Order Code RL32048
Iran: U.S. Concerns and
Policy Responses
Updated November 24, 2008
Kenneth Katzman
Specialist in Middle Eastern Affairs
Foreign Affairs, Defense, and Trade Division

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Iran: U.S. Concerns and Policy Responses
Summary
The Bush Administration has characterized Iran as a “profound threat to U.S.
national security interests,” a perception generated primarily by Iran’s nuclear
program and its military assistance to armed groups in Iraq and Afghanistan, to the
Palestinian group Hamas, and to Lebanese Hezbollah. The Bush Administration’s
approach has been to try to prevent a nuclear breakout by Iran by applying
coordinated international economic pressure on Iran while also offering it potential
cooperation should it comply with the international demands to suspend its
enrichment of uranium. The incorporation of diplomacy and engagement into the
overall U.S. strategy led the Administration to approve the participation of a high-
level State Department official at multilateral nuclear talks with Iran on July 19,
2008, although that meeting, and subsequent discussions, have not resulted in Iran’s
acceptance of the international offer of incentives. Based on statements during the
campaign and since, the incoming Obama Administration is likely to focus more on
consistent engagement with Iran and to de-emphasize the potential for U.S. military
action or efforts to promote democracy in Iran.
During 2006 and 2007, three U.N. Security Council resolutions (1737, 1747,
and 1803) imposed sanctions that ban weapons of mass destruction (WMD)-related
trade with Iran; freeze the assets of Iran’s nuclear and related entities and
personalities; prevent Iran from transferring arms outside Iran; ban or require
reporting on international travel by named Iranians; call for inspections of some
Iranian sea and airborne cargo shipments; and call for restrictions on dealings with
some Iranian banks. Further U.N. Security Council sanctions have been considered,
although progress was slowed by U.S.-Russia tensions over Georgia in August 2008.
Separate U.S. efforts to persuade European governments to curb trade, investment,
and credits to Iran; and to convince foreign banks not to do business with Iran, are
beginning to weaken Iran’s economy, compounding the effect of a sharp drop in oil
prices in late 2008.
To strengthen its approach, the Bush Administration has maintained a
substantial naval presence in the Persian Gulf, which U.S. commanders insist would
prevent any Iranian attempts to close the crucial Strait of Hormuz for any extended
period. The Administration did not rule out military action if the other efforts to curb
Iran’s uranium enrichment program failed. Some believe that only a change of
Iran’s regime would end the threat posed by Iran, although regime change has not
been a prominent feature of Bush Administration policy toward Iran since 2006.
Bills in the 110th Congress, including H.R. 1400, S. 970, S. 3227, S. 3445, H.R.
7112, H.Con.Res. 362, and S.Res. 580 – versions of which are likely to be introduced
in the 111th Congress – would tighten U.S. sanctions on Iran.
This report is updated regularly. For further information, see CRS Report
RS20871, The Iran Sanctions Act (ISA), and CRS Report RS22323, Iran’s Activities
and Influence in Iraq, both by Kenneth Katzman, and CRS Report RL34544, Iran’s
Nuclear Program: Status, by Paul Kerr.

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Contents
Political History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Regime Structure, Stability, and Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The 2005 Election of Mahmoud Ahmadinejad . . . . . . . . . . . . . . . . . . . 5
Ahmadinejad’s Policies and Political Position . . . . . . . . . . . . . . . . . . . 6
March 2008 Majles Elections and June 2009 Presidential Elections . . 7
Human Rights and Dissent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Dissidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exiled Opposition Groups: People’s Mojahedin Organization of
Iran (PMOI)/Camp Ashraf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Other Armed Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Son of the Former Shah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Other Activists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Iran’s Strategic Capabilities and Weapons of Mass Destruction Programs . . . . . 14
Conventional Military/Revolutionary Guard/Qods Force . . . . . . . . . . . . . . 15
Nuclear Program and International Sanctions . . . . . . . . . . . . . . . . . . . . . . . 17
Establishment of “P5+1” Contact Group/June 2006 Incentive
Package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Resolution 1696 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Resolution 1737 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Resolution 1747 and Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Resolution 1803 and Additional Incentives . . . . . . . . . . . . . . . . . . . . . 22
Resolution 1835 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Chemical Weapons, Biological Weapons, and Missiles . . . . . . . . . . . . . . . 23
Ballistic Missiles/Warheads . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Foreign Policy and Support for Terrorist Groups . . . . . . . . . . . . . . . . . . . . . . . . 26
Relations with the Persian Gulf States . . . . . . . . . . . . . . . . . . . . . . . . . 26
Iranian Policy in Iraq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Supporting Palestinian Militant Groups . . . . . . . . . . . . . . . . . . . . . . . 29
Lebanese Hezbollah . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Central Asia and the Caspian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Afghanistan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Al Qaeda . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
U.S. Policy Responses, Options, and Legislation . . . . . . . . . . . . . . . . . . . . . . . . 35
Overview of Bush Administration Iran Policy . . . . . . . . . . . . . . . . . . . . . . . 36
Containment and Possible Military Action . . . . . . . . . . . . . . . . . . . . . . . . . 36
Iranian Retaliatory Scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Containment and the Gulf Security Dialogue . . . . . . . . . . . . . . . . . . . 39
Presidential Authorities and Legislation . . . . . . . . . . . . . . . . . . . . . . . 40
Regime Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Engagement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

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“Grand Bargain Concept” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Further International and Multilateral Sanctions . . . . . . . . . . . . . . . . . . . . . 45
European/Japanese/Other Foreign Country Policy on Sanctions and
Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
World Bank Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
U.S. Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Terrorism/Foreign Aid Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Proliferation Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Targeted Financial Measures by Treasury Department . . . . . . . . . . . . 51
U.S. Trade Ban/Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
The Iran Sanctions Act (ISA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
110th Congress Comprehensive Sanctions Legislation: H.R. 1400,
S. 970, S. 3227, S. 3445, H.R. 7112, H.Con.Res. 362,
and S.Res. 580 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Counter-Narcotics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Travel-Related Guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Status of Some U.S.-Iran Assets Disputes . . . . . . . . . . . . . . . . . . . . . . 57
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
List of Figures
Figure 1. Structure of the Iranian Government . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Figure 2. Map of Iran . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
List of Tables
Table 1. Major Factions and Personalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Table 2. Factions in the Eighth Majles (Elected March 14 - April 25, 2008) . . . . 8
Table 3. Selected Economic Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Table 4. Human Rights Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Table 5. Iran’s Conventional Military Arsenal . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table 6. Summary of Provisions of U.N. Resolutions on Iran Nuclear Program
(1737, 1747, and 1803) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Table 7. Iran’s Ballistic Missile Arsenal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Table 8. Iran Democracy Promotion Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Table 9. Entities Sanctioned Under U.N. Resolutions and U.S. Laws and
Executive Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

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Iran: U.S. Concerns and
Policy Responses
Much of the debate over U.S. policy toward Iran has centered on the nature of
the current regime; some believe that Iran, a country of almost 70 million people, is
a threat to U.S. interests because hardliners in Iran’s regime dominate and set a policy
direction intended to challenge U.S. influence and allies in the region. 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.
Political History
The United States was an ally of the late Shah of Iran, Mohammad Reza Pahlavi
(“the Shah”), who ruled from 1941 until his ouster in February 1979. The Shah
assumed the throne when Britain and Russia forced his father, Reza Shah Pahlavi
(Reza Shah), from power because of his perceived alignment with Germany in World
War II. Reza Shah had assumed power in 1921 when, as an officer in Iran’s only
military force, the Cossack Brigade (reflecting Russian influence in Iran in the early
20th century), he launched a coup against the government of the Qajar Dynasty. Reza
Shah was proclaimed Shah in 1925, founding the Pahlavi dynasty. The Qajars had
been in decline for many years before Reza Shah’s takeover. That dynasty’s
perceived manipulation by Britain and Russia had been one of the causes of the 1906
constitutionalist movement, which forced the Qajars to form Iran’s first Majles
(parliament) in August 1906 and promulgate a constitution in December 1906.
Prior to the Qajars, what is now Iran was the center of several Persian empires and
dynasties, but whose reach shrunk steadily over time. Since the 16th century, Iranian
empires lost control of Bahrain (1521), Baghdad (1638), the Caucasus (1828),
western Afghanistan (1857), Baluchistan (1872), and what is now Turkmenistan
(1894). Iran adopted Shiite Islam under the Safavid Dynasty (1500-1722), which
brought Iran out from a series of Turkic and Mongol conquests.
The Shah was anti-Communist, and the United States viewed his government
as a bulwark against the expansion of Soviet influence in the Persian Gulf. In 1951,
under pressure from nationalists in the Majles (parliament) who gained strength in
the 1949 Majles elections, he appointed a popular nationalist parliamentarian, Dr.
Mohammad Mossadeq, as Prime Minister. Mossadeq was widely considered left-
leaning, and the United States was wary of his policies, which included his drive for
nationalization of the oil industry. Mossadeq’s followers began an uprising in
August 1953 when the Shah tried to dismiss Mossadeq, and the Shah fled. The Shah
was restored in a successful CIA-supported uprising against Mossadeq.

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CRS-2
The Shah tried to modernize Iran and orient it toward the West, but in so doing
he also sought to marginalize Iran’s Shiite clergy. He exiled Ayatollah Ruhollah
Khomeini in 1964 because of Khomeini’s active opposition, which was based on the
Shah’s anti-clerical policies and what Khomeini alleged was the Shah’s forfeiture of
Iran’s sovereignty to the United States. Khomeini fled to and taught in Najaf, Iraq,
a major Shiite theological center that contains the Shrine of Imam Ali, Shiism’s
foremost figure. There, he was a peer of senior Iraqi Shiite clerics and, with them,
advocated direct clerical rule or velayat-e-faqih (rule by a supreme Islamic
jurisprudent). In 1978, three years after the March 6, 1975, Algiers Accords between
the Shah and Iraq’s Baathist leaders, which settled territorial disputes and required
each party to stop assisting each other’s oppositionists, Iraq expelled Khomeini to
France, from which he stoked the Islamic revolution. Mass demonstrations and
guerrilla activity by pro-Khomeini forces, allied with a broad array of anti-Shah
activists, caused the Shah’s government to collapse in February 1979. Khomeini
returned from France and, on February 11, 1979, declared an Islamic Republic of
Iran, as enshrined in the constitution that was adopted in a public referendum in
December 1979 (and amended in 1989). Khomeini was strongly anti-West and
particularly anti-U.S., and relations between the United States and the Islamic
Republic turned hostile even before the November 4, 1979, seizure of the U.S.
Embassy by pro-Khomeini radicals.
Regime Structure, Stability, and Elections
About a decade after founding the Islamic republic, Ayatollah Ruhollah
Khomeini died on June 3, 1989. The regime he established, consisting of some
elected and some appointed positions, has appeared relatively stable, but faces
chronic but low-level unrest in areas inhabited by minorities, and substantial
unpopularity among many intellectuals, students, labor groups, and women. Upon
his death, one of his disciples, Ayatollah Ali Khamene’i, a two term president (1981-
1989), was selected Supreme Leader by an “Assembly of Experts” (an elected
body).1 The fourth election for the Assembly of Experts, which is empowered to
oversee the work of the Supreme Leader and replace him if necessary, as well as to
amend the constitution, was held on December 15, 2006. After that election, Akbar
Hashemi-Rafsanjani, still a major figure having served two terms as president
himself (1989-1997), was named deputy leader of the Assembly. After the death of
the leader of the body, Rafsanjani was elected head of the Assembly in September
2007, defeating the harder line Ayatollah Ahmad Jannati. (An organizational chart
on the Iranian regime is at the end of this paper.)
Khamene’i has vast formal powers as Supreme Leader — he is Commander in
Chief of the armed forces, giving him the power to appoint commanders and to be
represented on the highest national security body, the Supreme National Security
Council, composed of top military and civilian security officials. He appoints half
1 The Assembly also has the power to amend Iran’s constitution.

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CRS-3
of the twelve-member Council of Guardians;2 and the members of Iran’s Supreme
Judicial Council, but he does not appoint the cabinet, which is named by the
President and confirmed by the Majles (parliament). Headed by Jannati, the
conservative-controlled Council of Guardians reviews legislation to ensure it
conforms to Islamic law, and it screens election candidates. Khamene’i also has the
power, under the constitution, to remove the elected President if either the Supreme
Judicial Council or the elected Majles (parliament) say the President should be
removed, with cause. The President runs the cabinet, which he appoints, subject to
parliament’s (Majles) confirmation; the current President is Mahmoud Ahmadinejad.
The Supreme Leader appoints members of the 42-member Expediency Council, set
up in 1988 to resolve legislative disagreements between the Majles and the Council
of Guardians. Expediency Council members serve five-year terms. The Council,
appointed most recently in February 2007, is still headed by Rafsanjani; its executive
officer is former Revolutionary Guard commander-in-chief Mohsen Reza’i.
Table 1. Major Factions and Personalities
Conservatives
Supreme
Born in July 1939 to an Azeri (Turkic) family from Mashhad. Lost
Leader Ali
the use of his right arm in an assassination attempt in June 1981. Has
Khamene’i
all the formal powers but not the undisputed authority of his
predecessor, founder of the revolution Ayatollah Ruhollah Khomeini.
Considered moderate-conservative despite frequent hardline rhetoric
including on Israel. Seeks to challenge U.S. hegemony and wants
Israel defeated but respects U.S. military power and fears military
confrontation with United States. Generally supports the business
community (bazaaris), and opposes state intervention in the economy.
Akbar
Key strategist of the regime, longtime advocate of “grand bargain” to
Hashemi-
resolve all outstanding issues with United States, although on Iran’s
Rafsanjani
terms. A mid-ranking cleric, now leads both Expediency Council and
Assembly of Experts. Heads moderate-conservative faction known as
Executives of Construction. Was Majles (parliament) speaker during
1981-89 and President 1989-1997. One of Iran’s richest men, family
owns large share of Iran’s total pistachio nut production.
President
Leads faction of younger, harder line conservatives associated with
Mahmoud
Revolutionary Guard, revolutionary institutions, and provincial
Ahmadinejad
governments, who comprise much of his cabinet. Generally supports
state control of the economy, subsidies, and social welfare programs
for lower classes. Popular in rural areas and appears to have support
of Khamene’i. See box.
2 The Council of Guardians consists of six Islamic jurists and six secular lawyers. The six
Islamic jurists are appointed by the Supreme Leader. The six lawyers on the Council are
selected by the judiciary but confirmed by the Majles (parliament).

