Order Code IB93033
Issue Brief for Congress
Received through the CRS Web
Iran: Current Developments
and U.S. Policy
Updated July 9, 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
Travel Sanctions
Assets Disputes/Victims of Terrorism
Military Containment
Iran’s Opposition Movements

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Iran: Current Developments and U.S. Policy
SUMMARY
Even before Iran’s tacit cooperation with
communities, are also a major concern, al-
post-September 11 U.S. efforts to defeat
though neither the Clinton nor the Bush Ad-
Afghanistan’s Taliban regime, signs of mod-
ministrations cited progress as a specific
eration in Iran had stimulated the United
condition for an improvement in relations.
States to try to engage Iran in official talks.
The Bush Administration has identified Iran’s
Iran, still split between conservatives and
modernization of its conventional forces as a
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,
been minor and that Iran still is relatively
has not accepted to date. Recent reports of
poorly equipped.
Iranian meddling in post-Taliban Afghanistan
and Iran’s intercepted January 2002 shipment
Although the Bush Administration says
of arms allegedly to the Palestinian Authority
it is still willing to hold a dialogue with Iran,
have reversed the warming trend. Iran was
the focus of current U.S. policy appears to be
grouped with North Korea and Iraq as part of
a return to the containment policy that
the “axis of evil” identified in President
prevailed during the early part of the Clinton
Bush’s January 29, 2002 State of the Union
Administration. During the first term of the
message.
Clinton Administration, as part of a policy of
“dual containment” of Iran and Iraq, President
President Bush has identified Iran’s
Clinton imposed a ban on U.S. trade and
efforts to acquire weapons of mass destruction
investment in Iran in 1995, and a 1996 law
and delivery means, coupled with its support
imposed sanctions on foreign investment in
of terrorist groups, as key U.S. concerns.
Iran’s energy sector (Iran-Libya Sanctions Act,
Iran’s ballistic missile program has made
ILSA).
major strides over the past few years, with the
help of several foreign suppliers, and its nu-
In keeping with a 1997 policy shift to-
clear program is advancing with Russia’s help.
ward engagement, the Clinton Administration
and Congress later eased sanctions to allow
Iran has opposed the U.S.-led Middle
U.S. exports to Iran of food and medical
East peace process since its inception in Octo-
supplies and importation from Iran of goods
ber 1991. It continues to provide material
such as carpets and caviar. The United States
support to Hizballah in Lebanon and to Pales-
has consistently worked with its allies to
tinian groups that oppose the Arab-Israeli
prevent arms and advanced technology sales
peace process, such as Hamas and Palestinian
to Iran and to limit Iran’s influence over
Islamic Jihad. All Iranian factions have
regional energy flows. U.S. purchases of
publicly supported Palestinian violence
Iranian crude oil and U.S. company invest-
against Israel since September 2000.
ments in Iran remain barred. ILSA was re-
newed for another 5 years on August 3, 2001
Iran’s human rights practices, particularly
(H.R. 1954, P.L. 107-24).
its treatment of the Baha’i and the Jewish
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
The multi-year 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. The United States
gave Iran $350,000 worth of humanitarian aid for victims of a June 22 earthquake.
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’s reform program has been largely obstructed by hardliners,
including Supreme Leader Ali Khamene’i (successor to Ayatollah Khomeini), who control
key revolutionary institutions and other levers of power. The hardliners also have
constrained Khatemi’s efforts to moderate Iran’s 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 and even some members of the
Majlis. In February 2002 testimony, DCI George Tenet said Iran’s reform movement was
“losing momentum” to the “unelected” hardliners, and Khatemi has publicly criticized
hardline elements for slowing his reform attempts.
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 and could put U.S. allies and installations at risk.
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. According to U.S. military officials, equipment already purchased
has given Iran the ability to block the Strait of Hormuz at least temporarily, 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
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provides for $300 million per year in Iranian arms purchases over the next 5 years. Russia
claims that the arms would be purely defensive, but 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”). In May
2002, it was reported that Iran will buy new cruise-missile carrying patrol boats from China.
