libya Sanctions Act (ILSA)
Caspian/Central Asian Energy Routes Through Iran
European and Japanese Relations With/Lending to Iran
Multilateral Lending to Iran/WTO
WTO
Related Sanctions
Assets Disputes/Victims of Terrorism
Military Containment
Iran’s Opposition Movements

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Iran: Current Developments and U.S. Policy
SUMMARY
More than two decades after the Novem-
Iran’s human rights practices, particularly
ber 4, 1979 seizure of the U.S. embassy in
its treatment of the Baha’i and the Jewish
Tehran, and even before Iran’s tacit
communities, are also a major concern, al-
cooperation with post-September 11 U.S.
though neither the Clinton nor the Bush Ad-
efforts to defeat Afghanistan’s Taliban regime,
ministrations cited progress as a specific con-
signs of moderation in Iran had stimulated the
dition for an improvement in relations. The
United States to try to engage Iran in official
Bush Administration has identified Iran’s
talks. Iran, still split between conservatives
modernization of its conventional forces as a
and reformers loyal to President Mohammad
potential threat to U.S. interests in the Persian
Khatemi, who was elected in May 1997 and
Gulf, but others argue that the buildup has
overwhelmingly reelected on June 8, 2001, has
been minor and that Iran still is relatively
not accepted to date. However, recent reports
poorly equipped.
of Iranian meddling in post-Taliban Afghani-
stan and Iran’s intercepted January 2002
Although the Bush Administration says it
shipment of arms allegedly to the Palestinian
is still willing to hold a dialogue with Iran, the
Authority have reversed the warming trend.
focus of U.S. policy appears to be contain-
Iran was grouped with North Korea and Iraq
ment. During the first term of the Clinton
as part of the “axis of evil” identified in
Administration, as part of a policy of “dual
President Bush’s January 29, 2002 State of the
containment” of Iran and Iraq, President
Union message.
Clinton imposed a ban on U.S. trade and
investment in Iran in 1995, and a 1996 law
The President has identified Iran’s efforts
imposed sanctions on foreign investment in
to acquire weapons of mass destruction and
Iran’s energy sector (Iran-Libya Sanctions
delivery means, coupled with its support of
Act, ILSA). The sanctions were intended to
terrorist groups, as key U.S. concerns. Iran’s
deny Iran the material resources to threaten
ballistic missile program has made major
U.S. interests.
strides over the past few years, with the help
of several foreign suppliers, and its nuclear
In keeping with a 1997 policy shift to-
program is advancing with Russia’s help.
ward engagement, in 1999 and 2000 the
Clinton Administration and Congress eased
Iran has opposed the U.S.-led Middle
sanctions somewhat to allow U.S. exports to
East peace process since its inception in Octo-
Iran of food and medical supplies and importa-
ber 1991. It continues to provide material
tion from Iran of luxury consumer goods, such
support to Hizballah in Lebanon and to
as carpets. However, the United States con-
Islamic-oriented Palestinian groups that op-
tinues to work with its allies to prevent arms
pose the Arab-Israeli peace process, such as
and advanced technology sales to Iran and to
Hamas and Palestinian Islamic Jihad. All
limit Iran’s influence over regional energy
Iranian factions have strongly supported Pales-
flows. U.S. purchases of Iranian crude oil and
tinian violence against Israel since September
U.S. company investments in Iran remain
2000.
barred. Legislation to renew ILSA for another
5 years was signed on August 3, 2001 (H.R.
1954, P.L. 107-24).
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
Legislation to renew the Iran-Libya Sanctions Act for another 5 years was signed on
August 3, 2001 (H.R. 1954, P.L. 107-24). The thawing of U.S.-Iran relations reversed in
January 2002 over revelations that Iran had sold arms to the Palestinian Authority and over
Iranian efforts to exert influence on the new Afghan government. In his January 29, 2002
State of the Union message, President Bush named Iran, along with Iraq and North Korea,
as part of an “axis of evil,” constituting major potential threats to U.S. national security.
BACKGROUND AND ANALYSIS
The power struggle in Iran between revolutionary purists and more moderate reformists
colors Iran’s domestic and foreign policies. President Mohammad Khatemi, who was re-
elected on June 8, 2001 by a landslide 77% of the vote against nine more conservative
candidates, holds a popular mandate for greater domestic freedoms. His reelection victory
was larger than his 69% first win in May 1997. His supporters hold about 70% of the seats
in the 290-seat Majlis (parliament) following victories in the February 18, 2000 Majlis
elections. However, Khatemi has expressed frustration that his reform program has been
obstructed by hardliners, including Supreme Leader Ali Khamene’i (successor to Ayatollah
Khomeini), who use their control of key levers of power to prevent a loosening of domestic
restrictions or moderation of foreign policy. As part of a hardline backlash since April 2000,
hardliners in the judiciary have closed more than 40 reformist newspapers and imprisoned or
questioned several editors. In February 2002 testimony, DCI George Tenet said Iran’s reform
movement may be “losing momentum” to the “unelected” hardliners. Iran arrested student
reformers in late February 2002, a blow to the reform movement.
Iran’s Strategic Buildup
Iran is not considered a major conventional threat to the United States, but some of its
weapons of mass destruction (WMD) programs, particularly medium range ballistic missiles,
appear to be making significant progress. For further information, see CRS Report RL30551,
Iran: Arms and Technology Acquisitions.
Conventional Weapons
Iran’s armed forces total about 550,000 personnel, including both the regular military
and the Revolutionary Guard, the latter of which is populated largely by hardliners. Low oil
prices and high debts slowed Iran’s defense acquisitions to about $300 million per year during
1996-1999, from over $1 billion per year in the early 1990s, although purchase levels appear
to be rising again. Equipment already purchased has given Iran the ability to temporarily
block the Strait of Hormuz or disrupt international shipping, but Iran is largely lacking in
ability to project power far beyond its borders. In November 2000, Russia told the United
States it would no longer abide by a 1995 pledge to refrain from new conventional arms deals
with Iran. On October 2, 2001, Iran and Russia signed an agreement that provides for $300
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million per year in Iranian arms purchases over the next 5 years. Despite Russian assurances
that the arms would be purely defensive, the systems reportedly under consideration include
new MiG-29 and Sukhoi combat aircraft and anti-ship missiles, as well as the S-300 air
defense system (the Russian counterpart of the U.S. “Patriot”). See CRS Report RL31083,
Conventional Arms Transfers to Developing Nations, 1993-2000.
