Order Code IB93033
CRS Issue Brief for Congress
Received through the CRS Web
Iran: Current Developments
and U.S. Policy
Updated July 25, 2003
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
Regime Power Struggle and the Opposition
Exiled Oppositionists
Iran’s Strategic Capabilities
Conventional Weapons
Weapons of Mass Destruction (WMD)
Nuclear Program
Chemical and Biological Weapons
Missiles
Iranian Foreign Policy and Involvement in Terrorism
Persian Gulf
Saudi Arabia/Khobar Towers
Gulf Islands Dispute With UAE
Iraq
Middle East/North Africa
Lebanon/Hizballah
Central and South Asia/Azerbaijan
Al Qaeda/Afghanistan/Pakistan
Human Rights Concerns
Religious Persecution
Trial of 13 Jews
U.S.-Iran Relations and Sanctions
Possibility of Military Action
Economic Sanctions
Terrorism/Foreign Aid
Proliferation Sanctions
Counternarcotics
Trade Ban
The Iran-Libya Sanctions Act (ILSA)
Caspian/Central Asian Energy Routes Through Iran
Europe and Japan’s Relations With/Lending to Iran
Multilateral Lending to Iran
WTO
Travel Sanctions
Assets Disputes/Victims of Terrorism

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Iran: Current Developments and U.S. Policy
SUMMARY
While
continuing
previous
U.S.
Another U.S. concern has been Iran’s
Administrations’ policies of containing Iran
opposition to the U.S.-led Middle East peace
while pursuing limited engagement with it, the
process since its inception in October 1991.
the Bush Administration is evaluating whether
Iran continues to provide material support to
or not to move more toward a regime change
Hizballah in Lebanon and to Palestinian
policy, and how to prevent Iran from obtaining
groups that oppose the Arab-Israeli peace
a nuclear weapons capability. During the late
process, such as Hamas and Palestinian Is-
1990s, signs of moderation in Iran had stimu-
lamic Jihad. Iran’s human rights practices,
lated the United States to try to engage Iran in
particularly its treatment of the Baha’i and the
broad, official talks. Relations took another
Jewish communities, are frequently criticized
downturn when Iran was grouped with North
by U.S. officials and Members of Congress.
Korea and Iraq as part of the “axis of evil”
identified in President Bush’s January 29,
Thus far, the Bush Administration has
2002 State of the Union message. The group-
continued most aspects of the containment
ing came despite Iran’s tacit cooperation with
policies toward Iran that characterized preced-
the United States against the Taliban in the
ing administrations. During the first term of
post-September 11, 2001 war in Afghanistan.
the Clinton Administration, as part of a policy
of “dual containment” of Iran and Iraq, Presi-
Iran was also quietly helpful in the U.S.
dent Clinton imposed a ban on U.S. trade and
effort to oust Iraq’s Saddam Hussein in 2003,
investment in Iran in 1995, and a 1996 law
although Iran reportedly is supporting Shiite
imposed sanctions on foreign investment in
Islamic factions there that could greatly boost
Iran’s energy sector (Iran-Libya Sanctions Act,
Iran’s influence in post-war Iraq. Some Al
ILSA).
In keeping with a 1997 policy shift
Qaeda activists are in Iran as well, although
toward engagement, the Clinton Administra-
Iran claims some are “in custody.” The Bush
tion and Congress later eased sanctions to
Administration has warned Iran not to meddle
allow U.S. exports to Iran of food and medical
in Iraq, to extradite any Al Qaeda in Iran, and
supplies and importation from Iran of goods
to curb its nuclear program. The Bush Ad-
such as carpets and caviar. The United States
ministration has sought to dampen speculation
has consistently worked with its allies to
that the United States might take major mili-
prevent arms and advanced technology sales
tary action against Iran to change its regime,
to Iran and to limit Iran’s influence over
but it has indicated support for demonstrators
regional energy flows.