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CRS-4
Majles Speaker
Overwhelming winner for Majles seat from Qom on March 14, 2008
Ali Larijani
and selected Majles Speaker on May 25 (237 out of 290 votes).
Former state broadcasting head (1994-2004) and Minister of Culture
and Islamic Guidance (1993) , was head of Supreme National Security
Council and chief nuclear negotiator from August 2005 until October
2007 resignation. Sought to avoid U.N. Security Council isolation.
Politically close to Khamene’i, he still serves on the Supreme National
Security Council.
Mohammad
Former Revolutionary Guard Air Force commander and police chief,
Baqer Qalibaf
but a moderate-conservative and likely challenger to Ahmadinejad in
2009 presidential election. Encourages comparisons of himself to
Reza Shah, invoking an era of stability and strong leadership.
Supporters won nine out of 15 seats on Tehran city council in
December 2006 elections, propelling him to mayor of Tehran. With
Larijani and former Revolutionary Guard Commander-in-Chief
Mohsen Reza’i, recruited moderate conservatives for March 2008
Majles election.
Ayatollah
Founder of the hardline Haqqani school, and spiritual mentor of
Mohammad
Ahmadinejad. Fared poorly in December 2006 elections for 86-seat
Taqi Mesbah-
“Assembly of Experts” that can amend the constitution, oversee
Yazdi
Khamene’i’s performance, and determine his successor, but did win
a seat. An assertive defender of the powers of the Supreme Leader and
a proponent of an “Islamic state” rather than the current “Islamic
republic,” and advocates isolation from the West. Some believe
Mesbah-Yazdi harbors ambition to replace Khamene’i.
Mahmud
An Ayatollah, has headed the Supreme Judicial Council since 1999.
Hashemi
Ally of Khamene’i and Rafsanjani, has supported repeated
Shahrudi
crackdowns on independent media critical of the regime. But, has
cracked down on judicial corruption and on mistreatment of prisoners.
Politically close to Shiite Islamist parties in Iraq, he is hosting
Moqtada Al Sadr, the radical young Iraqi cleric who has been studying
Islamic theology in Qom since late 2007.
Militant
Longtime organization of hardline clerics headed by Ayatollah
Clerics
Mohammad Mahdavi-Kani. Not to be confused with an
Association
organization with almost the same name, below.
Reformists
Mohammad
Reformist president during 1997-2005. Elected May 1997, with 69%
Khatemi/
of the vote; re-elected June 2001with 77%. Rode wave of sentiment
Reformists
for easing social and political restrictions among students,
intellectuals, youths, and women that seeks reform but not outright
replacement of the Islamic republican regime. Khatemi supporters
held about 70% of the 290 seats in the 2000-2004 Majles, but
reformist Mostafa Moin finished fifth in the first round of presidential
elections on June 17, 2005. Khatemi now heads International Center
for Dialogue Among Civilizations and is being strongly urged by
colleagues to run again for President in June 2009 elections. Visited
U.S. in September 2006 to speak at Harvard and the Washington
National Cathedral on “dialogue of civilizations.”
S o c i e t y o f
Reformist grouping once led by Mehdi Karrubi. Karrubi formed a
Militant Clerics
separated “National Trust” grouping after his 2005 loss in the
presidential election.

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CRS-5
Office of
Hardline reformists. Originally strong Khatemi supporters, but
Consolidation
turned against him for failing to challenge hardliners, particularly
Unity (Daftar
after July 1999 violent crackdown on student riots, in which four
Tahkim-e-
students were killed. Generally dispersed and repressed under
Vahdat)
conservative presidency of Ahmadinejad.
The Islamic
The most prominent and best organized pro-reform grouping. Its
Iran
leaders include Khatemi’s brother, Mohammad Reza Khatemi (a
Participation
deputy speaker in the 2000-2004 Majles) and Mohsen Mirdamadi.
Front (IIPF).
Mojahedin of
Composed mainly of left-leaning Iranian figures who support state
t h e I s l a m i c
control of the economy, but want greater political pluralism and
R e v o l u t i o n
relaxation of rules on social behavior. Its leader is former Heavy
O r ga n i za t i o n
Industries Minister Behzad Nabavi.
(MIR)
The 2005 Election of Mahmoud Ahmadinejad. After suffering several
election defeats at the hands of Mohammad Khatemi and the reformists during 1997-
2000 — and losing the grip on power they held while Khomeini was alive — the
conservative camp argued that the reformists were deviating too far from Khomeini’s
principles, and gained strength after the February 28, 2003, municipal elections,
when reformists largely boycotted. The conservatives gained additional strength
from the February 20, 2004, Majles elections, in which the Council of Guardians
disqualified about 3,600 mostly reformist candidates, including 87 members of the
incumbent Majles, enabling the conservatives to win about 155 out of the 290 seats
on turnout of about 51%. The Administration and the Senate (S.Res. 304, adopted
by unanimous consent on February 12, 2004) criticized the elections as unfair
because of the screening.
As the reformist faction suffered setbacks, the conservatives prepared for the
June 2005 presidential elections.3 After the Council of Guardians narrowed the field
of candidates to 8 out of the 1,014 persons who filed, Rafsanjani 4 was considered the
favorite against several opponents more hardline than he is — three had ties to the
Revolutionary Guard: Ali Larijani (see Table 1); Mohammad Baqer Qalibaf (see
Table 1); and Tehran mayor Mahmoud Ahmadinejad. In the June 17, 2005 first
round, turnout was about 63% (29.4 million votes out of 46.7 million eligible voters).
With 21% and 19.5%, respectively, Rafsanjani and Ahmadinejad, who did
unexpectedly well because of tacit backing from Khamene’i and the Basij (an
internal security force under the Revolutionary Guard), moved to a run-off.
Reformist candidates Mehdi Karrubi and Mostafa Moin fared worse than expected
and did not make the runoff. Ahmadinejad won a landslide victory in the June 24
runoff, receiving 61.8% to Rafsanjani’s 35.7%. Turnout was 47%, less than the first
round. He took office on August 6, 2005.
3 Rafsanjani was constitutionally permitted to run because a third term would not have been
consecutive with his previous two terms.
4 In the 2001 presidential election, the Council permitted 10 out of the 814 registered
candidates.

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CRS-6
Ahmadinejad’s Policies and Political Position. Since taking office,
Ahmadinejad has inflamed world opinion with several anti-Israel statements, the first
of which was stated at an October 26, 2005, Tehran conference entitled “A World
Without Zionism” that “Israel should be wiped off the map” and that “anybody who
recognizes Israel will burn in the fire of the Islamic nations’ fury.” A similar point
of contention was his insistence on the holding of a December 2006 conference in
Tehran questioning the Holocaust, a theme he has returned to several times since,
including at a September 2007 speech at Columbia University, a forum where he
also denied that Iran had any homosexuals. A U.N. Security Council statement and
Senate and House resolutions (H.Res. 523 and S.Res. 292), passed in their respective
chambers, condemned the statement. (On June 21, 2007, the House passed
H.Con.Res. 21, calling on the United Nations Security Council to charge
Ahmadinejad with violating the 1948 Convention on the Prevention and Punishment
of the Crime of Genocide; the Convention includes “direct and public incitement”
to commit genocide as a punishable offense.)
Some Iranian leaders, both conservative and reformist, and portions of the
population, appear concerned that Ahmadinejad’s defiance of the international
community on the nuclear issue — as well as his frequent visits and meetings with
such anti-U.S. figures as Venezuela’s Hugo Chavez — is isolating Iran and
potentially provoking confrontation with the United States. Several experts believe
that Supreme Leader Khamene’i, although publicly backing Iran’s “right” to develop
nuclear energy, wants to curb Ahmadinejad’s authority and thereby limit the
potential for confrontation with the United States. The first decision that
strengthened this view was the October 2005 grant of new governmental supervisory
powers to the Expediency Council. In July 2006, Khamene’i created a ten-person
advisory “Foreign Policy Committee” consisting of former defense and foreign
ministers. A shakeup in the nuclear negotiating team in October 2007 represented
a further indication of splits in the leadership on that issue, especially because the
former negotiator (now Majles Speaker), Ali Larijani, continued to undertake official
visits representing the Supreme Leader. In April 2008, Ahmadinejad fired two
cabinet ministers, including the Interior Minister Mustafa Pour-Mohammadi who is
close to Khamene’i. In a further sign of rift and of the increasing damage to Iran’s
economy that international sanctions are inflicting, the Supreme Leader’s top foreign
policy advisor, former Foreign Minister Ali Akbar Velayati, said in July 2008 that
Iran should consider Western offers to settle the nuclear issue.
However, Khamene’i’s public statements of support for Ahmadinejad in August
2008 could indicate that the regime is rallying together to confront international
demands. He praised Ahmadinejad for refusing to bow to international demands on
the nuclear issue and said the cabinet should make plans for another four years.
Khamene’i defended Ahmadinejad again on September 19, 2008, by saying that the
political elite should cease its squabbling over the comments of a Vice President that
Iran considers itself a friend of the Israeli people. Still, on November 4, 2008, the
Majles impeached Interior Minister Ali Kordan for falsely claiming he had an
Oxford University degree. Sadeq Mahsouli, a former Revolutionary Guard official,
was confirmed as replacement on November 18, 2008. If one more Minister is fired
or removed – meaning half the cabinet changes during his term – Ahmadinejad
would be constitutionally required to submit the entire cabinet to a vote of
confidence, although he could expand the cabinet to avoid that consequence.

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CRS-7
March 2008 Majles Elections and June 2009 Presidential Elections.
Khamene’i’s endorsement, if it is open and active, would likely help Ahmadinejad
in the June 2009 presidential elections. He is assumed to be running for re-election
even though his allies explained his several public absences in late October 2008 as
due to his exhaustion. In the presidential contest, Ahmadinejad is likely to face a
challenge from Mohammad Baqr Qalibaf, and probably a reformist candidate as well,
possibly Khatemi (see table above for factions and major personalities). Prior to the
March 2008 Majles elections, it had appeared as though Ahmadinejad’s political
fortunes were declining to the point where he would not run or would not win re-
election. In the December 15, 2006, municipal elections, his supporters won only
3 out of the 15 seats on the Tehran city council, with similar results in other cities.

Ahmadinejad supporters did not fare as poorly in the March 2008 Majles
elections as some expected. In those elections, about 7,600 persons filed to run for
the 290 total seats, of which 30 are in Tehran. Of these, about 2,000 mostly
reformist candidates, including 103 Majles incumbents, were disqualified by the
Council of Guardians. Still, the selection of Ali Larijani, leader of the “moderate-
conservative” faction, as Majles Speaker, has presented Ahmadinejad with a more
critical Majles than was the case previously.
Ahmadinejad has maintained his political prospects by appealing to the lower
classes and rural voters. He has raised wages and lowered interest rates for poorer
borrowers, cancelling some debts of farmers, and increased social welfare payments
and subsidies. He fired the technocratic Central Bank governor in September 2008
in favor of an official who supports his move to provide direct subsidies to the bank
accounts of poorer Iranians. Some believe these moves have fed inflation, but rural
Iranians see him as attentive to their economic plight. However, Ahmadinejad was
weakened by the June 2007 rationing of gasoline — a move intended to curb
consumption that forces Iran to import refined gasoline. The rationing harmed
poorer Iranians in the urban areas who sometimes use their cars as unofficial taxis,
but it did reduce dependence on imported gasoline (to about 25% from 40%). The
Oil Minister resigned in August 2007, probably because of the unpopularity of the
program among some. Further popular sentiment against him came in protests by
bazaar merchants in major cities against the imposition of sales taxation; the protests
caused a suspension of the imposition of the tax. Ahmadinejad apparently believed
that his distributive policies would be supported by high oil prices, but the fall in the
price of oil in late 2008 has left Ahmadinejad open to increased criticism for
mismanagement of the economy. Some business owners say the difficulty obtaining
credit from foreign banks is hurting their ability to operate.

---

CRS-8
Table 2. Factions in the Eighth Majles
(Elected March 14 - April 25, 2008)

Pro-Ahmadinejad Conservatives (United Front of Principalists)
117
Anti-Ahmadinejad Conservatives (Coalition of Principalists)
53
Reformists (39 seats in eighth Majles)
46
Independents
71
Seats annulled or voided
3
Ahmadinejad has not moved to correct economic structural imbalances, such as
the dependence on oil revenues, which account for about 20% of Iran’s gross
domestic product (GDP), and its extensive imports of refined gasoline. Major
economic sectors or markets are controlled by the quasi-statal “foundations”
(bonyads), run by powerful former officials, and there are special trading privileges
for them and the bazaar merchants, a key constituency for some conservatives. The
same privileges reportedly apply to businesses run by the Revolutionary Guard, as
discussed below.
Mahmoud Ahmadinejad
First non-cleric to be president of the Islamic republic since the assassination of then
president Mohammad Ali Rajai in August 1981. About 52, he campaigned as a “man of
the people,” the son of a blacksmith who lives in modest circumstances, who would
promote the interests of the poor and return government to the principles of the Islamic
revolution during the time of Ayatollah Khomeini. His official biography says he served
with the “special forces” of the Revolutionary Guard, and he served subsequently (late
1980s) as a deputy provincial governor. A part of the “Isargaran” faction composed of
former Guard and Basij (volunteer popular forces) leaders and other hardliners. U.S.
intelligence reportedly determined he was not, as was thought by some, one of the holders
of the 52 American hostages during November 1979-January 1981. Other accounts say
Ahmadinejad believes his mission is to prepare for the return of the 12th Imam - Imam
Mahdi — whose return from occultation would, according to Twelver Shiite doctrine, be
accompanied by the establishment of Islam as the global religion. Earned clerical
criticism in May 2008 for again invoking intervention by Imam Mahdi in present day
state affairs. Regularly attends U.N. General Assembly sessions in New York each
September; attended again in 2008, giving interviews to American papers and other
media. In an October 2006 address, Ahmadinejad said, “I have a connection with God.”
Sent letter of congratulation to President-elect Barack Obama for his election victory.
For more information, see CRS Report RS22569, Iran: Profile of President Mahmoud
Ahmadinejad, by Hussein Hassan.