Weapons of Mass Destruction (WMD)
It is partly because of Iran’s attempts to acquire WMD that President Bush, in his
January 29, 2002 State of the Union message, labeled Iran part of an “axis of evil” along with
Iraq and North Korea. U.S. government proliferation reports, including a February 2002 CIA
report covering January - June 2001, assert that Iran is actively seeking to acquire WMD and
advanced conventional weapons. Iran’s programs, particularly its missile program, continue
to be assisted primarily by entities in Russia, China, and North Korea. The foreign assistance
continued despite U.S. anti-proliferation efforts through multilateral export control regimes
such as the Wassenaar Arrangement, Missile Technology Control Regime, Nuclear Suppliers
Group, Zangger Committee, and Australia Group. (See also CRS Report RL30408, Weapons
of Mass Destruction in the Middle East.)
Chemical and Biological Weapons. U.S. proliferation reports state that Iran is
seeking to acquire a self-sufficient chemical weapons infrastructure, that it may have some
capability for biological weapons deployment, and that it has stockpiled chemical weapons,
including blister, blood, and choking agents. On June 11, 2001, the Bush Administration
imposed trade sanctions, in accordance with the Iran Nonproliferation Act of 2000 (P.L. 106-
178) on China’s Jiangsu Yongli Chemicals and Technology Import and Export Corporation
for allegedly selling Iran technology not permitted for export to Iran under the Chemical
Weapons Convention. Two more Chinese entities (Liyang Chemical Equipment and China
Machinery and Electric Equipment Import-Export Co.) and one individual (Q.C.Chen) were
sanctioned under the Act in January 2002 for alleged export to Iran of chemical and biological
technology. This record raises questions about Iran’s compliance with its obligations under
the Chemical Weapons Convention (CWC), which Iran signed on January 13, 1993, and
ratified on June 8, 1997. However, the Organization for the Prohibition of Chemical
Weapons (OPCW), charged with monitoring the convention, has indicated general
satisfaction with Iran’s compliance thus far. OPCW toured Iran’s declared chemical sites in
February 1999, and Iran has made required declarations. Iran is a party to the 1972
Biological and Toxin Weapons Convention.
Missiles. Largely with Russian help, Iran is making progress in its missile program.
Although two of its first three tests of the 800-mile range Shahab-3 (July 1998, July 2000,
and September 2000) were either inconclusive or unsuccessful (the July 2000 test appears to
have been a success), U.S. intelligence officials said publicly in August 2001 that Iran will
soon “field” the Shahab-3. At least one defense publication said in mid-October 2001 that
Iran had launched serial production of the Shahab-3. Iran is also developing a 1,200 mile
range Shahab-4, and it has publicly mentioned an even longer- range Shahab-5, although
development of the Shahab-5 apparently has not begun, according to U.S. reports. DCI
Tenet testified in February 2002 that Iran will likely field an intercontinental ballistic missile
by 2015. On June 11, 2001, the Bush Administration imposed trade sanctions on North
Korean and Iranian entities under the Iran Nonproliferation Act of 2000 for alleged exports
to Iran of missile technology. CIA reports to and testimony before Congress in February
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2002 cast doubt that China is upholding a November 2000 pledge not to export missile
technology to Iran or other countries. On February 22, 2002, the Washington Times reported
that China had delivered HQ-7 surface-to-air missiles to Iran. In late February 2002, the
United States and Russia differed sharply over U.S. allegations that Russian entities are
continuing to give Iran missile technology.
Nuclear Weapons. DCI Tenet testified in February 2002 that Iran might be able to
produce enough fissile material for a nuclear weapon by late this decade, and sooner if it gets
such material from outside. Russia, despite these U.S. concerns and protests, is proceeding
with its January 1995 contract with Iran to complete a nuclear power plant at Bushehr, and
the two countries have said it should be complete by the end of 2002. In November 2001,
Russia shipped to Iran the first reactor shell of the project. There have been inconclusive
Iranian and Russian statements on whether Iran will commission Russia to build additional
reactors. The February 2002 CIA report to Congress, covered January - June 2001, says that
some Iran-China interactions raise questions about China’s adherence to its pledge to refrain
from new nuclear cooperation with Iran. Iran accepts International Atomic Energy Agency
(IAEA) safeguards of its known nuclear facilities, and agency visits to Iran’s declared facilities
since 1992 have found no evidence at the sites visited to indicate Iran is developing nuclear
weapons. Iran has refused to permit an enhanced IAEA inspections program (“93+2”) that
would include surprise inspections to undeclared facilities, although some observers say Iran
is mulling accepting more stringent inspections.
Each year since FY1998, foreign aid laws have contained provisions cutting U.S. aid to
the Russian government if it continues the Bushehr project or assists Iran’s ballistic missile
program. No waiver was provided for either in the FY1998 or the FY2000 legislation,
although the cuts do not apply to nuclear dismantlement in Russia or aid to Russia’s private
sector. The foreign operations appropriations for both FY2001 (P.L. 106-429) and FY2002
(conference report H.Rept. 107-345) contain a similar provision, but both increase the aid cut
to 60%. The House version of the FY2002 foreign relations authorization bill, H.R. 1646,
passed by the House on May 16, 2001, contains Title IX, the Iran Nuclear Proliferation
Prevention Act of 2001. Virtually identical to bills introduced in the 106th and 105th
congresses, the provision would make the IAEA subject to cuts in U.S. voluntary
contributions if it continued technical assistance to Iran’s nuclear program.
Iranian Foreign Policy and Involvement in Terrorism
Iran’s continued support for terrorism contributed to President Bush’s strong criticism
of Iran in his State of the Union message. The State Department report on international
terrorism for 2000, released April 30, 2001, states that Iran “remained the most active state
sponsor of terrorism in 2000,” although the report attributed that activity to two hardline
institutions — the Revolutionary Guard and the Intelligence Ministry. On the other hand, Iran
strongly condemned the September 11 attacks and tacitly supported the U.S. war on the
Taliban and Al Qaida. (See also CRS Report RL31119, Terrorism: Near Eastern Groups
and State Sponsors, 2002.)
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Persian Gulf
Khatemi has largely succeeded in improving relations with Iran’s neighbors, particularly
the six states of the Gulf Cooperation Council (GCC; Saudi Arabia, Kuwait, Bahrain, Qatar,
Oman, and the United Arab Emirates). Since he came into office, Iran apparently has reduced
support for Shiite Muslim dissident movements in the Gulf states. See also CRS Report
RL30728, Persian Gulf: Issues for U.S. Policy, 2000.