U.S. purchases of
and others in Iran who call for major internal
Iranian crude oil and U.S. company invest-
changes.
ments in Iran remain barred. ILSA was re-
newed for another 5 years on August 3, 2001
Iran’s efforts to acquire weapons of mass
(H.R. 1954, P.L. 107-24).
destruction and delivery means, coupled with
its support of terrorist groups, have long been
key U.S. concerns. The concerns have been
heightened recently by reported major strides
in Iran’s nuclear program.
Congressional Research Service
˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
A visit by the International Atomic Energy Agency to the newly revealed Natanz
facility on February 21 found that the facility contained a more advanced uranium
enrichment program than was expected. A June 6, 2003 IAEA report strongly criticized Iran
for lack of candor on its nuclear program, and President Bush said on June 18 that the United
States would “not tolerate” construction of an Iranian nuclear weapon. During June 6 - 18,
students in Tehran and other major cities demonstrated for major political reform. On July
23, 2003, Iranian officials said they are holding at least one senior Al Qaeda figure.
BACKGROUND AND ANALYSIS
The debate over U.S. policy toward Iran centers on a number of options for changing
Iran’s regime or modify its behavior; curbing its weapons of mass destruction (WMD)
programs; and limiting or end its support for terrorist groups. Options include engagement,
additional U.S. or international sanctions, military action, and supporting opposition forces.
Regime Power Struggle and the Opposition
The United States does not have a declared policy of changing Iran’s regime, although
adopting such a stance reportedly is under consideration by the Bush Administration. Some
who favor a regime change policy point to a growing movement by pro-reform elements
against the more conservative clerics that dominate Iran’s top leadership. Since February
2002, DCI George Tenet has been saying that Iran’s reform movement is
“losing
momentum” to the “unelected” hardliners, including Supreme Leader Ali Khamene’i
(successor to Ayatollah Khomeini) who controls key institutions such as the Council of
Guardians and the military. Since mid-2002, the elected reformist President Mohammad
Khatemi has become more vocal in criticizing obstructions by hardliners, and in late August
2002, he proposed new legislation that would strengthen the power of his office; it was
passed by the Majlis but has not yet been approved by the conservative-dominated legislative
review body called the Council of Guardians. Since early 2000, hardliners in the judiciary
have closed more than 60 reformist newspapers and imprisoned or questioned several editors
and even some members of the Majlis. Khatemi suffered a political setback in February 28,
2003, local elections, with hardliners winning most of the seats in Tehran in a low turnout
(14% in Tehran) election that suggested reformist disillusionment at the slow pace of reform
thus far. Khatemi, who was re-elected on June 8, 2001 by a landslide 77% of the vote
against nine more conservative candidates, remains popular, by most accounts.
His
reelection victory was larger than his 69% first win in May 1997. His supporters have held
about 70% of the seats in the 290-seat Majlis (parliament) since their victory in the February
18, 2000 Majlis elections.
Indications of popular dissatisfaction re-surfaced on June 12, 2003, with student-led
protests in major cities, lasting about six days, calling for major reforms, including
limitations on the powers of the Supreme Leader. Some protesters called for Khatami to
resign for being ineffective in promoting reform. President Bush issued statements in
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support of the demonstrators, although Secretary of State Powell said the protests represented
a “family fight” within Iran in which the United States should not seek a role. Press reports
say as many as four students might have been killed by regime security forces during the days
of protest.
Exiled Oppositionists. Others believe that the United States should support exiled
opposition groups, which seek outright replacement rather than reform of the current regime.
No exile group is currently funded by the United States. In 1995, the Clinton 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 focused 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 called the Farsi service of RFE/RL, began operations
in Prague on October 31, 1998, and has become, as of December 2002, Radio Farda
(“Tomorrow” in Farsi), which broadcasts nearly around the clock. Another $4 million for
the radio for FY1999 was provided by the omnibus appropriation (P.L. 105-277). Another
U.S.-sponsored television broadcast service to Iran, under the auspices of the Voice of
America, began operations on July 3, 2003.