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CRS-9
Table 3. Selected Economic Indicators
Economic Growth
4.3% (2007 est.)
Per Capita Income
$8,100/yr purchasing power parity
Proven Oil Reserves
135 billion barrels (highest after Russia and Canada)
Oil
4.1 million barrels per day (mbd)/ 2.4 mbd exports. Exports could shrink
Production/Exports
to zero by 2015-2020 due to accelerating domestic consumption.
Major Oil/Gas
China — 300,00 barrels per day (bpd); about 4% of China’s oil imports;
Customers
Japan — 600,000 bpd, about 12% of oil imports; other Asia (mainly
South Korea) — 450,000 bpd; Italy — 300,000 bpd; France — 210,000
bpd; Netherlands 40,000 bpd; other Europe — 200,000 bpd; India —
150,000 bpd (10% of its oil imports; Africa — 200,000 bpd. Turkey —
gas: 8.6 billion cubic meters/yr
Refined Gasoline
Imports were $5 billion value per year in 2006, but now about $4 billion
Import/ Suppliers
per year after rationing. 60% is supplied by European oil trader Vitol
(Switzerland). Other traders and suppliers include BP; Total (France);
Trafigura (Switzerland/Nethelands); Reliance Energy (India, Jamnagar
refinery); Russia’s Lukoil; Kuwait, UAE, Turkey, Venezuela (Petroleos
de Venezuela), Singapore, the Netherlands, China, Turkmenistan, and
Azerbaijan. Iran planning at least eight new or upgrade refinery projects
to expand capacity to about 3 million barrels per day from 1.5 mbd.
Major Export
Japan ($9.9 billion); China ($9.2 billion); Turkey ($5.1 billion); Italy
Markets (2006)
($4.45 billion); South Korea ($4 billion); Netherlands ($3.2 billion);
France ($2.7 billion); South Africa ($2.7 billion); Spain ($2.3 billion);
Greece ($2 billion)
Major Imports From
Germany ($5.6 billion); China ($5 billion); UAE ($4 billion); S. Korea
(2006)
($2.9 billion); France ($2.6 billion); Italy ($2.5 billion); Russia ($1.7
billion); India ($1.6 billion); Brazil ($1.3 billion); Japan ($1.3 billion).
Export Credit
Germany $715 million, down from $2 billion in 2005; France — $3.8
Guarantees (2006)
billion, down from $5.7 billion in 2005.
Major Non-Oil
Renault (France) and Mercedes (Germany)- automobile production in
Investments
Karaj, Iran — valued at $370 million; Renault (France), Peugeot (France)
and Volkswagen (Germany) — auto parts production; Turkey — Tehran
airport, hotels; China — shipbuilding on Qeshm Island, aluminum factory
in Shirvan, cement plant in Hamadan; UAE financing Esfahan Steel
Company; India — steel plant, petrochemical plant; S. Korea — steel
plant in Kerman Province; S. Korea and Germany — $1.7 billion to
expand Esfahan refinery.
Trade With U.S.
$320 million (trade is severely restricted by U.S. sanctions). Exports to
(2007)
U.S. — $173 million (large categories: pomegranate juice, caviar,
pistachio nuts, carpets, medicines, artwork). Imports from U.S. — $146
million (food, medicines, tobacco products, seeds).
“Oil Stabilization
$12.1 billion (August 2008, IMF estimate).
Fund” Reserves
External Debt
$19 billion (2005 est.)
Development
2003 (latest available): $136 million grant aid. Biggest donors: Germany
Assistance Received
($38 million); Japan ($17 million); France ($9 million).
Inflation
27+ (September 2008), according to Iranian economists.
Unemployment Rate
11%+
Source: CIA World Factbook, various press, IMF, Iran Trade Planning Division (2006), press.

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CRS-10
Human Rights and Dissent
The regime appears to have a relatively firm grip on power, in part because it
vigorously suppresses dissent. However, Iranian opinion is hard to gauge and even
seemingly low level unrest has the potential to spiral into a potential threat to the
regime if, for example, the regime is perceived as committing fraud in an election or
if it mismanages a financial crisis. The Bush Administration has highlighted Iran’s
human rights abuses in order to build international consensus to pressure Iran. The
State Department’s human rights report for 2007, released March 11, 2008, said
Iran’s already poor human rights record “worsened” during the year — a formulation
similar to that used in the report for 2006. The latest human rights report and the
2008 State Department “religious freedom” report (released September 19, 2008) cite
Iran for widespread serious abuses, including unjust executions, politically motivated
abductions by security forces, torture, arbitrary arrest and detention, and arrests of
women’s rights activists.
Table 4. Human Rights Practices5
Group/
Regime Practice/Recent Developments
Issue
Ethnic and
Persians are about 51% of the population, and Azeris (a Turkic people) are about
Religious
24%. Kurds are about 7% of the population, and about 3% are Arab. Of religions,
Breakdown
Shiite Muslims are about 90% of the Muslim population and Sunnis are about 10%.
About 2% of the population is non-Muslim, including Christians, Zoroastrians (an
ancient religion in what is now Iran), Jewish, and Baha’i.
Private
Since 2000, judicial hardliners have closed hundreds of reformist newspapers,
Media
although many have tended to reopen under new names. During March 26 - March
2007, authorities banned more than 20 publications. Iran also has blocked hundreds
of pro-reform websites. During 2007, regime increased controls over use of the
internet because citizens have increasingly turned to that medium as a source for
news and political debate. In August 2007, the government closed a major reformist
daily newspaper, Shargh, which had previously been suspended repeatedly. In
February 2008, the regime closed the main women’s magazine, Zanan (women in
Farsi) for allegedly highlighting gender inequality in Islamic law. In November
2008, the regime arrested famed Iranian blogger Hossein Derakshan.
Labor
Unions are technically not independent, but under a state-controlled “Workers’
Unions/
House” umbrella. However, some activists show independence and, in 2007, the
Students/
regime arrested labor activists for teachers’ associations, bus drivers’unions, and a
Other
bakery workers’ union. The regime reportedly also dissolved student unions and
Activists
replaced them with regime loyalists following student criticism of Ahmadinejad.
H.Con.Res. 203 condemns Iran’s July 2007 arrests of several union officers. In
September 2008, Iran arrested several HIV/AIDs researchers for alleged anti-
government activities.
5 Sources: State Department reports on human rights and on religious freedom.
[http://www.state.gov/g/drl/rls/hrrpt/2006/78852.htm]; [http://www.state.gov/g/drl/rls
/irf/2005/51599.htm].

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CRS-11
Group/
Regime Practice/Recent Developments
Issue
Women
Regime strictly enforcing requirement that women fully cover themselves in public,
generally with a garment called a chador, including through detentions. In March
2007, the regime arrested 31 women activists who were protesting the arrest in 2006
of several other women’s rights activists; all but 3 of the 31 were released by March
9. In May 2006, the Majles passed a bill calling for increased public awareness of
Islamic dress, an apparent attempt to persuade women not to wear Western fashion.
The bill did not contain a requirement that members of Iran’s minority groups wear
badges or distinctive clothing. In April 2006, Ahmadinejad directed that women be
allowed to attend soccer matches, but the Supreme Leader reversed that move.
Women can vote and run in parliamentary elections, but their candidacies for
president have routinely been barred by the Council of Guardians. Iranian women
can drive, and many work outside the home, including owning and running their
own businesses. There are 9 women in the 290-seat Majles (13 in the last Majles).
Religious
Each year since 1999, the State Department religious freedom report has named Iran
Freedom
as a “Country of Particular Concern” under the International Religious Freedom
Act. No sanctions added, on the grounds that Iran is already subject to extensive
U.S. sanctions. Continued deterioration in religious freedom noted in the
International Religious Freedom report for 2008 (September 19, 2008).
Baha’is
Iran repeatedly cited for repression of the Baha’i community, which Iran’s Shiite
Muslim clergy views as a heretical sect. In the 1990s, several Baha’is were executed
for apostasy (Bahman Samandari in 1992; Musa Talibi in 1996; and Ruhollah
Ruhani in 1998). Another, Dhabihullah Mahrami, was in custody since 1995 and
died of unknown causes in prison in December 2005. In February 2000, Iran’s
Supreme Court set aside the death sentences against three other Baha’is. A wave of
Baha’i arrests occurred in May 2006 and two-thirds of university students of the
Baha’i faith were expelled from university in 2007. Several congressional
resolutions have condemned Iran’s treatment of the Baha’is, including in 1982,
1984, 1988, 1990, 1992, 1994, 1996, 2000, and 2006. In the 110th Congress, H.Res.
1008 condemns Iran’s treatment of the Baha’is (passed House August 1, 2008).
Jews
Along with Christians, a “recognized minority,” with one seat in the Majles, the
30,000-member Jewish community (the largest in the Middle East aside from Israel)
enjoys somewhat more freedoms than Jewish communities in several other Muslim
states. However, in practice the freedom of Iranian Jews to practice their religion is
limited, and Iranian Jews remain reluctant to speak out for fear of reprisals. During
1993-1998, Iran executed five Jews allegedly spying for Israel. In June 1999, Iran
arrested 13 Jews (mostly 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),
receiving sentences ranging from 4 to 13 years. An appeals panel reduced the
sentences, and all were released by April 2003. On November 17, 2008, Iran
hanged businessman Ali Ashtari (a Muslim), who was arrested in 2006, for allegedly
providing information on Iran’s nuclear program to Israel.
Sunnis
The State Department reports note other discrimination against Sufis and Sunni
Muslims, although abuses against Sunnis could reflect that minority ethnicities,
including Kurds, are mostly Sunnis. Regime repressed 2006 unrest among the
minority Azeri population, as well as Arabs in southern province of Khuzestan.
Human
The June 4, 2008 (latest annual), State Department “Trafficking in Persons” report
Trafficking
continues to place Iran in Tier 3 (worst level) for failing to take action to prevent
trafficking in persons. Girls purportedly are trafficked for sexual exploitation within
Iran and from Iran to Turkey, Pakistan, and the Gulf states.
Juvenile
Iran has executed six persons under the age of 18 in 2008. No other country has
Executions
executed juvenile offenders in 2008. As a party to the International Covenant on
Civil and Political Reights and the Convention on the Rights of the Child, Iran is
obligated to abolish such executions.

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CRS-12
Dissidents. The regime is highly concerned about dissidents who previously
held senior regime positions. These dissidents are popular inside Iran, but their
ascendancy, were it to occur, might not fundamentally alter Tehran’s foreign or
defense policies. One figure, Ayatollah Hossein Ali Montazeri, was released in
January 2003 from several years of house arrest, but he remains under close watch.
Montazeri was Khomeini’s designated successor until 1989, when Khomeini
dismissed him for allegedly protecting intellectuals and opponents of clerical rule.
Other dissidents have sought to challenge or expose the regime’s practices from
inside Iran. Journalist Akbar Ganji conducted hunger strikes to protest regime
oppression; he was released on schedule on March 18, 2006 after sentencing in 2001
to six years in prison for alleging high-level involvement in 1999 murders of Iranian
dissident intellectuals that the regime had blamed on “rogue agents” in the security
apparatus. The Bush Administration issued a statement calling for his release on July
12, 2005. Canadian journalist (of Iranian origin) Zahra Kazemi was detained in 2003
(for filming outside Tehran’s Evin prison) and allegedly beaten to death in custody.
An intelligence agent who allegedly conducted the beating was acquitted July 25,
2004.
Exiled Opposition Groups: People’s Mojahedin Organization of Iran
(PMOI)/Camp Ashraf. Of the groups seeking to replace rather than moderate the
regime, one of the best known is the People’s Mojahedin Organization of Iran
(PMOI).6 Secular and left-leaning, it was formed in the 1960s to try to overthrow the
Shah of Iran and advocated Marxism blended with Islamic tenets. It allied with pro-
Khomeini forces during the Islamic revolution and supported the November 1979
takeover of the U.S. Embassy in Tehran but was later driven into exile. Even though
it is an opponent of Tehran, since the late 1980s the State Department has refused
contact with the PMOI and its umbrella organization, the National Council of
Resistance (NCR). The State Department designated the PMOI as a foreign terrorist
organization (FTO) in October 19977 and the NCR was named as an alias of the
PMOI in the October 1999 re-designation. The FTO designation was prompted by
PMOI attacks in Iran that sometimes kill or injure civilians — although the group
does not appear to purposely target civilians. In August 14, 2003, the State
Department designated the NCR offices in the United States an alias of the PMOI,
and NCR and Justice Department authorities closed down those offices.
The State Department report on international terrorism for 2007 asserts that the
organization — and not just a radical element of the organization as the group asserts
— was responsible for the alleged killing of seven American defense advisers to the
former Shah in 1975-1976. The report again notes the group’s promotion of women
in its ranks and again emphasizes the group’s “cult-like” character, including
indoctrination of its members and separation of family members, including children,
6 Other names by which this group is known is the Mojahedin-e-Khalq Organization (MEK
or MKO) and the National Council of Resistance (NCR).
7 The designation was made under the authority of the Anti-Terrorism and Effective Death
Penalty Act of 1996 (P.L. 104-132).