Saudi Arabia/Khobar Towers/Gulf States. Iran and Saudi Arabia restored
relations in December 1991 (after a 4 year break), and progressively higher level contacts
have taken place since December 1997. In May 1999, Khatemi became the first senior
Iranian leader to visit Saudi Arabia since the Islamic revolution. In April 2000, Saudi
Arabia’s number three leader, Prince Sultan, hosted a visit by Iran’s Defense Minister.
Supreme Leader Khamene’i has been invited to visit the Kingdom as well. In mid-April 2001,
Saudi Arabia and Iran formally entered into an anti-crime security pact, suggesting that Saudi
Arabia wishes to bury the issue of the June 25, 1996 Khobar Towers housing complex
bombing, which killed 19 U.S. airmen. On June 21, 2001, a federal grand jury indicted 14
suspects, 13 Saudis and a Lebanese citizen, for the Khobar bombing. The indictment
indicated that official elements in Iran were likely involved, but no indictments of any Iranians
were announced. Saudi officials announced that the 11 Saudi suspects who are in custody
in Saudi Arabia would be tried in Saudi courts and not turned over to U.S. justice. In 2000,
Iran entered into anti-crime security pacts with the other Gulf states of Kuwait and Oman.
(See CRS Issue Brief IB93113, Saudi Arabia: Postwar Issues and U.S. Relations.)
Gulf Islands Dispute With UAE. Relations between Iran and the UAE deteriorated
sharply in April 1992, when Iran asserted complete control of the Persian Gulf island of Abu
Musa, which it and the UAE shared under a 1971 bilateral agreement. (In 1971, Iran, then
ruled by the U.S.-backed Shah, seized two other islands, Greater and Lesser Tunb, from the
emirate of Ras al-Khaymah, which later became part of the UAE.) The UAE wants to refer
the dispute to the International Court of Justice (ICJ), but Iran insists on resolving the issue
bilaterally. Several GCC states — Saudi Arabia, Qatar, and Oman — have attempted to
mediate and Iran-UAE talks did resume in July 2001, but there is no evidence of Iranian
flexibility to date on the key issue of sovereignty. The United States, which is concerned
about Iran’s military improvements to the islands, generally supports UAE proposals but
takes no position on sovereignty. Jane’s Defence Weekly reported in March 2000 that Iran’s
military improvements were relatively minor.
Iraq. A legacy of the 8-year long Iran-Iraq war (1980-1988) is deep lingering suspicion
between Iran and Iraq, but relations have improved dramatically over the past few years.
Since early 1998, the two have exchanged significant numbers of prisoners from the 1980-
1988 Iran-Iraq war. An October 2000 visit to Iraq by Iran’s Foreign Minister Kamal Kharrazi
resulted in apparent agreement to abide by the waterway-sharing and other provisions of their
1975 Algiers Accords, which Iraq had abrogated prior to its September 1980 invasion of Iran.
In exchange for a share of the proceeds, Iran’s maritime authorities generally cooperate with
Iraq’s illicit export of oil products through the Gulf, although Iran has occasionally prevented
such shipments. Iranian hardliners still give support to Shiite militants in southern Iraq (the
Supreme Council for the Islamic Revolution in Iraq, SCIRI) trying to overthrow Iraq’s
regime, and Iran allowed the Iraqi National Congress (INC), Iraq’s main opposition umbrella,
to open an office in Tehran in 2001.
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Middle East Peace Process/North Africa
Many of the allegations of Iran’s support for terrorism center on its assistance to groups
opposed to the Arab-Israeli peace process, primarily Hamas, Palestinian Islamic Jihad (PIJ),
Hizballah, and the Popular Front for the Liberation of Palestine-General Command.
Apparently corroborating press reports, U.S. terrorism reports state that, following the start
of the September 2000 Palestinian uprising, Iran increased its support for terrorism somewhat
by encouraging coordination among Palestinian terrorist groups. These groups have escalated
attacks on Israel since the Palestinian uprising began in September 2000. Iran also incites
anti-Israel violence, including hosting a conference of anti-peace process organizations on
April 24, 2001: the conference served as a platform for Iranian statements against Israel that
the United States called “outrageous and intolerable.” Khamene’i told the meeting that
Israelis had exaggerated the Holocaust to justify “crimes” against the Palestinians. Khamene’i
said in early November 2000 that the Palestinian-Israeli violence could end only if Israel were
“eradicated.” Khatemi has sometimes tried to moderate Iran’s position somewhat, saying
during his November 2001 visit to the United Nations that Iran would accept a final Israeli-
Palestinian settlement acceptable to the Palestinians. At the same time, Khatemi has sought
to avoid conflict with hardliners by joining them in pledging continued support to anti-peace
process groups.
On the other hand, Iran has traditionally had few ties to the non-Islamist Palestinian
organizations, including elements linked to the Palestinian Authority, that have conducted
some of the day-to-day violence against Israel in the current uprising. It was therefore a new
development when Israel and the United States asserted in early January 2002 that Iran was
the source of a shipment, intercepted by Israel, of 50 tons of arms bought by the Palestinian
Authority. The arms could be used for terrorism or for conventional combat capabilities.
About 100 Iranian Revolutionary Guards remain in Lebanon to coordinate arms
deliveries to Hizballah, and the Los Angeles Times reported on May 6, 2001 that the United
States, in late 2000, succeeded in persuading Turkey to prevent Iran from flying over Turkish
airspace to Syria, thereby denying Iran an easy route for resupplying Hizballah. Even though
the United Nations certified Israel’s May 2000 withdrawal from Lebanon as complete,
Hizballah occasionally attacks Israel in the Shebaa Farms border area that Israel controls and
that Hizballah claims constitutes occupied Lebanese territory. Iran publicly supported
Hizballah’s ambush and capture of three Israeli soldiers and one alleged Israeli agent in
October 2000, all in that area. (H.Res. 99 expresses the sense of the House of
Representatives that Iran, Syria, and Lebanon pressure Hizballah to allow visitations to the
four captives by the International Committee of the Red Cross. The measure passed the
House on June 25, 2001.) In late October 2001, Israel announced it believed the three
captured soldiers had died. A New York Times report of January 12, 2002 said that, in the
mid-1990s, Iran had transferred American-built Stinger anti-aircraft systems obtained in
Afghanistan to Hizballah. Israel asserted in February 2002 that Iran had 8,000 Katyusha
rockets to Hizballah recently, but the Israeli claim could not be confirmed.