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 (FTO)
in October 1997 under the Anti-Terrorism and Effective Death Penalty Act of 1996, and the
NCR was named as an alias of the PMOI in the October 1999 re-designations. In November
2002, a letter signed by about 150 House Members was released, asking the President to
remove the PMOI from the FTO list. U.S. forces attacked PMOI military installations in
Iraq during Operation Iraqi Freedom and, after temporarily agreeing to a ceasefire with PMOI
military elements in Iraq, subsequently demanded their surrender and disarmament. Press
reports in late May 2003 say some Administration officials, particularly in the Defense
Department, want the group removed from the FTO list and a U.S. alliance with the group
against the Tehran regime. On June 17, 2003 France arrested about 170 PMOI members,
including its co-leader Maryam Rajavi (wife of PMOI founder Masoud Rajavi, who is based
in Iraq.) She was subsequently released. For further information, 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, 44 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 stations in California, and press reports say
a growing number of Iranians are listening to his broadcasts, although he is not believed to
have a major following in Iran.
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Iran’s Strategic Capabilities
Fo the past two decades, the United States has sought to contain the strategic threat
posed by Iran’s WMD programs and its support of terrorist groups. Iran is not considered
a major conventional threat to the United States, but some of its weapons of mass destruction
(WMD) programs, particularly its nuclear and ballistic missile programs, are making
significant progress and could put U.S. allies and forces at risk.
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 loyal to the hardliners. According to U.S.
military officials, Iran’s forces could block the Strait of Hormuz at least temporarily, but Iran
is largely lacking in ability to project power far beyond its borders.
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 continue to be assisted primarily by entities in
Russia, China, and North Korea. For further information, see CRS Report RL30551, Iran:
Arms and Weapons of Mass Destruction Suppliers.
Nuclear Program. U.S. and European concerns are growing about the scope of Iran’s
nuclear program, despite Iran’s occasional voluntary revelations about its facilities. On June
18, 2003, President Bush stated that the United States would “not tolerate construction” of
a nuclear weapon by Iran. In response to allegations by Iran’s exiled opposition, Iran
acknowledged in December 2002 that it is building two additional facilities, at Arak and
Natanz, that could be used to produce fissile material for a nuclear weapon. Natanz could
produce enriched uranium by 2005, and the Arak facility reportedly is a heavy water reactor
that could be used to produce plutonium. International Atomic Energy Agency (IAEA)
director Mohammad Baradei visited the Natanz site on February 21, 2003, and his report of
June 6, 2003, formally discussed by the IAEA on June 18, 2003, was highly critical of Iran,
citing that Natanz was an advanced uranium enrichment facility and that Iran had hidden
other aspects of its nuclear program, such as importation of uranium. The report stopped
short of declaring Iran in violation of the NPT. The Bush Administration has asserted that
it believes Iran is working toward a nuclear weapons capability and that it is in violation of
its obligations under the 1968 Nuclear Non-proliferation Treaty (NPT), questioning Iran’s
assertion that the sites are for electricity generation purposes only. The revelations mean Iran
might produce a nuclear weapon “toward the end of the decade,” somewhat sooner than the
“end of the decade” previously stated.
Despite the stepped up international attention and European and other support for the
U.S. position, Iran is still refusing the IAEA’s urging that it sign the “Additional Protocol”
to the NPT, which would allow no-notice inspections, but it has pledged to inform the IAEA
in advance of constructing any new nuclear facilities. Russia, according to some observers,
has suspended work, under a January 1995 contract with Iran, to complete a nuclear power
plant at Bushehr. The plant is to be operational by the end of 2003. Russia says that it has
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reached agreement with Iran to supply fuel for the reactor for ten years and for Russia to
reprocess the plant’s spent nuclear material, but the new revelations have apparently made
Russia more skeptical of Iran’s promises. Some press reports indicate that military action
against Iran’s nuclear facilities might be considered if diplomacy fails to halt Iran’s suspected
nuclear weapons program.
Chemical and Biological Weapons. Official U.S. reports state that Iran is seeking
a self-sufficient chemical weapons infrastructure, mainly from Chinese sources, and that it
has stockpiled chemical weapons, including blister, blood, and choking agents. This 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.
The reports say Iran may have some capability to produce biological agents, but that its
ability to weaponize them is limited.