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. Iran’s programs, particularly its missile program, continue to
be assisted primarily by entities in Russia, China, and North Korea. In mid-May 2002, the
Administration, under the Iran Nonproliferation Act of 2000 (P.L. 106-178), sanctioned 9
companies and 3 persons in China, Armenia, and Moldova for alleged WMD technology
(chemical weapons and missile-related) sales to Iran. (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. (These entities were again named in the May 2002
sanctioning discussed above.) 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.
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), but Iran conducted an apparently successful test in late May 2002, and press
reports say Iran might have deployed the Shahab-3 and produced 10 - 20 of them. Amid
press reports that Iran might also be making progress on the 1,200 mile range Shahab-4, U.S.
officials said in May 2002 that Iran’s could be upgraded to reach countries in central Europe.
An intelligence community official upgraded the missile threat from Iran, testifying on
March 11, 2002, that the United States would “most likely” face an intercontinental ballistic
missile threat from Iran 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 statements in February 2002 cast
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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.
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 2003 and operational by
2005. Russia says that the project envisages that all spent nuclear material produced by the
plant would be returned to Russia and reprocessed there. Amid concerns among experts that
the plant could help Iran produce fissile material for a nuclear weapon, Iran, perhaps fearing
a U.S. air or missile strike to destroy the plant, has been surrounding it with anti-aircraft
batteries (“Inside the Ring,” Washington Times, May 10, 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, covering 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 might accept the plan.
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 2001, released May 21, 2002, again states, as it has for most of the past decade,
that Iran “remained the most active state sponsor of terrorism in 2001,” although the report
attributes the terrorist 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 Qaeda. (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 Iranian agents were likely involved, but no indictments of any Iranians were
announced. In June 2002, it was reported that Saudi Arabia had sentenced some of the
eleven suspects held there. 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 the two have drawn closer in recent 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 sometimes cooperate with
Iraq’s illicit export of oil products through the Gulf. 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. U.S.
official terrorism reports state that, following the start of the September 2000 Palestinian
uprising, Iran increased its support for terrorism by encouraging coordination among
Palestinian terrorist groups. Iran also incites anti-Israel violence, including hosting
conferences of anti-peace process organizations (April 24, 2001, and June 2-3, 2002).
Khamene’i has continued to call Israel a “cancerous tumor” and he 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 pledging his support for 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
viewed as 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.
About 150 Iranian Revolutionary Guards remain in Lebanon to coordinate Iranian arms
deliveries to Hizballah, which are offloaded in Damascus and trucked into Lebanon. 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 delivered 8,000 Katyusha rockets to Hizballah
recently, but the Israeli claim could not be confirmed. The Washington Post reported on
June 30, 2002 that Hizballah is cooperating with Al Qaeda on logistics and terrorist training,
although some experts are skeptical that the two could bridge their differing goals. On the
other hand, in mid-April 2002, Foreign Minister Kharrazi visited Lebanon and urged
Hizballah to exercise restraint on the Israeli-Lebanese border at a time of heightened tensions
between Israel and the Palestinians.
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 in the mid 1990s as Sudan sought to burnish its international image.
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. However, Iran does
host at least one anti-Azerbaijan guerrilla leader (Hasan Javadov), and it reportedly harbors
leaders of the Islamic Movement of Uzbekistan (IMU). Some allegations surfaced in April
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2002 that Iran is actively helping the Islamic Movement of Uzbekistan (IMU), an Al Qaeda
ally, regroup after the war in Afghanistan.
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.
Tensions eased somewhat in conjunction with the mid-May 2002 visit of Azerbaijan’s
President Heydar Aliyev to Iran, although there was little evident progress on a bilateral
division of their portions of the Caspian.
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 initially 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
northern Afghanistan where Persian-speaking Afghans predominate. There have been press
reports and U.S. official statements since in January 2002 that Iran is harboring – or at least
not aggressively moving to arrest – Al Qaeda fighters who have fled Afghanistan. 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 has 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
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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. In
April 2002, the U.N. Human Rights Commission narrowly voted not to investigate Iran’s
human rights record during 2002-3.
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
sentences ranging from 4 years to 13 years. Three Jews were acquitted. On September 21,
2000, a three-judge appeals panel reduced 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; another 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.
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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. 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 (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 more toward engagement.
The Administration offered Iran official dialogue, with no substantive preconditions. In
January 1998, Khatemi publicly agreed only to increase “people-to-people” exchanges with
the United States, ruling out 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. 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.