On May 10, 1999, Argentina’s Supreme Court ruled that the March 17, 1992 bombing
of the Israeli Embassy in Buenos Aires was the work of Hizballah. On September 2, 1999,
Argentina issued an arrest warrant for senior Hizballah guerrilla leader Imad Mughniyah in
connection with it. An Argentine judge has also accused Iran and Hizballah of a July 18,
1994 bombing of a Jewish cultural center (AMIA) in Buenos Aires; 20 alleged Argentine
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accomplices have been arrested and their trial began in late September 2001, but the main
suspects are still at large. H.Res. 531 and S.Res. 329, calling on Argentina to step up the
investigation of the 1994 bombing, were passed by their full chambers on July 17 and July
19, 2000, respectively. In May 2001, an FBI team traveled to Argentina to help with the
AMIA investigation.
Sudan. Sudan’s close relations with Iran in the early 1990s contributed to Sudan’s
placement on the U.S. “terrorism list” on August 18, 1993. However, Sudan’s alliance with
Iran frayed as Sudan has sought to achieve removal from the terrorism list.
Central and South Asia/Azerbaijan
Iran’s policy in Central Asia has thus far emphasized economic cooperation over Islamic
ideology, although Iran has become increasingly assertive in its relations with Azerbaijan. In
early 1992, Iran led the drive to bring the Central Asian states and Azerbaijan into the
Economic Cooperation Organization (founded in 1985 by Iran, Pakistan, and Turkey, as a
successor to an organization founded by those states in 1964). Iran is hoping to attract
energy pipeline routes through it, rather than through other countries. Iran does not appear
to be supporting radical Islamic fundamentalist groups in the Central Asian countries (with
the possible exception of Tajikistan) or in Russia’s Dagestan and Chechnya regions, but Iran
does host at least one anti-Azerbaijan guerrilla leader (Hasan Javadov), and it reportedly
allows anti-Uzbekistan activists access to Iran’s state radio. Tensions with Azerbaijan flared
in late July 2001 over energy exploration rights in the Caspian; Iranian warships and combat
aircraft intimidated an international oil firm (BP) on contract to Azerbaijan from continuing
its work an area of the Caspian Iran considers its own. The United States called Iran’s
actions in the Caspian provocative, and it offered new border security aid and increased
political support to Azerbaijan. Iran and Armenia, adversary of Azerbaijan, agreed on
expanded defense cooperation in early March 2002.
Afghanistan/Pakistan. Iran long opposed the puritanical Sunni Muslim regime of
the Taliban in Afghanistan on the grounds that it oppressed Shiite Muslim and other Persian-
speaking minorities. Iran nearly launched a military attack against the Taliban in September
1998 after Taliban fighters captured and killed several Iranian diplomats based in northern
Afghanistan. Subsequently, Iran provided military aid to the anti-Taliban Northern Alliance
coalition, made up of mostly Persian-speaking minority groups. Iran — along with the United
States, Russia, and the countries bordering Afghanistan — attended U.N.-sponsored
meetings in New York (the Six Plus Two group) to try to end the internal conflict in
Afghanistan. Iran and the United States also participated in a U.N.-sponsored group in
Geneva, which also includes Italy and Germany. Tacitly aligned with the U.S. military
campaign against the Taliban in Afghanistan, Iran pledged search and rescue assistance to the
United States and pledged to allow U.S. humanitarian aid for the Afghan people to transit
Iran en route to Afghanistan. U.S. officials have called Iran’s role in the anti-Taliban/Al
Qaeda effort, including efforts to form a new government at the Bonn conference (ended in
agreement December 5, 2001) “constructive.”
Some of Iran’s activities in Afghanistan reflect official suspicion of the United States:
Iran publicly opposed U.S. military retaliation for the September 11 attacks and refused to
join a U.S.-led anti-terrorism coalition. Iran is said to fear the pro-U.S. tilt of the new
government of Afghanistan and the waning of Iran’s traditional sway in western, central, and
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northern Afghanistan where Persian-speaking Afghans predominate. Amid press reports in
January 2002 that Iran might be harboring some Al Qaeda fighters who have fled Afghanistan,
President Bush warned Iran against such activity. Other reports say Iran is arming local
Afghan strongmen including Herat governor Ismail Khan, Mazar-e-Sharif governor Abdul
Rashid Dostam, and others, and President Bush warned Iran not to seek to exert influence
over the new government of Afghanistan. Apparently seeking to deflect the U.S. criticism,
in March 2002 Iran reportedly expelled exiled Pashtun figure Gulbuddin Hikmatyar, an
opponent of the new Afghan government. The expulsion followed a February 24, 2002 visit
to Iran by Afghan interim leader Hamid Karzai in which the two countries agreed to
cooperate broadly. (See CRS Report RL30588, Afghanistan: Current Issues and U.S. Policy
Concerns.)
Former Yugoslavia
On June 26, 1996, and again on May 5, 1997, President Clinton certified to Congress
that Bosnia had expelled foreign forces and ended intelligence cooperation with Iran. The
certifications were required by P.L. 104-122, an FY1996 supplemental appropriation, and
P.L. 104-208, the FY1997 foreign aid appropriation, in order to provide U.S. aid to Bosnia.
Human Rights Concerns
U.S. and U.N. human rights reports cite Iran for widespread human rights abuses,
(especially of the Baha’i faith), including assassinations and executions of regime opponents
(Kurds, People’s Mojahedin, and others) in Iran and abroad. These reports note that
Khatemi’s efforts to promote rule of law have met repeated challenges from hardliners.
Religious Persecution. On October 27, 2001, the State Department again named
Iran as a “Country of Particular Concern,” under the International Religious Freedom Act.
No sanctions were added, on the grounds that Iran is already subject to extensive U.S.
sanctions. Religious persecution continues, especially against the Baha’i community, because
Iran’s Shiite Muslim clergy views the sect as heretical. Two Baha’is (Dhabihullah Mahrami
and Musa Talibi) were sentenced to death in 1996 for apostasy. On July 21, 1998, Iran
executed Ruhollah Ruhani, the first Bahai executed since 1992 (Bahman Samandari). The
United States condemned the execution. In February 2000, Iran’s Supreme Court set aside
the death sentences against three Bahais, Sirus Zabihi-Moqaddam, Hedayat Kashefi-
Najafabadi, and Manucher Khulusi. On April 21, 1999, the Clinton Administration expressed
concern about the sentencing to prison of four Baha’is. Recent resolutions condemning Iran’s
treatment of the Baha’is, including S.Con.Res. 57, which passed the Senate July 19, 2000,
and H.Con.Res. 257, which passed the House on September 19, 2000.
Trial of 13 Jews. Although the 30,000 member Jewish community (the largest in the
Middle East aside from Israel) enjoys more freedoms than Jewish communities in several
other Muslim states, during 1993-1998 Iran executed five Jews allegedly spying for Israel.