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 inconclusive or unsuccessful (the July 2000 test appears to have been
a success), but Iran conducted an apparently successful series of final tests in June 2003,
subsequently calling the missile operational and formally delivering five of them to the
Revolutionary Guard. Iran is also trying to make a 1,200 mile range Shahab-4, but U.S.
officials told journalists in late October 2002 that an Iranian test of an extended-range
Shahab had failed. In March 2002, an intelligence community official upgraded the missile
threat from Iran, testifying that the United States would “most likely” face an intercontinental
ballistic missile threat from Iran by 2015. On September 6, 2002, Iran said it successfully
tested a 200 mile range “Fateh 110" missile, and Iran said in late September 2002 that it has
begun production of the missile. (For more information, see CRS Report RS21548, Iran’s
Ballistic Missile Capabilities.)
Iranian Foreign Policy and Involvement in Terrorism
Iran’s support for terrorist groups has long concerned U.S. Administrations, particularly
by giving Tehran an opportunity to try to obstruct the U.S.-led Middle East peace process.
Iran’s continued support for terrorism contributed to President Bush’s strong criticism of Iran
in his 2002 State of the Union message. The State Department report on international
terrorism for 2002, released April 30, 2003, again stated, as it has for most of the past
decade, that Iran “remained the most active state sponsor of terrorism in 2002,” although the
report attributes the terrorist activity to two hardline institutions: the Revolutionary Guard
and the Intelligence Ministry. (See also CRS Report RL31119, Terrorism: Near Eastern
Groups and State Sponsors, 2002.)
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 has reduced support
for Shiite Muslim dissident movements in the Gulf states. See also CRS Report RL31533,
Persian Gulf States: Post-War Issues for U.S. Policy, 2003.
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Saudi Arabia/Khobar Towers.
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; he visited again on September 11, 2002.
Supreme Leader Khamene’i has been invited to visit the Kingdom as well but has not done
so. The exchanges suggest that Saudi Arabia has tried to move beyond the issue of the June
25, 1996 Khobar Towers housing complex bombing, which killed 19 U.S. airmen, and was
believed orchestrated by Iranian agents. On June 21, 2001, a federal grand jury indicted 14
suspects, 13 Saudis and a Lebanese citizen, for that bombing. The indictment indicated that
Iranian agents were likely involved, but no indictments of any Iranians were announced. In
June 2002, Saudi Arabia reportedly sentenced some of the eleven Saudi suspects held there.
(See CRS Issue Brief IB93113, Saudi Arabia: Postwar Issues and U.S. Relations.)
Gulf Islands Dispute With UAE. Relations between Iran and the UAE have been
strained since 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, completely seized two other islands, Greater and Lesser
Tunb, from the emirate of Ras al-Khaymah, and it seized part of Abu Musa that year from
the emirate of Sharjah.) 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 have
attempted to mediate and Iran-UAE tensions have eased, but Iran insists that it has
sovereignty over the islands. The United States, which is concerned about Iran’s military
control over the islands, supports UAE proposals but takes no position on sovereignty.
Iraq. Senior U.S. officials have, on several occasions since the fall of Saddam Hussein
on April 9, 2003, warned Iran not to interfere in post-war Iraq to try to establish a pro-
Iranian Islamic republic there. Iran has ties to several Shiite Islamic groups that are gaining
influence over southern Iraq, despite lingering suspicion between Iran and Iraq, a legacy of
the 8-year long Iran-Iraq war (September 1980 - August 1988). Iran had publicly opposed
a major U.S. military offensive against Iraq because it was not authorized by the United
Nations, but it tacitly backed the war in the hope that Saddam’s overthrow would put
Tehran’s proteges in power there.
Tehran has long supported Shiite militants in southern Iraq, particularly the Supreme
Council for the Islamic Revolution in Iraq (SCIRI) and the Da’wa (Islamic Call) party.