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CRS-13
from its activists. The group’s alliance with Saddam Hussein’s regime in the 1980s
and 1990s has contributed to the U.S. shunning of the organization.
The designation is up for formal review in October 2008, and, in July 2008, the
PMOI formally petitioned to the State Department that its designation be revoked,
on the grounds that it renounced any use of terrorism in 2001. The group is trying
to build on recent legal successes in Europe. In December 2006, a European Union
(EU) court struck down EU’s freezing of the PMOI’s assets in Europe. In May
2008, a British appeals court determined that the group should no longer be
considered a terrorist organization on the grounds that the British government did not
provide “any reliable evidence that supported a conclusion that PMOI retained an
intention to resort to terrorist activities in the future.” In June 2003, France arrested
about 170 PMOI members, including its co-leader Maryam Rajavi (wife of PMOI
founder Masoud Rajavi, whose whereabouts are unknown). She was released and
remains based in France, and is occasionally received by European parliamentarians
and other politicians. Press reports say that some Administration officials want the
group removed from the FTO list and want a U.S. alliance with it against the Tehran
regime.8 In November 2002, a letter signed by about 150 House Members was
released, asking the President to remove the PMOI from the FTO list.9
Those advocating that policy take heart from the U.S. decision in July 2004 to
grant the Ashraf detainees “protected persons” status under the 4th Geneva
Convention, meaning they will not be extradited to Tehran or forcibly expelled as
long as U.S. forces have a mandate to help secure Iraq. U.S. forces attacked PMOI
military installations in Iraq during Operation Iraqi Freedom and negotiated a
ceasefire with PMOI military elements in Iraq, requiring the approximately 3,350
PMOI fighters to remain confined to their Ashraf camp near the border with Iran. Its
weaponry is in storage, guarded by U.S. and U.S.-allied personnel. Another 350
PMOI fighters have taken advantage of an arrangement between Iran and the ICRC
for them to return home if they disavow further PMOI activities. Another 200 are in
the process of leaving Ashraf if a host country could be found. However, the U.S.-
led mandate expires in December 2008 and might be replaced by a bilateral U.S.-Iraq
agreement. This might give the pro-Iranian Prime Minister Nuri al-Maliki the ability
to implement his threats to expel the group or even to turn its members over to
Tehran. Iraq’s Defense Minister has said that Iraqi security forces are planning to
take over Ashraf from the U.S.-led coalition, raising fears among supporters of the
PMOI that the Iraqi government is preparing to move against it.
Other Armed Groups. Some armed groups are operating in Iran’s border
areas, and are generally composed of ethnic or religious minorities. One such group
is Jundullah, composed of Sunni Muslims from the Baluchistan region bordering
Pakistan. An armed Kurdish group operating out of Iraq is the Free Life Party, known
by its acronym PJAK. Another militant group, the “Ahwazi Arabs,” operates in the
largely Arab inhabited areas of southwest Iran, bordering Iraq.
8 Cloud, David. “U.S., Iran Hit Bumpy Terrain on Road to Rapprochement.” Wall Street
Journal, May 12, 2003.
9 “Removal of Iran Group From Terror List Sought.” Washington Post, November 23, 2002.

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CRS-14
The Son of the Former Shah. Some Iranian exiles, as well as some elites
still in Iran, want to replace the regime with a constitutional monarchy led by Reza
Pahlavi, the U.S.-based son of the late former Shah and a U.S.-trained combat pilot.
However, he does not appear to have large-scale support inside Iran. In January 2001,
the Shah’s son, who is about 50 years old, ended a long period of inactivity by giving
a speech in Washington, DC, calling for unity in the opposition and the institution
of a constitutional monarchy and democracy in Iran. He has since broadcast messages
into Iran from Iranian exile-run stations in California.10 His political adviser is MIT-
educated Shariar Ahy. No U.S. assistance has been provided to exile-run stations.
The conference report on the FY2006 regular foreign aid appropriations, P.L. 109-
102, stated the sense of Congress that the Administration consider such support.
Other Activists. Numerous Iranians-Americans in the United States want
to see a change of regime in Tehran. Many of them are based in California, where
there is a large Iranian-American community, and there are about 25 small-scale
radio or television stations that broadcast into Iran. Some well-known U.S.-based
activists include The Abdorrahman Boroumand Foundation; and the Iran Human
Rights Documentation Center (IHDC). The center is run by persons mostly of Iranian
origin and affiliated with Yale University’s Griffin Center for Health and Human
Rights. It is documenting abuses in Iran, using contacts with Iranians in Iran. Another
exile is Amir Abbas Fakravar, a leader of the student dissidents who emerged in the
July 1999 anti-regime student riots.
Some organizations, such as The National Iranian American Council (NIAC),
are not necessarily seeking influence inside Iran. The mission of NIAC, composed
largely of Iranian-Americans, is to promote discussion of U.S. policy and the group
has advocated engagement with Iran.
Iran’s Strategic Capabilities and
Weapons of Mass Destruction Programs
The Bush Administration’s “National Security Strategy” document released
March 16, 2006 said the United States “may face no greater challenge from a single
country than from Iran.” The perception is based largely on Iran’s growing weapons
of mass destruction (WMD) programs and its ability to exert influence in the region
counter to U.S. objectives.11 Iran’s national security goals are to protect itself from
foreign, primarily U.S., interference or attack, and to be able to protect and defend
the Shiite Islamic world that Iran sees as oppressed by the more numerous and
dominant Sunnis. Iran’s advanced and other conventional weaponry is deemed to
pose a less significant threat than its WMD, but Iran’s forces could still, in some
cases, threaten U.S. forces and allies in the Gulf region.
10 Kampeas, Ron. “Iran’s Crown Prince Plots Nonviolent Insurrection from Suburban
Washington.” Associated Press, August 26, 2002.
11 See [http://www.whitehouse.gov/nsc/nss/2006/].

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CRS-15
Conventional Military/Revolutionary Guard/Qods Force
Iran’s armed forces are extensive; they are widely considered relatively combat
ineffective against a well-trained, sophisticated military such as that of the United
States or a regional power such as Turkey, but believed sufficiently effective to deter
or fend off conventional threats from Iran’s weaker neighbors such as post-war Iraq,
Turkmenistan, Azerbaijan, and Afghanistan. Iran’s forces lack the logistical ability
to project power much beyond Iran’s borders. Iran’s armed forces have few formal
relationships with foreign militaries, but Iran and India have a “strategic dialogue”
and some Iranian naval officers reportedly are being trained in India. Iran and
Turkey have agreed in principle (April 2008) to jointly fight terrorism along their
border. Most other military relationships Iran has, such as with Russia, Ukraine,
Belarus, North Korea, and a few others, generally center on Iranian arms purchases
or upgrades.
The Islamic Revolutionary Guard Corps (IRGC),12 which also controls the Basij
(mobilization) volunteer militia that enforces adherence to Islamic customs, is
generally loyal to the hardliners politically and is clearly more politically influential
than is Iran’s regular military, which is larger but was held over from the Shah’s era.
The two forces, the Guard and the regular military, technically report to a Joint
Headquarters. As further evidence of the Guard’s pre-eminence, Chairman of the
Joint Chiefs of Staff Admiral Mike Mullen said on November 29, 2007 that the
IRGC Navy was given responsibility to patrol the entire Persian Gulf, and that the
regular Navy is patrolling the Strait of Hormuz and Gulf of Oman.
IRGC leadership developments are significant because of the political influence
of the IRGC. On September 2, 2007, Khamene’i replaced Rahim Safavi with
Mohammad Ali Jafari as Commander In Chief of the Guard; Jafari is considered a
hardliner against political dissent and is reputedly close to the Supreme Leader and
less so to Ahmadinejad. In December 2007, Jafari briefly took direct control of the
Basij, which operates from thousands of positions in Iran’s institutions, and indicated
he would increase its role in monitoring and suppressing dissent. Later, the Basij
command was given to senior Guard leader Mohammad Baqr Zolqadr, who had been
serving as deputy Interior Minister, although command reshuffles in July 2008
(integrating the Basij more closely with provincially-based IRGC units) furthered the
view that the Basij is playing a more active role in uncovering suspected plotting by
Iran’s minorities and others. More information on Iran’s military and how it might
perform against the United States is discussed under “military options” below.
The Guard has a unit, the Qods (Jerusalem) Force, that operates outside Iran to
assist pro-Iranian movements with weapons, training, and finances. For the role of
the Guard/Qods Force in external activities, see below under “Foreign Policy and
Terrorism.” The IRGC is also increasingly involved in Iran’s economy, acting
through a network of contracting businesses it has set up, most notably Ghorb (also
called Khatem ol-Anbiya, Persian for “Seal of the Prophet”). Active duty IRGC
senior commanders reportedly serve on Ghorb’s board of directors.
12 For a more extensive discussion of the IRGC, see Katzman, Kenneth. “The Warriors of
Islam: Iran’s Revolutionary Guard,” Westview Press, 1993.

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CRS-16
In the 110th Congress, a provision of H.R. 1400 (passed by the House on
September 25), S. 970, and the FY2008 defense authorization bill (P.L. 110-181,
Senate amendment adopted September 6, 2007 by vote of 76-22) calls for the
Revolutionary Guard to be designated a foreign terrorist organization, or FTO. On
October 21, 2007, the Administration took a somewhat lesser step by naming the
IRGC, the Ministry of Defense, several of Guard commanders, the Guard’s
construction firms, and several Iranian banks, as proliferation entities under
Executive Order 13382. The Qods Force was named as a “specially designated
global terrorist entity” under Executive Order 13224. Both orders freeze the U.S.-
based assets and prevent U.S. transactions with the named entities, but these entities
are believed to have virtually no U.S.-based assets that could be frozen. The U.S.
action might have substantial effect on the IRGC and its business entities if U.S.
partner countries and others adopt similar sanctions. (A list of designated entities is
in a table at the end of this paper.)
Table 5. Iran’s Conventional Military Arsenal
Defense
Surface-
Military
Combat
Budget
Tanks
Air
Ships
Personnel
Aircraft
(billions
Missiles
U.S. $)
545,000
1,693
150
280
200
6.6
(regular
(incl. 480
I-Hawk
(incl. 25 MiG-
(incl. 10
military and
T-72)
plus some
29 and 30 Su-
Chinese-made
Revolutionary
Stinger
24)
Hudong, 40
Guard Corps
Boghammer, 3
(IRGC). IRGC
frigates) Also
is about one-
has 3 Kilo
third of total
subs
force.
“Qods Forces” of IRGC. Approximately 10,000 - 15,000 total in the Qods Force,
which promotes Iran’s regional and global objectives through advisory support to pro-
Iranian factions in Lebanon, Iraq, Persian Gulf states, Afghanistan, and Central Asia.
Also operates worldwide intelligence network to give Iran possible terrorist option and
to assist in procurement of WMD-related technology.
Ship-launched cruise missiles. Iran is able to arm its patrol boats with Chinese-made
C-802 cruise missiles. Iran also has Chinese-supplied HY-2 Seerseekers emplaced
along Iran’s coast.
Midget Subs. Iran is said to possess several, possibly purchased assembled or in kit
form from North Korea. Iran claimed on Nov. 29, 2007 to have produced a new small
sub equipped with sonar-evading technology.
Anti-aircraft missile systems. Russia has sold and now delivered to Iran (January
2007) 30 anti-aircraft missile systems (Tor M1), worth over $1 billion. In September
2006, Ukraine agreed to sell Iran the Kolchuga radar system that can improve Iran’s
detection of combat aircraft. In December 2007, Russia agreed to sell the even more
capable S-300 air defense system, purportedly modeled after the U.S. Patriot system,
which U.S. officials say would greatly enhance Iran’s air defense capability. It is
reportedly due for delivery by March 2009 and to be operational by June 2009. In
August 2008, Iran denied buying the system at all.

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CRS-17
Nuclear Program and International Sanctions
Since 2005, Iran and the international community have verged on a crisis over
Iran’s nuclear program as Iran has flouted international demands that it curb its
nuclear program. The Bush Administration believes Iran intends to develop a
nuclear weapon from that program, and Administration policy has been to prevent
that outcome. On November 7, 2008, President-elect Obama said that his
Administration, too, will seek to prevent a nuclear-armed Iran. The Obama
Administration will be taking office just after the International Atomic Energy
Agency (IAEA) reported on November 19, 2008 that Iran has enriched about 1,400
pounds of uranium, considered enough for a nuclear weapon, although only if
enriched to 90%. Iran’s enrichment thus far has been 5%, which is a level that
would permit only civilian uses.
International scrutiny of Iran’s nuclear program intensified in 2002, when Iran
confirmed PMOI allegations that it was building two facilities that could potentially
be used to produce fissile material useful for a nuclear weapon: a uranium enrichment
facility at Natanz and a heavy water production plant at Arak,13 considered ideal for
the production of plutonium. It was revealed in 2003 that the founder of Pakistan’s
nuclear weapons program, A.Q. Khan, sold Iran nuclear technology and designs.14
The International Atomic Energy Agency (IAEA), despite intensified inspections of
Iran’s facilities since late 2002, has said it cannot verify that Iran’s current program
is purely peaceful, and several of its reports (January 31, 2006, February 27, 2006,
May 26, 2008, and September 15, 2008) say it found documents that show a possible
involvement of Iran’s military in procuring technology for Iran’s program. One
such effort is called the “Green Salt” project, involving testing of relevant high
explosives and of missile re-entry vehicles. Iran says many of these documents that
the IAEA says it has are likely forged, but a September 15, 2008, IAEA report added
that Iran had still not completely addressed these IAEA concerns. A September 16,
2008, IAEA Board meeting also reportedly included an IAEA presentation showing
that Iran had tried to refit its main long-range missile to carry a nuclear payload. A
National Intelligence Estimate (unclassified key judgments), released December 3,
2007,15 cast doubt on the most alarming interpretations of Iran’s program (as well as
on that of a previous NIE issued in May 2005), saying that Iran had — but in late
2003 halted — a covert nuclear weapons program as a result of increased
international scrutiny.
Iranian leaders continue to assert that Iran’s nuclear program is for electricity
generation and that enrichment is its “right” as a party to the NPT. Iran says its oil
resources are finite and that enriching uranium to make nuclear fuel is allowed under
13 In November 2006, the IAEA, at U.S. urging, declined to provide technical assistance to
the Arak facility on the grounds that it was likely for proliferation purposes.
14 Lancaster, John and Kamran Khan. “Pakistanis Say Nuclear Scientists Aided Iran.”
Washington Post, January 24, 2004.
15 Text at [http://www.dni.gov/press_releases/20071203_release.pdf]

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CRS-18
the 1968 Nuclear Non-Proliferation Treaty,16 to which Iran is a party. An analysis
was published by the National Academy of Sciences challenging the U.S. view that
Iran is petroleum rich and therefore has no need for a nuclear power program.
According to the analysis, the relative lack of investment is causing a decline in
Iranian oil exports to the point where Iran might have negligible exports of oil by
2015.17 U.S. officials say that Iran’s gas resources make nuclear energy unnecessary.
Despite Iran’s professions that WMD is inconsistent with its ideology, the NIE
says it is likely that Iran will eventually try to develop a nuclear weapon. Iran’s
factions appear to agree on the utility of a nuclear weapons capability as a means of
ending its perceived historic vulnerability to invasion and domination by great
powers, and as a symbol of Iran as a major nation. Others believe a nuclear weapon
represents the instrument with which Iran intends to intimidate its neighbors and
dominate the Persian Gulf region. There are also fears Iran might transfer WMD to
extremist groups or countries.
There is still major disagreement over the urgency of the issue. The
Administration’s key concern is that Iran is expanding its ability to produce enriched
uranium. The NIE assessed that Iran will likely be technically capable of producing
enough highly enriched uranium for a nuclear weapon some time during 2010-2015.
According to the IAEA report of November 19, 2008, Iran continues to run the 3,000
centrifuge “IR-1” (type of centrifuge) enrichment line, as well as about 300 more
centrifuges of a different design. Iran is testing a new generation of centrifuge design
(“IR-2”).
The Administration is somewhat less concerned with Russia’s work, under a
January 1995 contract, on an $800 million nuclear power plant at Bushehr. Russia
insisted that Iran sign an agreement under which Russia would provide reprocess the
plant’s spent nuclear material; that agreement was signed on February 28, 2005. The
plant was expected to become operational in 2007, but Russia had insisted (including
during President Putin’s visit to Iran in October 2007) that Iran first comply with the
U.N. resolutions discussed below. In December 2007, perhaps to signal disagreement
with further pressure on Iran, Russia began fueling the reactor, and Iran says it
expects the plant to become operational in 2009. As part of Russia’s work with Iran,
Russia has trained 1,500 Iranian nuclear engineers.
Diplomatic Efforts in 2003 and 2004/Paris Agreement. In 2003,
France, Britain, and Germany (the “EU-3”) opened a separate diplomatic track to
curb Iran’s program. On October 21, 2003, Iran pledged, in return for peaceful
nuclear technology, to (1) fully disclose its past nuclear activities, (2) to sign and
ratify the “Additional Protocol” to the NPT (allowing for enhanced inspections), and
(3) to suspend uranium enrichment activities. Iran signed the Additional Protocol on
16 For Iran’s arguments about its program, see Iranian paid advertisement “An Unnecessary
Crisis — Setting the Record Straight About Iran’s Nuclear Program,” in the New York
Times, November 18, 2005. P. A11.
17 Stern, Roger. “The Iranian Petroleum Crisis and United States National Security,”
Proceedings of the National Academy of Sciences of the United States of America.
December 26, 2006.