In June 1999, Iran confirmed that it had arrested 13 Jews — teachers, shopkeepers, and
butchers — from the Shiraz area that it said were part of an “espionage ring” for Israel. After
an April - June 2000 trial in which eight of the suspects “confessed” to the allegations, ten
of the Jews and two Muslims accomplices were convicted (July 1, 2000) and received
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sentences ranging from 4 years to 13 years. Three Jews were acquitted. The affair provoked
an international outcry, and the Clinton Administration worked through U.S. allies to
intercede, possibly contributing to a September 21, 2000 decision by a three-judge appeals
panel to reduce the sentences slightly, now ranging from 2 to 9 years. On February 8, 2001,
Iran’s Supreme Court rejected their appeals, allowing the revised sentences to stand. In
March 2001, Iran released one of the Jews on the grounds that his sentence included time
served. A second was released on January 16, 2002. Several bills in the 106th Congress
condemned the arrests and called for the release of the detainees and for linking U.S. relations
with Iran to the trial’s outcome; the Senate passed S.Con.Res. 39 (June 23, 1999) and
S.Con.Res. 109 (May 4, 2000). In April 2001, a similar bill, H.Con.Res. 29, was introduced
in the 107th Congress.
U.S. Policy and Legislation
The February 11, 1979 fall of the Shah of Iran, a key U.S. ally, opened a long rift in
U.S.-Iranian relations, but the rift appears to be starting to close somewhat. On November
4, 1979, radical “students” seized the U.S. Embassy in Tehran and held its diplomats hostage
until minutes after President Reagan’s inauguration on January 20, 1981. The United States
broke relations with Iran on April 7, 1980, and the two countries have had no official dialogue
since. The exception was the abortive 1985-86 clandestine arms supply relationship with Iran
in exchange for some American hostages held by Hizballah in Lebanon (the so-called
“Iran-Contra Affair”). Iran maintains an interests section in Washington through the Embassy
of Pakistan, staffed by Iranian permanent resident aliens or U.S. citizens of Iranian descent.
The U.S. protecting power in Iran is Switzerland.
Upon taking office in 1993, the Clinton Administration moved to further isolate Iran as
part of a strategy of “dual containment” of Iran and Iraq. In 1995 and 1996, the Clinton
Administration and Congress added sanctions on Iran in response to growing concerns about
Iran’s weapons of mass destruction and conventional weapons acquisition programs, its
support for terrorist groups, and its efforts to subvert the Arab-Israeli peace process. The
election of Khatemi in May 1997 precipitated a shift in U.S. policy from containment to
engagement, although with key efforts to limit Iran’s strategic capabilities still in place. The
Clinton Administration sought to engage Iran in a dialogue, with no substantive
preconditions. In January 1998, Khatemi publicly agreed to increase “people-to-people”
exchanges with the United States but ruled out an official dialogue.
In a June 17, 1998 speech, then Secretary of State Albright stepped up the U.S. outreach
effort by calling for mutual confidence building measures that could lead to a “road map” for
normalization of relations. Encouraged by the reformist victory in Iran’s March 2000
parliamentary elections, Secretary Albright gave another speech on March 17, 2000,
acknowledging past U.S. meddling in Iran, easing sanctions on some Iranian imports, and
promising to work to resolve outstanding claims disputes. Iran welcomed the steps, but
called them insufficient to warrant the beginning of a dialogue. Iran also rejected a U.S.
suggestion for consular visits by U.S. officials. In early September 2000 meetings at the
United Nations in connection with the Millennium Summit, Secretary Albright and President
Clinton sent a positive signal to Iran by attending Khatemi’s speeches.
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Until early 2002, the Bush Administration appeared to be continuing the Clinton
Administration efforts, in part by building on the cooperation between the two countries in
Afghanistan. The Administration’s November 13, 2001 continuation of the 1979 national
emergency on Iran justified the emergency by saying that U.S. “relations with Iran have not
yet returned to normal,” a far softer statement than previous justifications sighting a continued
threat from Iran. However, Iran continued to refuse to engage in official, bilateral talks until
at least some U.S. sanctions are lifted. Following a move by some Majlis deputies to call for
re-establishing relations with the United States, Supreme Leader Khamene’i moved forcefully
to squash talk of improved relations on October 30, 2001, when he threatened to fire Iranian
officials who strive for that result. His statement came a few weeks after several Members
of Congress had dinner in the Senate with Iran’s U.N. representative.
The gradual thaw in relations, which appeared to accelerate in the context of the
Afghanistan crisis, appears to have stalled or reversed as of January 2002. Allegations of
Iran’s sale of arms to the Palestinian Authority and reputed meddling in Afghanistan have
caused the Administration and Congress to become far more critical of Iran’s intentions and
actions. As noted above, President Bush named Iran as part of an “axis of evil” in his State
of the Union message. In subsequent comments, the President and his aides said that the
United States would still be willing to hold dialogue with Iran and that the President was
implying he wanted Iran’s behavior to change, not threatening military action against Iran.
Economic Sanctions
Since the November 4, 1979 seizure of the U.S. hostages in Tehran, economic sanctions
have formed a major part of U.S. policy toward Iran. On November 14, 1979, President
Carter declared a national emergency with respect to Iran, renewed every year since 1979.
Terrorism/Foreign Aid. Following the October 1983 bombing of the U.S. Marine
barracks in Lebanon, believed perpetrated by Iranian allies, Iran was added to the “terrorism
list” in January 1984. The designation bans direct U.S. financial assistance and arms sales,
restricts sales of U.S. dual use items, and requires the United States to oppose multilateral
lending to the designated countries. Separate from its position on the terrorism list,
successive foreign aid appropriations laws since the late 1980s ban direct assistance to Iran
(loans, credits, insurance, Eximbank credits) and indirect assistance (U.S. contributions to
international organizations that work in Iran). Section 307 of the Foreign Assistance Act of
1961 (added in 1985) names Iran as unable to benefit from U.S. contributions to international
organizations, requiring proportionate cuts if these institutions work in Iran. Iran is also
barred from sales of U.S. munitions list items because it has been designated every year since
1997 as not cooperating with U.S. anti-terrorism efforts, under the Anti-Terrorism and
Effective Death Penalty Act (P.L. 104-132). That Act also penalizes countries that assist or
sell arms to terrorism list countries.