SCIRI is headed by Ayatollah Mohammad Baqr al-Hakim, the late Ayatollah Khomeini’s
choice to head an Islamic republic in Iraq, who returned to Iraq on May 10, 2003. In the
political vacuum left by the ousting of the Baath regime of Iraq, these and similar parties
have seized control over many of the towns and cities of southern Iraq. SCIRI loyalists from
its armed wing are called the “Badr Corps.” Iran denies that it is “meddling” in Iraq’s affairs,
saying that longtime Iraqi activists have returned to Iran to participate in the politics of post-
Saddam Iraq. (For more information on Shiite and other contender for power in Iraq, see
CRS Report RL31339, Iraq: U.S. Regime Change Efforts and Post-War Governance.)
Over the past five years, Saddam Hussein had sought to improve relations with Iran to
reduce Iraq’s regional isolation. Since early 1998, Iran and Iraq exchanged almost all
remaining prisoners from the 1980-1988 Iran-Iraq war. An October 2000 visit to Iraq by
Iran’s Foreign Minister Kamal Kharrazi resulted in agreement to abide by the waterway-
sharing and other provisions of their 1975 Algiers Accords, which Iraq had abrogated prior
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to its September 1980 invasion of Iran. In exchange for a share of the proceeds, Iran’s naval
forces sometimes cooperated with Iraq’s illicit export of oil through the Gulf.
Middle East/North Africa
Many of the U.S. concerns about 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. 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 make other statements
suggesting that he seeks Israel’s destruction. Khatemi, while publicly pledging support for
the anti-peace process groups, has sometimes tried to moderate Iran’s position somewhat.
On October 15, 2002, the Iranian Foreign Ministry said Iran would not seek to block any
final, two-state Israeli-Palestinian settlement. It was 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 (PA).
Iran has traditionally had few ties to the non-Islamist Palestinian organizations, including
elements linked to the PA, that have conducted some of the day-to-day violence against Israel
in the current uprising.
Lebanon/Hizballah. About 150 Iranian Revolutionary Guards remain in Lebanon
to coordinate Iranian arms deliveries to Hizballah, which are offloaded in Damascus and
trucked into Lebanon.
The shipments have included Stingers obtained by Iran in
Afghanistan, mortars that can reach the Israeli city of Haifa if fired from southern Lebanon,
and, in 2002, over 8,000 Katyusha rockets, according to press reports. 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.
Hizballah is believed to take cues from harder line Iranian elements. In mid May 2003,
Khatemi made the first top level Iranian visit to Lebanon since the 1979 revolution. On
March 11, an Argentinian judge issued arrest warrants for four Iranian diplomats, including
former Intelligence Minister Ali Fallahian, for alleged complicity in the 1994 bombing of a
Jewish community center in Buenos Aires, which killed 85. Hizballah is believed to have
committed the act, as well as the 1992 bombing of Israel’s embassy in that city.
Central and South Asia/Azerbaijan
Iran’s policy in Central Asia has thus far emphasized economic cooperation over
Islamic ideology. Iran has become increasingly assertive in its relations with Azerbaijan,
even though its population, like Iran, adheres to Shiite Islam. 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 allegedly harbors leaders of the Islamic
Movement of Uzbekistan (IMU), including founder Tahir Yuldashev.
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Tensions with Azerbaijan flared in late July 2001 over energy exploration rights in the
Caspian; Iranian warships and combat aircraft threatened a British Petroleum (BP) ship on
contract to Azerbaijan out of an area of the Caspian Iran considers its own. The United
States called that action provocative, and it offered new border security aid and increased
political support to Azerbaijan. Iran and Armenia, an adversary of Azerbaijan, agreed on
expanded defense cooperation in early March 2002.
Iran-Azerbaijan 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.
Al Qaeda/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, and it 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 includes Italy and Germany.