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CRS-19
December 18, 2003, although the Majles has not ratified it. Iran abrogated the
agreement after the IAEA reports of November 10, 2003, and February 24, 2004,
stated that Iran had violated its NPT reporting obligations over an 18-year period.
(The NIE released on December 3, 2007 appears to indicate that it was in conjunction
with this October 2003 agreement with the EU-3 that Iran might have halted its
covert nuclear weapons work.)
In the face of the U.S. threat to push for Security Council action, the EU-3 and
Iran reached a more specific November 14, 2004, “Paris Agreement,” committing
Iran to suspend uranium enrichment (which it did as of November 22, 2004) in
exchange for renewed trade talks and other aid.18 EU-3 — Iran negotiations on a
permanent nuclear pact began on December 13, 2004, and related talks on a trade and
cooperation accord (TCA) began in January 2005. On March 11, 2005, the Bush
Administration announced it would support the talks, but not join them, by dropping
U.S. objections to Iran’s application to the World Trade Organization (which it did
in May 2005) and to consider sales of U.S. civilian aircraft parts to Iran.
Reference to the Security Council. The Paris Agreement broke down just
after Ahmadinejad’s election; Iran rejected as insufficient an EU-3 offer to assist Iran
with peaceful uses of nuclear energy and provide limited security guarantees in
exchange for Iran’s (1) permanently ending uranium enrichment; (2) dismantling the
Arak heavy water reactor;19 (3) no-notice nuclear inspections; and (4) a pledge not
to leave the NPT (it has a legal exit clause). On August 8, 2005, Iran broke the IAEA
seals and began uranium “conversion” (one step before enrichment) at its Esfahan
facility. On September 24, 2005, the IAEA Board voted to declare Iran in non-
compliance with the NPT and to refer the issue to the Security Council,20 but no time
frame was set for the referral. The Administration supported a November 2005
Russian proposal to Iran to establish a facility in Russia at which Iranian uranium
would be enriched, thereby enabling Iran to claim it had retained its right to enrich.
Iran did not accept the proposal. In January 2006, Iran resumed enrichment
activities, and on February 4, 2006, the IAEA board voted 27-321 to report Iran to the
U.N. Security Council. On March 29, 2006, the Council agreed on a presidency
“statement” setting a 30-day time limit (April 28, 2006) for ceasing enrichment.22
18 For text of the agreement, see [http://www.iaea.org/NewsCenter/Focus/IaeaIran/eu_iran
14112004.shtml].
19 In November 2006, the IAEA, at U.S. urging, declined to provide technical assistance to
the Arak facility on the grounds that it was likely for proliferation purposes.
20 Voting in favor: United States, Australia, Britain, France, Germany, Canada, Argentina,
Belgium, Ghana, Ecuador, Hungary, Italy, Netherlands, Poland, Portugal, Sweden, Slovakia,
Japan, Peru, Singapore, South Korea, India. Against: Venezuela. Abstaining: Pakistan,
Algeria, Yemen, Brazil, China, Mexico, Nigeria, Russia, South Africa, Sri Lanka, Tunisia,
and Vietnam.
21 Voting no: Cuba, Syria, Venezuela. Abstaining: Algeria, Belarus, Indonesia, Libya, South
Africa.
22 See [http://daccessdds.un.org/doc/UNDOC/GEN/N06/290/88/PDF/N0629088.pdf?Open
Element].

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CRS-20
Establishment of “P5+1” Contact Group/June 2006 Incentive
Package. Taking a multilateral approach, the Administration offered on May 31,
2006, to join the nuclear talks with Iran if Iran first suspends its uranium enrichment.
Such talks would center on a package of incentives and possible sanctions —
formally agreed to on June 1, 2006 — by a newly formed group of negotiating
nations, the so-called “Permanent Five Plus 1” (P5+1: United States, Russia, China,
France, Britain, and Germany). EU representative Javier Solana formally presented
the P5+1 offer to Iran on June 6, 2006. (The package is formally outlined in Annex
I to U.N. Resolution 1747.)
Incentives:
! Negotiations on an EU-Iran trade agreements and acceptance of Iran
into the World Trade Organization.
! Easing of U.S. sanctions to permit sales to Iran of commercial
aircraft or aircraft parts.
! Sale to Iran of a light-water nuclear reactor and guarantees of nuclear
fuel (including a five year buffer stock of fuel), and possible sales of
light-water research reactors for medicine and agriculture
applications.
! An “energy partnership” between Iran and the EU, including help for
Iran to modernize its oil and gas sector and to build export pipelines.
! Support for a regional security forum for the Persian Gulf, and
support for the objective of a WMD free zone for the Middle East.
! The possibility of eventually allowing Iran to resume uranium
enrichment if it complies with all outstanding IAEA requirements
and can prove that its nuclear program is purely peaceful.
Reported Sanctions:23
! Denial of visas for Iranians involved in Iran’s nuclear program and
for high-ranking Iranian officials.
! A freeze of assets of Iranian officials and institutions; a freeze of
Iran’s assets abroad; and a ban on some financial transactions.
! A ban on sales of advanced technology and of arms to Iran; and a
ban on sales to Iran of gasoline and other refined oil products.
! An end to support for Iran’s application to the WTO.
23 One source purports to have obtained the contents of the package from ABC News:
[http://www.basicint.org/pubs/Notes/BN060609.htm]

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CRS-21
Resolution 1696. Iran did not immediately give a formal response to the
incentive offer. On July 31, 2006, the Security Council voted 14-1 (Qatar voting no)
for U.N. Security Council Resolution 1696, giving Iran until August 31, 2006, to
fulfill the longstanding IAEA nuclear demands (enrichment suspension, etc).
Purportedly in deference to Russia and China, it was passed under Article 40 of the
U.N. Charter, which makes compliance mandatory, but not under Article 41, which
refers to economic sanctions, or Article 42, which would authorize military action.
It called on U.N. member states not to sell Iran WMD-useful technology. On August
22, 2006, Iran submitted a formal response to the June 6 offer proposal. Iran’s
response (not fully disclosed) reportedly did not offer to suspend uranium
enrichment, instead proposing broader engagement with the West and guarantees
that the United States would not seek regime change.
Resolution 1737. With the backing of the P5+1, chief EU negotiator Javier
Solana negotiated with Iran to try arrange a temporary enrichment suspension, but
talks ended on September 28, 2006, without agreement. After almost four months
of negotiations, the Security Council agreed to U.N. Security Council Resolution
1737. It was passed unanimously on December 23, 2006, under Chapter 7, Article
41 of the U.N. Charter. It prohibits sale to Iran — or financing of such sale — of
technology that could contribute to Iran’s uranium enrichment or heavy-water
reprocessing activities. It also required U.N. member states to freeze the financial
assets of 10 named Iranian nuclear and missile firms and 12 persons related to those
programs (see Table 8). It did not mandate the banning of travel by these
personalities, but called on member states not to admit them. It also provided an
exemption, sought by Russia, for the Bushehr reactor.
Resolution 1747 and Results. Resolution 1737 demanded enrichment
suspension by February 21, 2007. An IAEA report sent to Board member countries
that day said Iran continued its enrichment activities. On March 24, 2007, after only
three weeks of P5+1 negotiations, Resolution 1747 was adopted unanimously, which:
! added 10 military/WMD-related entities; 3 Revolutionary Guard
entities; 8 persons, and 7 Revolutionary Guard commanders listed
in Table 8. Bank Sepah is among the entities sanctioned.
! banned arms transfers by Iran, a provision targeted at Iran’s alleged
arms supplies to Lebanese Hezbollah and to Shiite militias in Iraq.
! required all countries to report to the United Nations when the
sanctioned Iranian persons travel to their territories.
! called for (but did not require) countries to avoid selling arms or
dual use items to Iran and to avoid any new lending or grants to Iran.
Resolution 1747 demanded Iran suspend enrichment by May 24, 2007. The
IAEA report of May 23, 2007 stated that Iran did not comply. However, suggesting
that Iran wanted to avoid further isolation, in August 2007, Iran agreed to sign with
the IAEA an agreement to clear up outstanding questions on Iran’s past nuclear
activities by the end of 2007. On that basis, the P5+1 grouping — along with the EU
itself — agreed to a joint statement on September 28, 2007 in which all the

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CRS-22
undersigned, including Russia and China, said they would negotiate another
sanctions resolution if there is no progress reported by the IAEA in implementing
the August 2007 agreement or in separate continued negotiations with EU
representative Javier Solana. The IAEA report was circulated on November 15,
2007, saying that Iran had provided additional information on its past programs, but
Solana characterized a November 30, 2007, meeting with new Iranian negotiator
Sayid Jallili as “disappointing,” suggesting no progress.
Resolution 1803 and Additional Incentives. After several months of
negotiations, Resolution 1803 was adopted by a vote of 14-0 (Indonesia abstaining)
on March 3, 2008. It: (1) bans sales of dual use items to Iran; (2) authorizes, but does
not require, inspections of cargo (carried by Iran Air Cargo and Islamic Republic of
Iran Shipping Line) suspected of shipping WMD-related goods; (3) imposes a firm
travel ban on five Iranians named in Annex II to the Resolution and requires reports
on international travel by 13 individuals named in Annex I; (4) calls for, but does not
require, a prohibition on financial transactions with Iran’s Bank Melli and Bank
Saderat; and (5) adds 12 entities to those sanctioned under Resolution 1737.
However, the provisions do not directly address civilian trade or investment. The
Administration nonetheless hailed the Resolution as demonstrating that the
international community remained unified in insisting Iran curb its nuclear program.
(On June 23, 2008, the EU, acting under Resolution 1803, froze the assets of Bank
Melli and several IRGC entities and commanders.)

Resolution 1803 also stated that “China, France, Germany, the Russian
Federation, the United Kingdom and the United States are willing to take further
concrete measures on exploring an overall strategy of resolving the Iranian nuclear
issue through negotiation on the basis of their June 2006 proposals.” Appearing to
want to preserve a unified front, the Bush Administration agreed to expand the June
2006 incentive package to induce Iranian cooperation. The P5+1 met on April 16,
2008, in Shanghai, China but it was not until a meeting in London on May 2, 2008,
that the powers agreed on a “refreshed” package of incentives to augment those in the
June 2006 package. According to press reports (the exact offer was not made
public), the powers included, beyond that in the June 2006 proposal, an offer of
political cooperation with Iran, and enhanced incentives on energy cooperation. EU
envoy Solana presented the package (which included a signature by Secretary of State
Rice) on June 14, 2008, but Iran was non-committal.
Perhaps sensing that the United States is succeeding in increasing financial and
diplomatic pressure on Iran, Iranian Foreign Minister Mottaki indicated on July 2,
2008, that Iran might be ready to negotiate on the revived June 2008 incentive
package by first accepting a proposed six week “freeze for freeze” — the P5+1 would
freeze further sanctions efforts and Iran would freeze any further expansion of
uranium enrichment (though not suspend outright). To try to take advantage of what
seemed to be divisions within Iran on whether to negotiate a settlement, the
Administration decided to send Undersecretary of State for Political Affairs William
Burns to join Solana and the other P5+1 representatives at a meeting in Geneva on
July 19, 2008 to receive Iran’s response to the “freeze for freeze” idea. Again, Iran
did not supply a direct answer either then, or by an extended deadline of August 2,
2008, instead focusing on elements of a final nuclear settlement.