Proliferation Sanctions. Some of these sanctions are discussed above, and two laws
are unique to Iran. The Iran-Iraq Arms Nonproliferation Act (P.L. 102-484) requires denial
of license applications for exports to Iran of dual use items. It also imposes sanctions on
foreign countries that transfer “destabilizing numbers and types of conventional weapons,”
as well as WMD technology, to Iran. Although progress with Russia has ebbed and flowed,
Congress has sought stronger steps to end the missile assistance to Iran. The Iran
Nonproliferation Act (P.L. 106-178) authorizes sanctions on foreign entities that assist Iran’s
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WMD programs. It 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 the Agency’s control had not transferred any WMD or
missile-related technology to Iran within the year prior. The provision contains certain
exceptions to ensure the safety of astronauts who will use the space station and for certain
space station hardware.
Counternarcotics. In February 1987, Iran was first designated as a state that failed
to cooperate with U.S. anti-drug efforts or take adequate steps to control narcotics
production or trafficking. U.S. and U.N. Drug Control Program (UNDCP) assessments of
drug production in Iran prompted the Clinton Administration, on December 7, 1998, to
remove Iran from the U.S. list of major drug producing countries. The decision exempts Iran
from the annual certification process that kept drug-related U.S. sanctions in place on Iran.
Britain reportedly has sold Iran small arms for its anti-drug efforts on the Afghan border.
Trade Ban. On May 6, 1995, President Clinton issued Executive Order 12959 banning
U.S. trade and investment in Iran, including the trading of Iranian oil overseas by U.S.
companies. This followed an earlier March 1995 executive order barring U.S. investment in
Iran’s energy sector, and, although modified, has been extended each year since. On March
13, 2001, President Bush renewed the declaration of a state of emergency that triggered the
March 1995 investment ban. An August 1997 amendment to the trade ban (Executive Order
13059) prevented U.S. companies from knowingly exporting goods to a third country for
incorporation into products destined for Iran. The trade ban was partly intended to blunt
criticism that U.S. trade with Iran made U.S. appeals for multilateral containment of Iran less
credible. Some goods related to the safe operation of civilian aircraft can be licensed for
export to Iran, and in December 1999, the Clinton Administration allowed the repair of engine
mountings on seven Iran Air 747’s (Boeing). Implementing regulations do not permit U.S.
firms to negotiate investment deals with Iran, and, in November 2000, the Office of Foreign
Assets Control (OFAC, Department of Treasury) warned U.S. firms against co-sponsoring
energy-related conferences with Iran.
Following a 1998 application by a U.S. firm to sell Iran agricultural products, and in the
context of Clinton Administration and congressional reviews of U.S. unilateral sanctions
policies, the Clinton Administration announced in April 1999 that it would license, on a case-
by-case basis, commercial sales of food and medical products to certain countries on which
unilateral U.S. trade bans are in place (Iran, Libya, and Sudan). Under regulations issued in
July 1999, private letters of credit can be used to finance approved sales, but no U.S.
government credit guarantees were made available and U.S. exporters were not permitted to
deal directly with Iranian banks. Iran says the lack of credit makes U.S. sales, particularly of
wheat, uncompetitive. The FY2001 agriculture appropriations (P.L. 106-387), contains 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. (In the 107th Congress, S.171, introduced January
24, 2001, would repeal this provision.) The Clinton Administration did not provide credit
guarantees, and the Bush Administration has not done so either.
In her March 17, 2000 speech, then Secretary Albright announced an easing of the trade
ban to allow U.S. importation of Iranian nuts, dried fruits, carpets, and caviar. Regulations
governing the sales were issued in April 2000. The United States was the largest market for
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Iranian carpets before the 1979 revolution, although U.S. anti-dumping tariffs imposed on
Iranian pistachio nut imports in 1986 (about 300%) and still in effect are dampening imports
of that product. Iranian caviar began arriving in the United States in May 2000, and Iranian
carpets are being sold in the United States, estimated to be a $100 million per year market.
The Iran-Libya Sanctions Act (ILSA). The Iran-Libya Sanctions Act (ILSA, H.R.
3107, P.L. 104-172, signed August 5, 1996), a law that sanctions foreign investment in Iran
or Libya’s energy sector, was scheduled to expire on August 5, 2001. H.R. 1954, which
renewed ILSA for five years but requires an Administration report on its effectiveness within
24-30 months, was passed by large majorities in both chambers in July 2001. It was signed
on August 3, 2001 (P.L. 107-24). For further discussion of ILSA and its renewal, see CRS
Report RS20871, The Iran-Libya Sanctions Act (ILSA).
Caspian/Central Asian Energy Routes Through Iran. The U.S. trade ban
permits U.S. companies to apply for licenses to conduct “swaps” of Caspian Sea oil with Iran,
but, as part of a U.S. policy to route Central Asian energy around Iran (and Russia), a Mobil
Corporation application to do so was denied in April 1999. The Administration continues to
oppose, and to threaten imposing ILSA sanctions on, pipeline projects that route
Caspian/Central Asian energy through Iran. U.S. policy has been to strongly favor
construction of a pipeline that would cross the Caspian Sea and let out in Ceyhan, Turkey
(Baku-Ceyhan pipeline), avoiding Iran or Russia. Four Caspian nations (Turkey, Georgia,
Azerbaijan, and Kazakhstan) signed an agreement embracing Baku-Ceyhan on November 18,
1999, and regional and corporate support for the project has gained momentum; a detailed
engineering study is under way. In a potential setback to it, in mid-2001 Kazakhstan began
pushing for construction of an oil pipeline across Iran. In December 2001, Kazakhstan’s
President Nazarbayev urged Secretary of State Powell to reconsider U.S. policy and allow
routes through Iran; Powell reiterated U.S. policy but did not reject the request outright.
Russia, which seeks to route oil and gas lines through it, reportedly also favors a route
through Iran. Despite U.S. pressure not to import Iranian gas, Turkey has begun to do so
through a new cross-border pipeline, under an August 1996 bilateral agreement. (See CRS
Report 98-86, Iran: Relations With Key Central Asian States.)
European and Japanese Relations With/Lending to Iran. U.S.-allied
differences on Iran narrowed since 1998 in concert with the Clinton Administration’s attempt
to engage Iran, a policy consistently favored by the European countries as a way to moderate
Iran’s behavior. During 1992-1997, the European Union (EU) countries maintained a policy
of “critical dialogue” with Iran. The United States did not oppose those talks with Iran but
maintained that the EU’s dialogue would not change Iranian behavior. The dialogue was
suspended immediately following the April 1997 German terrorism trial that found high-level
Iranian involvement in assassinating Iranian dissidents in Germany. Simultaneous with the
Khatemi era U.S. shift toward engagement, the EU-Iran dialogue formally resumed in May
1998. Since then, Khatemi has undertaken state visits to several Western countries, including
Italy (March 1999), France (October 1999), Germany (July 2000), and Japan (November
2000). The United States publicly welcomed these visits.