Iran tacitly supported the U.S.-led war on the Taliban and Al Qaeda, but some of Iran’s
subsequent activities in Afghanistan reflect official suspicion of the United States and the
influence of hardliners in Iran’s regime. Iran is said to fear the pro-U.S. tilt of the new
government of Afghanistan and it is moving to restore 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 hardliners in Iran
are harboring, or at least not aggressively moving to arrest, senior Al Qaeda operatives who
have fled Afghanistan. U.S. charges on this issue were renewed after the May 12, 2003
bombings in Riyadh, believed conducted by Al Qaeda, against four expatriate housing
complexes. Following the U.S. criticism, Iran said it had arrested several low-level Al Qaeda
activists and reiterated its position that Iran has long been an enemy of Al Qaeda and the
Taliban. On July 23, 2003, Iranian officials, for the first time, asserted Iran had “in custody”
senior Al Qaeda figures, purported to include Al Qaeda spokesman Sulayman Abu Ghaith
or top operative Sayf Al Adl. U.S. officials say they are not certain that Iran is actually
holding the Al Qaeda figures or is willing to turn them over to their countries of origin.
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 leader Hamid Karzai;
the two countries agreed to broad cooperation. (See CRS Report RL30588, Afghanistan:
Current Issues and U.S. Policy Concerns.)
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Human Rights Concerns
Iran’s human rights practices have been a source of concern to recent U.S.
Administrations, although U.S. policy has not generally considered Iran’s human rights
record as a strategic threat to U.S. interests or an obstacle to the beginning of a U.S.-Iran
dialogue. 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, and
the U.S. State Department report for 2002, released in March 2003, said Iran’s human rights
situation had deteriorated further in the past year. On July 24, Canada withdrew its
Ambassador from Iran in response to the apparent beating death while in Iranian detention
of a Canadian journalist of Iranian origin, Zahra Kazemi. She had been detained in early July
2003 for filming outside Tehran’s Evin prison. In April 2002, the U.N. Human Rights
Commission narrowly voted not to investigate Iran’s human rights record during 2002-2003.
On January 30, 2003, Iran released the 80-year-old Ayatollah Montazeri, from house arrest;
Montazeri was Khomeini’s designated successor until being dismissed by Khomeini in 1989,
and he has emerged as a critic of the current leadership. In the 108th Congress, resolutions
(S.Res. 82 and H.Res. 140) were introduced on March 12, 2003, expressing concern over
Iran’s human rights record, particularly its treatment of women.
Religious Persecution. In October 2001, the State Department again named Iran
as a “Country of Particular Concern,” under the International Religious Freedom Act, and
little progress in Iran’s performance on this issue was noted in the October 2002 religious
freedom report. 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 other Bahais. 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 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, 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 let the revised sentences
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; and three more were given
early release in October 2002. Iran said on April 24, 2003, that the remaining five had been
released. Several bills in the 106th Congress called for the release of the detainees and for
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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.-Iran Relations and Sanctions
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 there have been periods over the past five years in which a
significant thawing appeared imminent. 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 only limited official dialogue since. An
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, 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 toward engagement; the Clinton Administration offered Iran official dialogue,
with no substantive preconditions. In January 1998, Khatemi publicly agreed to increase
“people-to-people” exchanges with the United States but ruled out direct talks.
In a June 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 called the steps insufficient
to warrant direct dialogue. In September 2000 meetings at the United Nations in connection
with the Millennium Summit, 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 said 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. In October
2001, several Members of Congress had dinner in the Senate with Iran’s U.N. representative.
Relations worsened again in January 2002 over allegations of Iran’s sale of arms to the
Palestinian Authority and reputed meddling in Afghanistan, and President Bush named Iran
as part of an “axis of evil” in his January 2002 State of the Union message. On July 12,
2002, President Bush issued a statement supporting those Iranians demonstrating for reform
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and democracy, a message he reiterated on December 20, 2002 when he inaugurated a new
U.S. broadcast to Iran, Radio Farda (“Tomorrow” in Farsi). The statements signaled a shift
in U.S. policy from attempting to engage and support Khatemi to publicly supporting Iranian
reformers and activists, possibly a step toward a regime change policy for Iran.
This apparent shift, based on the conclusion that engaging Khatemi would not produce
more moderate Iranian policies on key issues, has been mirrored in Congress.