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CRS-23
Resolution 1835. As a result of the lack of progress, the P5+1 began
attempting to agree on another sanctions resolution. Ideas reportedly under
consideration included adding more Iranian banks to those with which business
would be banned, or banning insurance for Iran’s tanker fleet. On August 7, 2008,
separately from any U.N. action but intended to increase pressure on Iran, the EU not
only implemented those sanctions specified in Resolution 1803, including the
authority to inspect suspect shipments, but also called on its member states to refrain
from providing new credit guarantees on exports to Iran. However, the August 2008
crisis between Russia and Georgia set back U.S.-Russia relations, and Russia
opposed a new resolution to sanction Iran. In an effort to demonstrate to Iran
continued unity, the Council did adopt (September 27, 2008) Resolution 1835. It
called on Iran to comply with previous resolutions, but it reaffirmed a willingness to
continue to negotiate a solution with Iran and did not impose any new sanctions.
With Iran still not complying, the P5+1 met again on October 21, 2008, and in
Paris on November 13, 2008, but without agreement, the P5+1 met again but did not
reach consensus on imposing new sanctions on Iran. Furthermore, the November
19, 2008 IAEA report said Iran had blocked an IAEA effort to conduct an inspection
at the Arak heavy water plant. The potential for additional sanctions is further
discussed in the section on multilateral and international sanctions later.
Table 6. Summary of Provisions of U.N. Resolutions on Iran
Nuclear Program (1737, 1747, and 1803)
Require Iran to suspend uranium enrichment
Prohibit transfer to Iran of nuclear, missile, and dual use items to Iran, except for use
in light water reactors
Prohibit Iran from exporting arms or WMD-useful technology
Freeze the assets of 40 named Iranian persons and entities, including Bank Sepah, and
several Iranian front companies
Require that countries exercise restraint with respect to travel of 35 named Iranians
and ban the travel of 5 others
Calls on states not to export arms to Iran or support new business with Iran
Calls for vigilance with respect to the foreign activities of all Iranian banks, particularly
Bank Melli and Bank Saderat
Calls on countries to inspect cargoes carried by Iran Air Cargo and Islamic Republic
of Iran Shipping Lines if there are indications they carry cargo banned for carriage to
Iran.
Chemical Weapons, Biological Weapons, and Missiles
Official U.S. reports and testimony continue to state that Iran is seeking a self-
sufficient chemical weapons (CW) infrastructure, and that it “may have already”
stockpiled blister, blood, choking, and nerve agents — and the bombs and shells to

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CRS-24
deliver them. 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. These officials and reports also say that Iran
“probably maintain[s] an offensive [biological weapons] BW program ... and
probably has the capability to produce at least small quantities of BW agents.”
Ballistic Missiles/Warheads. Largely with foreign help, Iran is becoming
self-sufficient in the production of ballistic missiles and, by U.S. accounts, already
has the largest inventory of ballistic missiles in the Middle East. Tehran appears to
view its ballistic missiles as an integral part of its strategy to deter or retaliate against
forces in the region, including U.S. forces. To reinforce that point, during July 9 -
10, 2008, Iran conducted several highly publicized test launches of a variant of the
Shahab missile that Iran says has a 1,250 mile range, putting most key U.S. allies in
the region at risk; other missiles were tested on those days as well. Some analyses
suggested Iran might have falsified photos and other accounts of exactly how many
missiles were tested and their capabilities. Iran claimed a successful test of a “Sijil”
solid-fuel missile, with a range of 1,200 miles, on November 12, 2008.
However, Iran’s technical capabilities are a matter of some debate among
experts. As of August 19, 2008, the Bush Administration has reached agreements
with Poland and the Czech Republic to establish a missile defense system to counter
Iranian ballistic missiles. These agreements were reached over Russia’s opposition,
which was based on the belief that the missile defense system would be used to
neutralize Russian capabilities.

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CRS-25
Table 7. Iran’s Ballistic Missile Arsenal
Shahab-3
800 mile range. Two of first three tests (July 1998, July 2000, and
(“Meteor”)
September 2000) reportedly unsuccessful. After successful test in June
2003, Iran called missile operational (capable of hitting Israel). Despite
claims, some U.S. experts say the missile not completely reliable — some
observers said Iran detonated in mid-flight a purportedly more accurate
version on August 12, 2004. On May 31, 2005, Iran announced it had
tested a solid-fuel version.
Shahab-4
1,200 mile range. In October 2004, Iran announced it had extended range
of the Shahab-3 to 1,200 miles, and it added in early November 2004 that
it is capable of “mass production” of it. Agence France Presse report
(February 6, 2006) said January 2006 test succeeded. Related missiles
claimed produced by Iran - both of about 1,200 mile range, include the
“Ashoura” (claimed in November 2007); the “Ghadr” (displayed at
military parade in September 2007); and the “Sijil,” tested on November
12, 2008 (solid fuel). If claims are accurate, large portions of the Near
East and Southeastern Europe would be in range, including U.S. bases in
Turkey. On March 31, 2006, Iran claimed to have tested a missile,
possibly a Shahab-4, with separately targeted warheads. Tested again in
July 2008, but number of other tests and degree of success uncertain.
BM-25
1,500 mile range. On April 27, 2006, Israel’s military intelligence chief
said that Iran had received a shipment of North Korean-supplied BM-25
missiles. Missile said to be capable of carrying nuclear warheads. The
Washington Times appeared to corroborate this reporting in a July 6, 2006,
story, which asserted that the North Korean-supplied missile is based on
a Soviet-era “SS-N-6” missile.
ICBM
U.S. officials believe Iran might be capable of developing
an
intercontinental ballistic missile (3,000 mile range) by 2015. In February
2008 Iran claimed to have launched a probe into space, suggesting its
missile technology might be improving to the point where an Iranian
ICBM is an increasingly realistic possibility.
Other
On September 6, 2002, Iran said it successfully tested a 200 mile range
Missiles
“Fateh 110” missile (solid propellent), and Iran said in late September
2002 that it had begun production. Iran also possesses a few hundred short-
range ballistic missiles, including the Shahab-1 (Scud-b), the Shahab-2
(Scud-C), and the Tondar-69 (CSS-8).
Space
Iran claimed to have launched a rocket capable of carrying a satellite into
Vehicle
space (August 17, 2008). U.S. officials quoted in press articles said that
the second stage of the rocket failed.
Warheads
Wall Street Journal report of September 14, 2005, said that U.S.
intelligence believes Iran is working to adapt the Shahab-3 to deliver a
nuclear warhead. Subsequent press reports say that U.S. intelligence
captured an Iranian computer in mid-2004 showing plans to construct a
nuclear warhead for the Shahab.24 The IAEA is seeking additional
information from Iran.
24 Broad, William and David Sanger. “Relying On Computer, U.S. Seeks to Prove Iran’s
Nuclear Aims.” New York Times, November 13, 2005.

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CRS-26
Foreign Policy and Support for Terrorist Groups
Iran’s foreign policy is a product of the ideology of Iran’s Islamic revolution,
blended with long-standing national interests, and is intended largely to overturn the
“status quo” in the Middle East that Iran believes favors the United States, Israel, and
Sunni Muslim regimes. The State Department report on international terrorism for
2007, released April 30, 2008, again stated (as it has for more than a decade) that
Iran “remained the most active state sponsor of terrorism” in 2007, and it again
attributed the terrorist activity primarily to the Revolutionary Guard [presumably the
Qods Force]. The report focused particular attention on Iran’s lethal support to
Shiite militias in Iraq as well as on shipments to Taliban fighters in Afghanistan.25
On October 27, 2008, the deputy commander of the Basij became the first top Guard
leader to public acknowledge that Iran supplies weapons to “liberation armies” in the
region, a reference to pro-Iranian movements discussed below.
Relations with the Persian Gulf States.26 The Persian Gulf monarchy
states (Gulf Cooperation Council, GCC: Saudi Arabia, Kuwait, Bahrain, Qatar,
Oman, and the United Arab Emirates) are highly concerned about the growing
strategic influence of Iran but they do not openly support U.S. conflict with Iran that
might cause Iran to retaliate against Gulf state targets. At the same time, since the
mid-1990s, Iran has tried to blunt Gulf state fears of Iran by curtailing activity,
conducted during the 1980s and early 1990s, to sponsor Shiite Muslim extremist
groups in these states, all of which are run by Sunni governments. Iran undertook
this activity through the Qods Force and the MOIS. Iran found, to its detriment, that
subversion caused the Gulf states to ally closely with the United States. In part to
counter Iran’s perceived growing influence in the Gulf, in December 2006 the
summit of the GCC leaders announced that the GCC states might jointly study their
own development of “peaceful nuclear technology.” On the other hand, seeking to
avoid further tensions with Iran, the GCC leaders invited Ahmadinejad to speak at
the December 2-3, 2007, summit of the GCC leaders in Doha, Qatar, marking the
first time an Iranian president has been invited since the GCC was formed in 1981.
His speech reiterated a consistent Iranian theme that the Gulf countries, including
Iran, should set up their own security structure without the help of “outside powers.”
Press reports in August 2008 say that the GCC states are likely, despite divisions, to
host him again at the December 2008 GCC summit in Oman.
! Saudi Arabia. Many observers closely watch the relationship
between Iran and Saudi Arabia because of Saudi alarm over the
emergence of a pro-Iranian government in Iraq and Iran’s
ascendancy in Lebanon. Saudi Arabia sees itself as leader of the
Sunni Muslim world and views Shiite Muslims as heretical and
disloyal internally. Saudi leaders are concerned that Iran’s nuclear
program will further strengthen Iran strategically but the Saudis also
25 U.S. Department of State. Country Reports on Terrorism 2007. Released April 30, 2008.
[http://www.state.gov/s/ct/rls/crt/2007/103711.htm].
26 See CRS Report RL31533, The Persian Gulf States: Issues for U.S. Policy, 2006, by
Kenneth Katzman.

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CRS-27
worry about the potential for Iranian reaction against the Kingdom
should the United States take military action to stop Iran’s program.
The Saudis, who do not want a repeat of Iran’s sponsorship of
disruptive and sometimes violent demonstrations at annual Hajj
pilgrimages in Mecca in the 1980s and 1990s — or an increase in
Iranian support for Saudi Shiite dissidents — are receptive to easing
tensions with Iran, particularly, and they hosted Ahmadinejad in the
Kingdom in March 2007 and again for the Hajj in December 2007.
The Saudis continue to blame a pro-Iranian movement in the
Kingdom, Saudi Hezbollah, for the June 25, 1996, Khobar Towers
housing complex bombing, which killed 19 U.S. airmen.27 After
restoring relations in December 1991 (after a four-year break),
Saudi-Iran ties progressed to high-level contacts during Khatemi’s
presidency, including Khatemi visits in 1999 and 2002.
! United Arab Emirates (UAE) concerns about Iran never fully
recovered from the April 1992 Iranian expulsion of UAE security
forces from 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, as well as part of
Abu Musa from the emirate of Sharjah.) The UAE (particularly the
federation capital, Abu Dhabi, which takes a harder line than Dubai,
which has an Iranian-origin resident community as large as 300,000
and business ties to Iran) wants to refer the dispute to the
International Court of Justice (ICJ), but Iran insists on resolving the
issue bilaterally. The UAE has not pressed the issue vigorously in
recent years, although it formally protested Iran’s setting up of a
maritime and ship registration office on Abu Musa in July 2008.
The UAE insists the islands dispute be kept on the agenda of the
U.N. Security Council (which it has been since December 1971).
The United States supports UAE proposals but takes no formal
position on sovereignty. As an indicator of the degree to which the
issue has faded, in May 2007 the UAE received Ahmadinejad (the
highest level Iranian visit since the 1979 revolution) and allowed
him to lead an anti-U.S. rally of a reported several hundred Iranian-
origin residents of Dubai at a soccer stadium there.
! Qatar is wary that Iran might seek to encroach on its large North
Field (natural gas), which it shares with Iran (called South Pars on
Iran’s side) and through which Qatar earns large revenues for natural
gas exports. Qatar’s fears were heightened on April 26, 2004, when
27 Walsh, Elsa. “Annals of Politics: Louis Freeh’s Last Case.” The New Yorker, May 14,
2001. The June 21, 2001, federal grand jury indictments of 14 suspects (13 Saudis and a
Lebanese citizen) in the Khobar bombing indicate that Iranian agents may have been
involved, but no indictments of any Iranians were announced. In June 2002, Saudi Arabia
reportedly sentenced some of the eleven Saudi suspects held there. The 9/11 Commission
final report asserts that Al Qaeda might have had some as yet undetermined involvement in
the Khobar Towers attacks.

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CRS-28
Iran’s deputy Oil Minister said that Qatar is probably producing
more gas than “her right share” from the field and that Iran “will not
allow” its wealth to be used by others. These concerns might have
prompted Qatar to invite Ahmadinejad to the December 2007 GCC
summit in Qatar and to push for his invitation to the summit in
December 2008.
! Bahrain is about 60% Shiite, many of whom are of Persian origin,
but its government is dominated by the Sunni Muslim Al Khalifa
family. In 1981 and again in 1996, Bahrain publicly accused Iran of
supporting Bahraini Shiite dissidents (the Islamic Front for the
Liberation of Bahrain, Bahrain-Hezbollah, and other Bahraini
dissident groups) in efforts to overthrow the ruling Al Khalifa
family. Bahraini fears that Iran would try to interfere in Bahrain’s
November 25, 2006, parliamentary elections by providing support
to Shiite candidates did not materialize, although the main Shiite
opposition coalition won 18 out of the 40 seats of the elected body.
Tensions flared in July 2007 when an Iranian newspaper claimed
Bahrain is part of Iran — that question was the subject of the 1970
U.N.-run referendum in which Bahrainis opted for independence.
Still, Bahrain has sought not to antagonize Iran and has apparently
allowed Iran’s banks to establish a presence in Bahrain’s vibrant
banking sector. On March 12, 2008, the Treasury Department
sanctioned the Bahrain-based Future Bank under Executive order
13382 that sanctions proliferation entities. Future Bank purportedly
is controlled by Bank Melli.
Iranian Policy in Iraq. The U.S. military ousting of Saddam Hussein
benefitted Iran strategically,28 and U.S.-Iran differences in Iraq have widened to the
point where some describe the competition as a U.S.-Iran “proxy war” inside Iraq.
The Defense Department’s September 2008 “Measuring Stability” report on Iraq said
that “malign” Iranian influence in Iraq poses the most significant long-term threat to
Iraqi stability. This and the State Department terrorism report for 2007, released
April 30, 2008, complement the statements of U.S. officials that the Qods Force is
providing arms (including highly lethal “explosively forced projectiles,” EFPs, that
have killed over 200 U.S. soldiers in Iraq), training, guidance, and financing to
“special groups” of Shiite militias involved in sectarian violence and anti-U.S.
activities. The New York Times reported on May 5, 2008, that Lebanese Hezbollah
militants, who are Arabs, are providing some of the training to the Iraq militants at
training camps near Tehran; in August 2008, the U.S.-led coalition arrested nine
Hezbollah operatives allegedly involved in funneling arms to Shiite militiamen.
In June 2008, Maliki visited Iran for the third time since he became Prime
Minister, this time reportedly to reassure Iran that a proposed U.S.-Iraq defense pact
would not be directed against Iran. A draft agreement – revised slightly at Iraqi
request and resubmitted in early November 2008, is before the Iraqi parliament as of
28 This issue is covered in greater depth in CRS Report RS22323, Iran’s Influence in Iraq,
by Kenneth Katzman.