The resolution of the “Rushdie affair” to Britain’s satisfaction sparked improvement in
its relations with Iran. Iran maintains that Ayatollah Khomeini’s 1989 death sentence against
author Salman Rushdie cannot be revoked (his “Satanic Verses” novel was labeled
blasphemous) because Khomeini is no longer alive to revoke it. However, on September 24,
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1998, Iran’s Foreign Minister pledged to Britain that Iran will not seek to implement the
sentence and opposes any bounties offered for his death. Britain then upgraded relations with
Iran to the ambassadorial level, and Foreign Ministers of the two countries have exchanged
visits. In October 2000, the United Kingdom began extending longer term credit (two years
or greater) for exports to Iran. Some Iranian clerics (outside the formal government
structure) have said the death sentence stands, and the Iranian government has not required
the Fifteen Khordad foundation to withdraw its $2.8 million reward for Rushdie’s death.
Khatemi said on June 4, 2001 that he considers the issue closed.
In August 1999, Japan’s Foreign Minister continued a gradual improvement in relations
with Iran by visiting that country and announcing that Japan would resume its official
development lending program for Iran to construct a hydroelectric dam over the Karun River.
However, the $70 million increment announced was less that Iran had wanted, and Japan said
that this tranche would close out Japan’s involvement in the project. (In 1993, Japan
provided the first $400 million tranche of the overall $1.4 billion official development loan
program, but the lending was subsequently placed on hold as the United States sought to
persuade its allies to pressure Iran.) In late January 2000, Japan agreed to resume medium-
and long-term (two years or longer) export credit insurance for exports to Iran, suspended
since 1994. Economic relations improved further during Khatemi’s November 2000 visit to
Tokyo, which resulted in Japan’s commitment to provide insurance cover for over $500
million in private sector projects, including refurbishment of steel and petrochemical plants.
Iran also granted Japanese firms the first right to negotiate to develop the large Azadegan
field, and Iran and a Japanese-led consortium are moving forward with preliminary studies of
the field. Some press reports suggest that Royal Dutch/Shell might join the Azadegan
project, apparently because it can provide needed technology. In exchange, Japan agreed to
prepay Iran $1 billion per year for the next 3 years for Iranian oil. Partly at U.S. urging,
Japan refused to extend to Iran additional official loans.
During 1994-1995, and over U.S. objections at the time, Iran’s European and Japanese
creditors 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 and International Monetary Fund (IMF) involvement. Iran has
worked its external debt down from $32 billion in 1997 to about $7 billion as of December
2001, according to Iran’s Central Bank. Iran plans to retire about half of this remaining debt
by March 2002. The improved debt picture has led most European export credit agencies,
including Germany’s Hermes, France’s COFACE, and that of Spain, to restore insurance
cover for exports to Iran. In October 1999, Dutch banks extended $2 billion in credits to
investors in Iran. In July 2000, Germany increased its export insurance cover from $100
million to $500 million in conjunction with Khatemi’s visit there. In July 2001, France’s
Societe Generale de France extended a $1 billion credit line to a group of Iranian commercial
banks. In early September 2001, Iran and the EU met to discuss a possible trade pact that
would lower the tariffs or increase quotas for Iranian exports to the EU countries. In August
2001, Iran announced it would tap international capital markets for the first time since the
Islamic revolution by issuing a $280 million Eurobond.
Multilateral Lending to Iran/WTO. Section 1621 of the Anti-Terrorism and
Effective Death Penalty Act of 1996 (P.L. 104-132) amended the Foreign Assistance Act to
require the United States to vote against international loans to countries on the U.S. terrorism
list. Acting under provisions of successive foreign aid laws, in 1993 the United States voted
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its 16.5% share of the World Bank against loans to Iran of $460 million for electricity, health,
and irrigation projects. To signal opposition to international lending to Iran, the FY1994
foreign aid appropriations act (P.L. 103-87) cut the Administration’s request for the U.S.
contribution to the World Bank by the amount of those loans. That law, the FY1995 foreign
aid appropriation (P.L. 103-326), and the FY1996 foreign aid appropriations (P.L. 104-107),
would have significantly reduced U.S. payments to the Bank if it had provided new loans to
Iran. The legislation contributed to the Bank’s refusal to approve any new lending to since
then. By 1999, Iran’s moderating image had led the World Bank to consider new loans.
In May 2000, the United States was unsuccessful in obtaining further delay on a vote on
new lending for Iran, and its allies outvoted the United States to approve $232 million in
loans for health and sewage projects. Twenty one of the Bank’s twenty four governors voted
in favor, and France and Canada abstained. Earlier, Iran also had asked the International
Monetary Fund for about $400 million in loans (its quota is about $2 billion) to help it deal
with its trade financing shortfalls. However, Iran balked at accepting IMF conditionality, and
discussions broke off. Despite the required U.S. opposition, on May 10, 2001, the World
Bank’s executive directors voted to approve a two-year economic reform strategy for Iran
that envisions $775 million in new Bank loans. Voting on the actual loans is expected in the
spring of 2002.
WTO. On May 8, 2001, the World Trade Organization, at U.S. urging, postponed until
July 2001 a discussion on whether to launch entry talks with Iran. On July 18, 2001, and
again on October 10, 2001, the United States achieved further postponements in considering
Iran’s application for admission, although the Administration says that position is “under
review.” Iranian officials indicate to U.S. visitors that the dropping of U.S. opposition to
Iran’s membership in the WTO would be taken as a positive U.S. gesture.
Related Sanctions. Use of U.S. passports for travel to Iran is permitted, but a State
Department travel warning, softened somewhat in April 1998, asks that Americans “defer”
travel to Iran. Iranians entering the United States are fingerprinted, although Secretary
Albright implied in her March 17, 2000 speech that this practice would be eliminated. U.S.
regulations do not bar disaster relief and the United States donated $125,000, through relief
agencies, to help victims of two earthquakes in Iran (February and May 1997).
Assets Disputes/Victims of Terrorism. Iran claims that the United States has
frozen vast amounts of Iranian assets, presenting an obstacle to improved relations. A U.S.-
Iran Claims Tribunal, at the Hague, is arbitrating cases resulting from the break in relations
following the Iranian revolution. The major cases yet to be decided center on hundreds of
Foreign Military Sales cases between the United States and the Shah’s regime, which Iran
claims it paid for but were unfulfilled. About $400 million in proceeds from the resale of that
equipment is in a DOD account. In April 2000, then Secretary Albright named a
representative to negotiate a resolution of the claims issue at the Hague.