Two
resolutions introduced in late July 2002 (S.Res. 306 and H.Res. 504) called for positive U.S.
gestures toward “the people of Iran, and not political figures whose survival depends upon
preservation of the current regime.” A Senate bill, S. 1082, introduced May 19, 2003 by
Senator Sam Brownback, is widely interpreted as urging support for the Shah’s son (see
above) by calling for the use of some U.S. funds for broadcasting and democratization in the
Middle East to be used to promote the Shah’s son’s ideas for the holding of an
internationally-monitored democratic referendum in Iran. A House bill (H.R. 2466) contains
similar provisions and adds a section reimposing import sanctions on luxury goods from Iran.
The sentiments of some of these bills were incorporated into provisions of the House version
of the FY2004 foreign relations authorization bill (H.R. 1950), particularly sections calling
on the Administration to try to block international lending to Iran (see also below).
Despite the apparent policy shift, in May 2003 both countries acknowledged that they
were conducting direct talks in Geneva on Afghanistan and Iraq. This marked the first
confirmed direct dialogue. However, Iran said the talks did not indicate that the two
countries were on the verge of restoring diplomatic relations. The United States broke off
the channel, at least temporarily, following the May 12, 2003, bombing in Riyadh that some
press reports say might have been planned by Al Qaeda activists located in Iran. Senior
Administration officials reportedly are discussing U.S. policy options, including regime
change, military action, the future of the U.S.-Iran dialogue, and the IAEA assessment of
Iran’s nuclear program on May 29, 2003, but the outcome of the deliberations, if any, has
not been announced.
Possibility of Military Action. The aftermath of the U.S.-led war on Iraq, coupled
with heightened U.S. concerns about Iran’s WMD programs and links to terrorism, has led
to speculation that Iran might be a future target of U.S. military action. President Bush
reportedly told leaders at the June 2003 G-8 summit of industrialized countries that the
United States is not contemplating major military action against Iran at this time. However,
experts say that the Administration is considering a number of options, most of which are
diplomatic but some of which might include certain military actions such as airstrikes, to end
or slow Iran’s suspected nuclear weapons program.
U.S. military officials note that U.S. forces in the Gulf region could potentially be used
against Iran, if the President so decides. No military tensions are currently evident, and U.S.
military officers note that their encounters with Iranian naval vessels in the Gulf have been
more professional since Khatemi took office.
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.
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Terrorism/Foreign Aid. Following the October 1983 bombing of the U.S. Marine
barracks in Lebanon, believed perpetrated by Hizballah, 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 also 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
penalizes countries that assist or sell arms to terrorism list countries. 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. Several sanctions 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. During 2001 - 2003, a number of entities in North Korea, China,
India, Armenia, and Moldova were sanctioned under the Iran Nonproliferation Act, the Iran-
Iraq Arms Nonproliferation Act of 1992 (P.L. 102-484), and another law, the Chemical and
Biological Warfare Elimination Act of 1991, for sales to Iran. In late May 2003, the Bush
Administration sanctioned a major Chinese industrial entity, Norinco, for allegedly selling
missile technology to Iran. On July 4, 2003, an additional Chinese entity, the Taian Foreign
Trade General Corporation, was sanctioned under the Iran Nonproliferation Act.
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.
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. 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.
Each March since 1995, most recently on March 13, 2003, the U.S. Administration has
renewed a declaration of a state of emergency that triggered the March 1995 investment ban.
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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. 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 747s (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 are available and U.S. exporters are 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), contained a
provision banning the use of official credit guarantees for food and medical sales to Iran and
other countries on the U.S. terrorism list, except Cuba, although allowing for a presidential
waiver to permit such credit guarantees. Neither the Clinton Administration nor the Bush
Administration has provided the credit guarantees.
In the March 2000 speech mentioned above, the trade ban was eased 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, but U.S. anti-dumping tariffs imposed on Iranian
pistachio nut imports in 1986 (over 300%) dampened imports of that product. In January
2003, the tariff on roasted pistachios was lowered to 22% and on raw pistachios to 163%.
The Iran-Libya Sanctions Act (ILSA). The Iran-Libya Sanctions Act (ILSA, H.R.