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CRS-29
November 24, 2008, and passage is expected. Some Iranian leaders have softened
public opposition to the pact because the revised version says that the United States
cannot use Iraq as a base to attack other countries.
Iran also has signed a number of agreements with Iraq on transportation, energy
cooperation, free flow of Shiite pilgrims, border security, intelligence sharing, and
other cooperation; several more agreements, including a $1 billion credit line for
Iranian exports to Iraq, were signed during Ahmadinejad’s March 2-3, 2008, visit to
Iraq; implementing agreements were signed in April 2008.

The “Iraq Study Group” (Recommendations 9, 10, and 11) in its December 2006
report, recommended U.S. dialogue with Iran but President Bush initially appeared
to reject that idea. The Administration might have later judged that its 2007 “troop
surge” and other military moves in the Gulf (extra aircraft carrier deployments)
strengthened the U.S. position, and the Administration supported a March 10, 2007,
regional conference in Iraq attended by Iran and Syria. Further regional talks on Iraq
(“Expanded Neighbors of Iraq” process) were held in Egypt during May 3-4, 2007.
A November 2, 2007 ministerial on Iraq was held in Istanbul and there was an April
22, 2008, Expanded Neighbors meeting in Kuwait. Another meeting attended by Iran
and the United States, to review the Iraq Compact, was in Sweden on May 29, 2008.
No substantive U.S.-Iran talks took place at any of these regional meetings on Iraq.
The Administration has held potentially more significant bilateral talks with Iran
on the Iraq issue. The first such meeting, in Baghdad, was on May 28, 2007; the two
sides met at the home of Prime Minister Nuri al-Maliki, who opened the meeting.
According to Ambassador Crocker (the Iranian side was represented by the Iranian
Ambassador to Iraq), the two sides agreed on broad principles for Iraq’s political
evolution and stability, but the United States would judge the dialogue by the
indications, discussed above, of Iranian cooperation in stopping military supply of
Shiite militias. Another round of talks was held on July 24, 2007, resulting in an
agreement to establish a working group to discuss ways to stabilize Iraq. This group
met for the first time on August 6, 2007. Because of signs that Iran had slowed
weapons flows into Iraq, another round of talks was tentatively scheduled for
December 18, 2007, but Iran repeatedly postponed the talks because of differences
over the agenda and the level of talks (Iran wants them to be at the ambassador level).
On May 5, 2008, Iran indefinitely suspended this dialogue, possibly because Iran
feels confident of its influence in Iraq.
A provision of the FY2008 defense authorization bill (P.L. 110-181) requires
a report to Congress on Iran’s interference in Iraq, but it does not authorize or
recommend use of U.S. force to stop these actions. On January 9, 2008, the Treasury
Department took action against suspected Iranian and pro-Iranian operatives in Iraq
by designating four individuals and one organization as a threat to stability in Iraq
under the July 17, 2007 Executive Order 13438, which freezes the assets and bans
transactions with named individuals. The named entities, which includes a senior
Qods Forces leader, are in the tables on sanctioned entities.
Supporting Palestinian Militant Groups. Iran’s support for Palestinian
militant groups has long concerned U.S. Administrations, particularly since doing so
gives Tehran an opportunity to try to obstruct Israeli-Palestinian peace prospects.

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CRS-30
Ahmadinejad’s various statements on Israel were discussed above, although other
Iranian leaders have made similar statements in the past. In the 1990s, Khamene’i
called Israel a “cancerous tumor” and made other statements suggesting that he seeks
Israel’s destruction. In December 2001, Rafsanjani said that it would take only one
Iranian nuclear bomb to destroy Israel, whereas a similar strike against Iran by Israel
would have far less impact because Iran’s population is large. Iran has sometimes
openly incited anti-Israel violence, including hosting conferences of anti-peace
process organizations (April 24, 2001, and June 2-3, 2002). During his presidency,
Khatemi refrained from inflammatory statements against Israel and conversed with
Israel’s president at the 2005 funeral of Pope John Paul II. The Iranian Foreign
Ministry, considered a bastion of moderates, has repeatedly stated that Iran’s official
position is that it would not seek to block an Israeli-Palestinian settlement but that
the peace process is too weighted toward Israel to result in a fair settlement.
The State Department report on terrorism for 2007 (mentioned above) again
accuses Iran of providing “extensive” funding, weapons, and training to Hamas,
Palestinian Islamic Jihad (PIJ), the Al Aqsa Martyr’s Brigades, and the Popular Front
for the Liberation of Palestine-General Command (PFLP-GC). All are named as
foreign terrorist organizations (FTO) by the State Department for their use of
violence to undermine the Arab-Israeli peace process. Some saw Iran’s regional
policy further strengthened by Hamas’s victory in the January 25, 2006, Palestinian
legislative elections, and even more so by Hamas’s June 2007 armed takeover of the
Gaza Strip, from which it periodically launches rockets on some Israeli towns. The
Hamas gains potentially position it to block moves toward peace, and Hamas
continues to oppose a two-state solution with Israel and to occasionally fire rockets
from Gaza into Israel. However, Hamas activists downplay Iranian influence,
asserting that Iran is mostly Shiite, while Hamas members are Sunni Muslims.29
Hamas was reputed to receive about 10% of its budget in the early 1990s from Iran,
although since then Hamas has cultivated funding from wealthy Persian Gulf donors
and supporters in Europe and elsewhere.
Iran again demonstrated its hard line on the peace process when it criticized the
participation of Iran’s ally, Syria, at the major U.S.-sponsored Middle East peace
meeting in Annapolis, Maryland on November 27, 2007. The meeting, in part,
represented a U.S. attempt to isolate Iran and other hardline opponents of an Israeli-
Palestinian peace agreement.
Lebanese Hezbollah. Iran has maintained a close relationship with
Hezbollah since the group was formed in 1982 by Lebanese Shiite clerics who were
sympathetic to Iran’s Islamic revolution and belonged to the Lebanese Da’wa Party.
Hezbollah was responsible for several acts of anti-U.S. and anti-Israel terrorism in
the 1980s and 1990s.30 Hezbollah’s attacks on Israeli forces in southern Lebanon
29 CNN “Late Edition” interview with Hamas co-founder Mahmoud Zahar, January 29,
2006.
30 Hezbollah is believed responsible for the October 1983 bombing of the U.S. Marine
barracks in Beirut, as well as attacks on U.S. Embassy Beirut facilities in April 1983 and
September 1984, and for the hijacking of TWA Flight 847 in June 1985 in which Navy diver
(continued...)

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CRS-31
contributed to an Israeli withdrawal in May 2000, but, despite United Nations
certification of Israel’s withdrawal, Hezbollah maintained military forces along the
border. Hezbollah continued to remain armed and outside Lebanese government
control, despite U.N. Security Council Resolution 1559 (September 2, 2004) that
required its dismantlement. In refusing to disarm, Hezbollah says it was resisting
Israeli occupation of small tracts of Lebanese territory (Shib’a Farms).
Neither Israel nor the United States opposed Hezbollah’s progressively
increased participation in peaceful Lebanese politics. In March 2005, President Bush
indicated that the United States might accept Hezbollah as a legitimate political force
in Lebanon if it disarms. In the Lebanese parliamentary elections of May — June
2005, Hezbollah expanded its presence in the parliament to 14 out of the 128-seat
body, and it gained two cabinet seats. As a matter of policy, the United States does
not meet with any Hezbollah members, even those in the parliament or cabinet.
Hezbollah is a designated FTO, but that designation bars financial transactions by the
group and does not specifically ban meeting with members of the group.
Whether or not Iran instigated Lebanese Hezbollah to provoke the July August
2006 crisis, Iran has long been its major arms supplier. Hezbollah fired Iranian-
supplied rockets on Israel’s northern towns during the fighting. As part of a package
of aid to Hezbollah said to exceed $100 million per year, reported Iranian shipments
to Hezbollah over the past five years have included the “Fajr” (dawn) and Khaybar
series of rockets that were fired at the Israeli city of Haifa (30 miles from the border),
and over 10,000 Katyusha rockets that were fired at cities within 20 miles of the
Lebanese border.31 Iran also supplied Hezbollah with an unmanned aerial vehicle
(UAV), the Mirsad, that Hezbollah briefly flew over the Israel-Lebanon border on
November 7, 2004, and April 11, 2005; at least three were shot down by Israel during
the conflict. On July 14, 2006, Hezbollah apparently hit an Israeli warship with a C-
802 sea-skimming missile probably provided by Iran. (See above for information on
Iran’s acquisition of that weapon from China.) Iran also purportedly provided advice
during the conflict; about 50 Revolutionary Guards Qods Force personnel were in
Lebanon (down from about 2,000 when Hezbollah was formed, according to a
Washington Post report of April 13, 2005) when the conflict began; that number
might have increased during the conflict to help Hezbollah operate the Iranian-
supplied weaponry.
Even though Hezbollah reduced its overt military presence in southern Lebanon
in accordance with the conflict-related U.N. Security Council Resolution 1701 (July
31, 2006), Hezbollah was perceived as a victor in the war for holding out against
heavy Israeli air-strikes and some ground action. The outcome boosted Hezbollah’s
30 (...continued)
Robert Stetham was killed. Hezbollah is also believed to have committed the March 17,
1992, bombing of Israel’s embassy in that city, which killed 29 people. Its last known
terrorist attack outside Lebanon was the July 18, 1994, bombing of a Jewish community
center in Buenos Aires, which killed 85. On October 31, 2006, Argentine prosecutors asked
a federal judge to seek the arrest of Rafsanjani, former Intelligence Minister Ali Fallahian,
former Foreign Minister Ali Akbar Velayati, and four other Iranian officials for this attack.
31 “Israel’s Peres Says Iran Arming Hizbollah.” Reuters, February 4, 2002.

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CRS-32
political leverage. Iran supported Hezbollah’s demands and provided it with leverage
by resupplying it with rockets, reportedly increasing its stockpile to 27,000 rockets,
more than double what Hezbollah had at the start of the 2006 war.32 Among the
deliveries are 500 Iranian-made “Zelzal” (Earthquake) missiles with a range of 186
miles, enough to reach Tel Aviv from south Lebanon. Iran also has made at least
$150 million available for Hezbollah to distribute to Lebanese citizens (mostly Shiite
supporters of Hezbollah) whose homes were damaged in the Israeli military
campaign.33
Perhaps emboldened by the supplies, Hezbollah, perhaps for the first time, used
its military wing for internal Lebanese political purposes. In mid May 2008,
Hezbollah fighters took over large parts of Beirut in response to an attempt by the
U.S. and Saudi-backed Lebanese government to curb Hezbollah’s media and
commercial operations. The success of its fighters contributed to a Qatar-brokered
settlement on May 21, 2008, in which the government rescinded its actions against
Hezbollah and agreed to give Hezbollah and its allies enough seats in a new cabinet
to be able to veto government decisions. Hezbollah agreed to the compromise
candidate of Lebanese Army commander Michel Suleiman to become the new
president; he has been sworn in. The new cabinet, in which Hezbollah has one
cabinet seat but its allies have seven others, giving Hezbollah its long-sought veto
power, was appointed in June 2008.
Prior to the 2006 conflict, in the 109th Congress, two resolutions (H.Res. 101
and S.Res. 82) passed their respective chambers. They urged the EU to classify
Hezbollah as a terrorist organization; S.Res. 82 called on Hezbollah to disband its
militia as called for in U.N. Security Council Resolution 1559 (September 2, 2004).
Central Asia and the Caspian. Iran’s policy in Central Asia has thus far
emphasized Iran’s rights to Caspian Sea resources, particularly against Azerbaijan.
That country’s population, like Iran’s, is mostly Shiite Muslim, but its leadership is
secular. In addition, Azerbaijan is ethnically Turkic, and Iran fears that Azerbaijan
nationalists might stoke separatism among Iran’s large Azeri Turkic population,
which demonstrated some unrest in 2006. These factors could explain why Iran has
generally tilted toward Armenia, which is Christian, even though it has been at odds
with Azerbaijan over territory and control of ethnic Armenians. In July 2001, Iranian
warships and combat aircraft threatened a British Petroleum (BP) ship on contract to
Azerbaijan out of an area of the Caspian that Iran considers its own. The United
States called that action provocative, and it is engaged in border security and defense
cooperation with Azerbaijan directed against Iran (and Russia). The United States
successfully backed construction of the Baku-Tblisi-Ceyhan oil pipeline, intended in
part to provide alternatives to Iranian oil. Along with India and Pakistan, Iran has
been given observer status at the Central Asian security grouping called the Shanghai
Cooperation Organization (SCO – Russia, China, Kazakhstan, Kyrgyzstan,
32 Rotella, Sebastian. “In Lebanon, Hezbollah Arms Stockpile Bigger, Deadlier.” Los
Angeles Times, May 4, 2008.
33 Shadid, Anthony. “Armed With Iran’s Millions, Fighters Turn to Rebuilding.”
Washington Post, August 16, 2006.