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. 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 since 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 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. The President and his aides stress that the United States would still
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be willing to hold dialogue with Iran, although they imply that Iran’s behavior would need
to moderate as a condition for the dialogue. U.S. statements about possible “preemptive
action” against rogue state WMD programs have apparently stoked Iranian fears of possible
U.S. military action. Despite the tensions, in early 2002 Foreign Relations Committee
Chairman Joseph Biden and the Chairman of the Middle East Subcommittee of the House
International Relations Committee, Benjamin Gilman, called for U.S. efforts to promote civil
society in Iran, in part to strengthen reformists’ efforts. Apparently under pressure from
Khamene’i, in late May 2002 Khatemi urged his reformist supporters in the Majles to
abandon efforts to explore renewed relations with the United States. That had been the
subject of recent closed-door meetings among reformist Majles members who want to end
U.S.-Iran estrangement.
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, and another law (P.L. 99-500, the
Defense Department Authorization Act of 1987) limits Defense Department contracts with
companies controlled by terrorism list states ($100,000 contract limit). 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), and another $350,000
worth of aid to the victims of a June 22, 2002 earthquake.
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, and imposes sanctions on
foreign countries that transfer to Iran “destabilizing numbers and types of conventional
weapons,” as well as WMD technology. The Iran Nonproliferation Act (P.L. 106-178)
authorizes sanctions on foreign entities that assist Iran’s WMD programs. It bans U.S.
extraordinary payments to the Russian Aviation and Space Agency in connection with the
international space station unless the President can certify that the agency or entities under
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.
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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.
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 imports were issued in April 2000. The United States was the largest market
for 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 and carpets are now sold in the United States; the
Iranian carpet market could eventually reach an estimated $100 million per year.
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 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,
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was passed by large majorities in both chambers in July 2001. It was signed on August 3,
2001 (P.L. 107-24). In testimony before the House International Relations Committee on
June 20, 2002, a senior State Department official said that the Bush Administration probably
would waive sanctions on European companies that invest in Iran, in exchange for European
assistance in curbing Iran’s WMD programs and terrorism. The statement was a response
to calls in Congress (H.Res.434) to sanction Canadian oil company Sheer Energy, which, in
May 2002, announced an $80 million contract to develop an Iranian oil field. 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 to the
point where pipeline construction might soon begin. Kazakhstan nonetheless is pushing for
construction of an oil pipeline across 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
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 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. Alongside the post-1997 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, 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 several visits. In October 2000, Britain 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.
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In August 1999, Japan continued a gradual improvement in relations with Iran by
announcing a resumption of Japan’s 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 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 Iran’s granting 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 $20 billion as of March
2002, according to Iran’s Central Bank. 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 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, and the EU decided in mid-June 2002 to move toward formal
negotiations on that pact. 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.
In July 2002, Iran offered $492 million in bonds, which attracted interest from European
banks. However, at the urging of the U.S. government, Moody’s stopped its credit ratings
service for Iran’s government bonds in May 2002 on the grounds that performing the credit
ratings service might violate the U.S. trade ban.
Multilateral Lending to Iran. 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 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.
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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
there was no agreement. Despite the required U.S. opposition, on May 10, 2001, the World
Bank’s executive directors voted to approve a two-year economic reform plan for Iran that
envisions $775 million in new Bank loans. Voting on the loans is expected later in 2002.
WTO. The Bush Administration has opposed Iran’s membership in the World Trade
Organization (WTO), although it says that position is “under review.” In May, July, and
October 2001, the WTO, at U.S. urging, postponed a discussion on whether to launch entry
talks with Iran.
Travel 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 required to be fingerprinted, although
the Clinton Administration had promised to eliminate the practice for Iranian visitors.
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 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 Hizballah 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
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in the course of a 1984 Hizballah 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 tenant of the Iranian Embassy building was evicted for
non-payment of rent in March 2002, with rent of about $750,000 overdue.) 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
April 2002, a federal judge ruled that Iran, under the Algiers Accords, had immunity from
a lawsuit 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.
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 could potentially be used against Iran,
if the President so decides. U.S. military officers note that their encounters with Iranian
naval vessels in the Gulf have been more professional 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
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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 this group, 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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