3107, P.L. 104-172, signed August 5, 1996) is a law that sanctions foreign investment in Iran
or Libya’s energy sector. It was to sunset on August 5, 2001, but it was renewed for another
five years (H.R. 1954, P.L. 107-24, signed August 3, 2001). The renewal law requires an
Administration report on its effectiveness within 24-30 months (as early as August 2003).
No sanctions have been imposed under ILSA, although three companies involved in one
project (South Pars) were deemed in violation in September 1998; sanctions were waived.
A number of other investments have remained “under review” for ILSA sanctions since
1999. In October 2002, Norway’s Statoil agreed to invest $300 million to develop phases
six, seven, and eight of the South Pars gas field. As noted below (Japan section), a deal to
develop the Azadegan field ($2 billion investment) is expected, as is the outcome of a
competition between BP and Totalfina Elf to develop the Bangestan field (also about $2
billion). Foreign firms have invested about $15 billion in Iran’s energy sector since Iran
opened it to investment. 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 Bush Administration
continues to oppose, and to threaten imposing ILSA sanctions on, pipeline projects through
Iran. U.S. policy has been to promote construction of a pipeline that would cross the Caspian
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Sea and let out in Ceyhan, Turkey (Baku-Ceyhan pipeline); the policy appeared to bear fruit
when four Caspian nations (Turkey, Georgia, Azerbaijan, and Kazakhstan) signed an
agreement embracing Baku-Ceyhan on November 18, 1999. Regional and corporate support
for the project subsequently gained momentum and the early stages of pipeline construction
have begun. Despite U.S. pressure not to import Iranian gas, in December 2001 Turkey
began doing so through a new cross-border pipeline, under an August 1996 agreement.
Europe and Japan’s Relations With/Lending to Iran. U.S.-allied differences
on Iran narrowed in the late 1990s 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 (“Mykonos 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. On December 12,
2002, Iran and the EU began formal negotiations on a trade pact that would lower the tariffs
or increase quotas for Iranian exports to the EU countries, with some linkage to Iran
addressing EU concerns on Iran’s human rights practices and terrorism sponsorship.
However, recent revelations about Iran’s possible nuclear weapons ambitions have caused
the EU to become more cautious in approaching Iran; on July 21, 2003, EU foreign ministers
warned Iran they would “review” relations unless Iran accepted more intrusive IAEA
inspections. They also expressed concern about Iran’s human rights record.
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.
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
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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. A $2 billion deal to
develop that field was expected by June 30, 2003, but Japan’s firms did not reach an
agreement by that deadline, partly in protest of Iran’s nuclear program, leaving the status of
that deal unclear. Partly at U.S. urging, Japan has refused to extend to Iran new 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 July 2002, Iran tapped international capital
markets for the first time since the Islamic revolution, selling $500 million in bonds to
European banks. At the urging of the U.S. government, in May 2002 Moody’s stopped its
credit ratings service for Iran’s government bonds 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 (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, as well as the
foreign aid appropriations for FY1995 (P.L. 103-326) and FY1996 (P.L. 104-107), would
have significantly reduced U.S. payments to the Bank if it had provided new loans to Iran.
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
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. In May 2003, the Bank began considering a $112
million loan to Iran for low- and middle-income housing.
WTO. The Bush Administration said in July 2001 that U.S. opposition to Iran’s
membership in the World Trade Organization (WTO) was “under review,” but there have
been no recent indications that the United States will drop that opposition. On several
occasions since then, the WTO, at U.S. urging, has postponed discussion on whether to
launch entry talks with Iran.
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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.
Assets Disputes/Victims of Terrorism. Iran views the issue of disputed claims
and blocked assets as 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, and about $22 million in diplomatic property remains blocked.
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. On May 30, 2003, federal judge Royce Lambert ruled
that Iran was behind the 1983 bombing of the Marine barracks in Beirut, in response to a
2001 lawsuit filed on behalf of over 600 people who lost family members in that bombing.
For information on suits against Iran that have been filed, their outcomes, and legislation
regarding these suits, see CRS Report RL31258, Suits Against Terrorism States by Victims
of Terrorism.
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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