The assets issue moved to the forefront following several U.S. court judgements against
Iran for past acts of terrorism against Americans, filed under the Anti-Terrorism and Effective
Death Penalty Act of 1996. Since March 1998, U.S. courts have awarded the following:
$247 million to the family of Alisa Flatow, killed in Israel in April 1995 in a bombing by
Palestinian Islamic Jihad (awarded in March 1998); $65 million to three Americans held
hostage in Lebanon - David Jacobsen, Joseph Cicippio, and Frank Reed (August 1998); $324
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for Lebanon hostage Terry Anderson (March 2000); $327 million to the families of two
Americans killed in a February 1996 Hamas bombing (July 2000); and $355 million to the
family of Marine Lt. Col. William Higgins, killed by Hizballah in 1989 (September 2000).
Former Lebanon hostage Thomas Sutherland won a $353 million judgement against Iran on
June 26, 2001.
In August 2001, the family of former Lebanon hostage father Lawrence Jenco won a
$314.6 million judgment against Iran for his captivity. In June 2001, former hostages
Benjamin Weir and Frank Regier sued Iran for over $100 million for their captivity in
Lebanon. Also in early June 2001, the family of former hostage Peter Kilburn, who was killed
in the course of his captivity in Lebanon, filed a suit against both Libya and Iran for more
than $200 million. In October 2001, victims of the October 1982 Hizbollah bombing of the
Marine barracks in Beirut filed a $5 billion suit against Iran. On January 23, 2002, a federal
judge ordered Iran to pay $42 million to the family of Charles Hegna, who was beaten in the
course of a 1984 Hizbollah hijacking of Kuwait Air 221. On February 6, 2002, a federal
judge awarded $56 million to the family of Ira Weinstein, killed in a 1996 Hamas bus bombing
in Israel.
On the basis of the sanctity of diplomatic property, the Clinton Administration blocked
efforts by the claimants to satisfy their judgments from frozen Iranian assets – diplomatic
property in Washington (worth about $22 million) or the DOD account mentioned above.
In December 1999, the Clinton Administration also blocked a Flatow effort to seize a $6
million U.S.-Iran Claims Tribunal judgement awarded to Iran. A provision of the Victims of
Trafficking and Violence Protection Act of 2000 (H.R. 3244, P.L. 106-386) provides for the
use of general revenues to pay 110% of compensatory damage awards to the above and
future successful claimants in a total not to exceed the rental proceeds from Iran’s diplomatic
property and the DOD account. The provision requires the President to try to recoup the
expended funds from Iran as part of an overall reconciliation in relations and assets
settlement, although there is no requirement that funds ultimately be withheld from Iran. A
provision of the FY2002 Commerce, Justice, State appropriation (P.L. 107-77) requires an
Administration legislative proposal on how to compensate successful U.S. claimants in future
terrorism-related judgments against Iran. In mid-October 2001, the Bush Administration
asked a federal judge to throw out a lawsuit against Iran by the 52 Americans held hostage
by Iran for 444 days. With regard to the 52 American hostages, the conference report on the
FY2002 defense appropriation (P.L. 107-117, H.Rept.107-350) states that the hostages
should be able to collect damages from Iranian assets, notwithstanding U.S.-Iran agreements
on the disposition of Iran’s assets.
Regarding the mistaken U.S. shootdown on July 3,1988 of an Iranian Airbus passenger
jet, on February 22, 1996, the United States, responding to an Iranian case before the
International Court of Justice (ICJ), agreed to pay Iran up to $61.8 million in compensation
($300,000 per wage earning victim, $150,000 per non wage earner) for the 248 Iranians killed
in the shootdown. The funds for this settlement came from a general appropriation for
judgments against the United States. The United States previously paid $3 million in death
benefits for 47 non-Iranians killed in the attack, but has not compensated Iran for the airplane
itself. A different case, pending before the ICJ, involves an Iranian claim for damages to
Iranian oil platforms during U.S. naval clashes with Iran in October 1987 and April 1988.
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Military Containment
U.S. policy has focused on containing the military threat posed by Iran to the United
States, U.S. allies in the Persian Gulf, and international shipping. Although containing Iraq
has been the primary goal of U.S. forces in the Persian Gulf region since the Iraqi invasion of
Kuwait, U.S. military officials note that U.S. forces can also be used to monitor and deter
Iran, if necessary. U.S. military officers note that their encounters with Iranian naval vessels
in the Gulf have been more professional and less tense since Khatemi took office.
Iran’s Opposition Movements
On February 8, 1995, then House Speaker Newt Gingrich said that a U.S. policy
supporting the overthrow of Iran’s regime was the only policy that made sense. The
Administration accepted a House-Senate conference agreement to include $18-$20 million
in funding authority for covert operations against Iran in the FY1996 intelligence
authorization act (H.R. 1655, P.L. 104-93) — about $14 million more than requested —
according to a Washington Post report of December 22, 1995. The Clinton Administration
reportedly succeeded in focusing the covert aid on changing the regime’s behavior, rather
than its overthrow. The conference report on H.R. 2267 (H.Rept. 105-405), the FY1998
Commerce/State/ Justice appropriation, provided $4 million for a “Radio Free Iran,” to be run
by Radio Free Europe/Radio Liberty (RFE/RL). The radio, which the Administration is
calling the Farsi service of RFE/RL, began operations in Prague on October 31, 1998.
Another $4 million for the radio for FY1999 was provided by the omnibus appropriation
(H.R. 4328, P.L. 105-277). (See CRS Report 98-539, Radio Free Iraq and Radio Free Iran:
Background, Legislation, and Policy Issues for Congress.)
Since the late 1980s, the State Department has refused contact with the anti-regime
People’s Mojahedin Organization of Iran (PMOI) and its umbrella organization, the National
Council of Resistance (NCR). It was designated as a foreign terrorist organization in
October 1997 under the Anti-Terrorism and Effective Death Penalty Act of 1996. For further
information on the PMOI, see CRS Report RL31119, Terrorism: Near Eastern Groups and
State Sponsors, 2002.
Some Iranian exiles follow the son of the late former Shah, who lives in the United
States. On January 24, 2001, the Shah’s son, Reza Pahlavi, 40 years old, ended a long period
of inactivity by giving a speech in Washington calling for unity in opposition to the current
regime and for the institution of a constitutional monarchy and genuine democracy in Iran.
He has since broadcast messages into Iran from a station in California, and press reports say
a growing number of Iranians are listening to his broadcasts.
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