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CRS-33
Uzbekistan, and Tajikistan). In April 2008, Iran applied for full membership in the
organization, which opposes a long-term U.S. presence in Central Asia.
Afghanistan.34 Iran is trying to restore some of its traditional sway in eastern,
central, and northern Afghanistan where Persian-speaking Afghans predominate. Iran
long opposed the 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 nine Iranian diplomats based in northern Afghanistan, and Iran
provided military aid to the Northern Alliance factions. During the major combat
phase of the post-September 11 U.S.-led war in Afghanistan, Iran offered search and
rescue of any downed service-persons and the trans-shipment to Afghanistan of
humanitarian assistance. In March 2002, Iran expelled Gulbuddin Hikmatyar, an
Afghan militant leader; it froze his Iran-based assets in January 2005.
After the Taliban’s fall, Iran aided minority factions still referred to as the
“Northern Alliance” that were prominent in the post-Taliban governing coalition.
After 2004, Iran’s influence waned somewhat as Northern Alliance figures were
marginalized in Afghan politics. To compensate, Iran has funded projects in
Afghanistan that total about $500 million since 2001 (close to a pledged amount in
international donors conferences), mostly in neighboring Herat. Iranian-funded Shiite
theological seminaries are being built in Kabul and elsewhere, perhaps an indication
of Iran’s continuing efforts to support Afghanistan’s Shiite (Hazara) minority, and
Iran has funded several media outlets in Afghanistan catering to Shiites.
There are indications that Iran will work even with Sunni radical movements if
doing so provides Iran with leverage against the United States. The State Department
terrorism report for 2007 accuses the Qods Force of supplying various munitions,
including 107mm rockets, to Taliban and other militants in Afghanistan; some
Taliban commanders openly say they are obtaining Iranian weapons. On April 17,
2007, U.S. military personnel in Afghanistan captured a shipment of Iranian weapons
that purportedly was bound for Taliban fighters. On June 6, 2007 and again on
September 6, 2007, NATO officers said they directly intercepted Iranian shipments
of heavy arms, C4 explosives, and advanced roadside bombs (explosively forced
projectiles, or EFPs, such as those found in Iraq) to Taliban fighters in Afghanistan.
Then U.S. commander of international forces in Afghanistan Gen. Dan McNeil said
at the time that the intercepted shipments were large enough that the Iranian
government would have to have known about them.
Al Qaeda. Iran is not a natural ally of Al Qaeda, largely because Al Qaeda is
an orthodox Sunni Muslim organization. The 9/11 Commission report said several
of the September 11 hijackers and other plotters, possibly with official help, might
have transited Iran, but the report does not assert that the Iranian government
cooperated with or knew about the plot. Another bin Laden ally, Abu Musab al-
Zarqawi, killed by U.S. forces in Iraq on June 7, 2006, reportedly transited Iran after
the September 11 attacks and took root in Iraq, becoming an insurgent leader there.
34 See CRS Report RL30588, Afghanistan: Post-War Governance, Security, and U.S. Policy,
by Kenneth Katzman.

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CRS-34
However, Iran might see possibilities for tactical alliance with Al Qaeda, and
U.S. officials have said since January 2002 that Iran has not prosecuted or extradited
senior Al Qaeda operatives (spokesman Sulayman Abu Ghaith, top operative Sayf
Al Adl, and Osama bin Laden’s son, Saad35) who are believed to be in Iran.36 U.S.
officials blamed these figures for the May 12, 2003, bombings in Riyadh, Saudi
Arabia against four expatriate housing complexes on these operatives, saying they
have been able to contact associates outside Iran.37 In testimony before the Senate
Committee on Foreign Relations on March 29, 2007, then Undersecretary of State
Nicholas Burns accused Iran of violating U.N. Security Council Resolutions 1267
and 1373, which require sharing information on Al Qaeda.
Iran asserted on July 23, 2003, that it had “in custody” senior Al Qaeda figures.
However, if that is not their status, the explanation could be that hardliners in Iran
might want to use Al Qaeda activists as leverage against the United States and its
allies. Some say Iran might want to exchange them for a U.S. hand-over of People’s
Mojahedin activists under U.S. control in Iraq. Possibly attempting to show that it is
an adversary and not an ally of Al Qaeda, on July 16, 2005, Iran’s Intelligence
Minister said that 200 Al Qaeda members are in Iranian jails.38
Latin America. A growing concern has been Iran’s developing relations with
countries and leaders in Latin America considered adversaries of the United States,
particularly Cuba and Venezuela’s Hugo Chavez. In February 2006, Secretary Rice
referred to Venezuela and Cuba as “sidekicks” of Iran because of their votes in the
IAEA against referring Iran to the Security Council. On October 30, 2007, Secretary
of Homeland Security Michael Chertoff said that Iran’s relationship with Venezuela
is an emerging threat because it represents a “marriage” of Iran’s extremist ideology
with “those who have anti-American views.” Chavez has visited Iran on several
occasions, offering Iran additional gasoline during Iran’s fuel shortages in 2007 as
well as joint oil and gas projects. The two countries have established direct air links,
and 400 Iranian engineers have reportedly been sent to Venezuela to work on
infrastructure projects there. The State Department terrorism report for 2006 said
that Cuba maintains “close relationships with other state sponsors of terrorism such
as Iran.” In October 2007, Uruguayan parliamentary investigators said they blocked
an attempt by the government to buy arms from Iran, using a diversion through
Venezuela.39 Iran is also trying to extend its influence in Latin America by offering
Bolivia $1 billion in aid and investment, according to an Associated Press report of
November 23, 2008.
35 Gertz, Bill. “Al Qaeda Terrorists Being Held by Iran.” Washington Times, July 24, 2003.
36 Keto, Alex. “White House Reiterates Iran Is Harboring Al Qaeda.” Dow Jones Newswires,
May 19, 2003.
37 Gertz, Bill. “CIA Points to Continuing Iran Tie to Al Qaeda.” Washington Times, July 23,
2004.
38 “Tehran Pledges to Crack Down on Militants.” Associated Press, July 18, 2005.
39 Arostegui, Martin. “Uruguay Caught Buying Iran Arms.” Washington Times, October 12,
2007.

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U.S. Policy Responses, Options, and Legislation
The February 11, 1979 fall of the Shah of Iran, a key U.S. ally, opened the long
and deep 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 (just after the failed U.S. military attempt to
rescue the hostages) and the two countries have had only limited official contact
since.40 The United States tilted toward Iraq in the 1980-1988 Iran-Iraq war,
including U.S. diplomatic attempts to block conventional arms sales to Iran,
providing battlefield intelligence to Iraq41 and, during 1987-1988, direct skirmishes
with Iranian naval elements in the course of U.S. efforts to protect international oil
shipments in the Gulf from Iranian mines and other attacks. In one battle on April
18, 1988 (“Operation Praying Mantis”), Iran lost about a quarter of its larger naval
ships in a one-day engagement with the U.S. Navy, including one frigate sunk and
another badly damaged. Iran strongly disputed the U.S. assertion that the July 3,
1988, U.S. shoot-down of Iran Air Flight 655 by the U.S.S. Vincennes over the
Persian Gulf (bound for Dubai, UAE) was an accident.
In his January 1989 inaugural speech, President George H.W. Bush laid the
groundwork for a rapprochement, saying that, in relations with Iran, “goodwill begets
goodwill,” implying better relations if Iran helped obtain the release of U.S. hostages
held by Hezbollah in Lebanon. Iran reportedly did assist in obtaining their releases,
which was completed in December 1991, but no thaw followed, possibly because
Iran continued to back groups opposed to the U.S.-sponsored Middle East peace
process, a major U.S. priority.
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 U.S. shift toward engagement; the Clinton
Administration offered Iran official dialogue, with no substantive preconditions. In
January 1998, Khatemi publicly agreed to “people-to-people” U.S.-Iran exchanges
as part of his push for “dialogue of civilizations, but he 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, in a March 17, 2000,
speech, acknowledged past U.S. meddling in Iran, announcing some minor easing of
40 An exception was the abortive 1985-1986 clandestine arms supply relationship with Iran
in exchange for some American hostages held by Hezbollah in Lebanon (the so-called
“Iran-Contra Affair”). Iran has an interest section in Washington D.C. under the auspices
of the Embassy of Pakistan; it is staffed by Iranian-Americans. The U.S. interest section in
Tehran has no American personnel; it is under the Embassy of Switzerland.
41 Sciolino, Elaine. The Outlaw State: Saddam Hussein’s Quest for Power and the Gulf
Crisis. New York: John Wiley and Sons, 1991. p. 168.

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the U.S. trade ban with Iran, and promised to try to resolve outstanding claims
disputes. In September 2000 U.N. “Millennium Summit” meetings, Albright and
President Clinton sent a positive signal to Iran by attending Khatemi’s speeches.
Overview of Bush Administration Iran Policy
It has been Bush Administration policy to prevent Iran from obtaining a nuclear
weapons capability, believing that a nuclear Iran would be even more assertive in
attempting to undermine U.S. objectives in the Middle East than it already is. The
Bush Administration has undertaken multi-faceted efforts to limit Iran’s strategic
capabilities through international diplomacy and sanctions — both international
sanctions as well as sanctions enforced by its allies, outside Security Council
mandate. At the same time, the Administration has engaged in bilateral diplomacy
with Iran on specific priority issues, such as stabilizing Afghanistan and Iraq. The
policy framework is supported by maintenance of a large U.S. conventional military
capabilities in the Persian Gulf and through U.S. alliances with Iran’s neighbors.
At times, the Bush Administration has considered or, to some extent, pursued
harder line options. Some Administration officials, reportedly led by Vice President
Cheney, believe that existing measures will not curb the threat posed by Iran and that
policy should focus on possible military confrontation with Iran or on U.S. efforts to
change Iran’s regime.42 President-elect Obama has not indicated an affinity for such
options. Legislation in the 110th Congress indicates congressional support for
increasing U.S. sanctions and for steps to compel other foreign companies to curtail
their business dealings with Iran.43
The Bush Administration policy of preventing a nuclear Iran is apparently
shared by President-elect Barack Obama, according to his post-election statements.
On the other hand, some commentators express support for a view articulated by
former CENTCOM Commander John Abizaid who asserted in 2006 that the United
States “can live with” a nuclear Iran.
Containment and Possible Military Action
A key question in Congress and among U.S. allies and other countries has been
whether or not to use military action to delay or halt Iran’s nuclear program.
Although some Members publicly oppose most forms of military action against Iran,
others fear that diplomacy and sanctions might not succeed and that preventing Iran
from acquiring a working nuclear device is paramount. In discussing possible
military options against Iran’s nuclear facilities, President Bush has repeatedly
42 Cooper, Helene and David Sanger. “Strategy on Iran Stirs New Debate at White House.”
New York Times, June 16, 2007.
43 The FY2007 defense authorization law (P.L. 109-364) called for a report by the
Administration on all aspects of U.S. policy and objectives on Iran (and required the DNI
to prepare a national intelligence estimate on Iran, which was released on December 3, 2007
as discussed above).

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maintained that “all options are on the table.”44 At the same time, he said during his
trip to Europe in June 2008 that he had left in place for the next Administration the
“multilateral [diplomatic] framework” discussed above, suggesting that he is not
leaning toward military action against Iran before leaving office. Comments in July
2008 by Joint Chiefs Chairman Admiral Mike Mullen to the effect that the U.S.
military “does not need a third war” in the region also indicate little Administration
inclination to preventively strike Iran. A U.S. ground invasion to remove Iran’s
regime has not, at any time, appeared to be under serious consideration in part
because of the heavy strains on U.S. forces from the Afghanistan and Iraq conflicts.
Proponents of U.S. air and missile strikes against suspected nuclear sites argue
that military action could set back Iran’s nuclear program because there are only a
limited number of key targets, and these targets are known to U.S. planners and could
be struck, even those that are hardened or buried.45 Estimates of the target set range
from 400 nuclear and other WMD-related targets, to potentially a few thousand
targets whose destruction would cripple Iran’s economic and military infrastructure.
At least 75 targets are underground or hardened. Those who take an expansive view
of the target set argue that the United States would need to reduce Iran’s potential for
retaliation by striking not only nuclear facilities but also Iran’s conventional military,
particularly its small ships and coastal missiles.
Still others argue that there are military options available that do not involve air
or missile strikes. Some say that a naval embargo or related embargo is possible that
could pressure Iran into reconsidering its stand on the nuclear issue. Such action is
“demanded” in H.Con.Res. 362 (see more on this bill below). Others say that the
imposition of a “no-fly zone” over Iran might also serve that purpose. Either action
could still be considered acts of war, and could escalate into hostilities.
Most U.S. allies in Europe, not to mention Russia and China, oppose military
action. These states tend to agree with experts who maintain that the United States
is not necessarily aware of or militarily able to reach all relevant sites; other
opponents believe any benefits would be minor, or only temporary, and that the costs
of a strike are too high. Some believe that a U.S. strike would cause the Iranian
public to rally around Iran’s regime, setting back U.S. efforts to promote change
within Iran. On the other hand, some European and other diplomats say that France
and Britain might back or even join a military strike if Iran were to begin an all-out
drive toward a nuclear weapon.
Israeli officials view a nuclear armed Iran as an existential threat and have
repeatedly refused to rule out the possibility that Israel might strike Iran’s nuclear
infrastructure. Speculation about this possibility increased on June 7, 2008, when
Israeli deputy prime minister Shaul Mofaz said that an attack on Iran is becoming
“unavoidable” because it continues to refuse to curb its nuclear program.
Speculation increased further in mid-June 2008 when Israeli officials confirmed
44 Fletcher, Michael and Keith Richburg. “Bush Tries to Allay E.U. Worry Over Iran.”
Washington Post, February 23, 2005.
45 For an extended discussion of U.S. air strike options on Iran, see Rogers, Paul. Iran:
Consequences Of a War. Oxford Research Group, February 2006.

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reports that Israel had practiced a long range strike such as that which would be
required to hit Iranian nuclear sites. Although Israeli strategists say this might be a
viable option, several experts doubt that Israel has the capability to make such action
sufficiently effective to justify the risks. U.S. military leaders are said by observers
to oppose an Israeli strike because such would inevitably draw the United States into
a conflict with Iran yet without the degree of planning, preparation, or capability that
would make a similar U.S. action a success.
Iranian Retaliatory Scenarios.46 Some officials and experts warn that a
U.S. military strike on Iran could provoke unconventional retaliation, using the
equipment discussed in the section on “conventional military capabilities,” that could
be difficult to counter. At the very least, such conflict is likely to raise world oil
prices significantly out of fear of an extended supply disruption. Others say such
action would cause Iran to withdraw from the NPT and refuse any IAEA inspections.
Other possibilities include firing missiles at Israel — and Iran’s July 2008 missile
tests could have been intended to demonstrate this retaliatory capability — or
directing Lebanese Hezbollah or Hamas to fire rockets at Israel.
Iran has acquired a structure and doctrine for unconventional warfare that partly
compensates for its conventional weakness. Then CENTCOM commander Gen.
John Abizaid said in March 2006 that the Revolutionary Guard Navy, through its
basing and force structure, is designed to give Iran a capability to “internationalize”
a crisis in the Strait of Hormuz. On January 30, 2007, his replacement at
CENTCOM, Admiral William Fallon, said that “Based on my read of their military
hardware acquisitions and development of tactics ... [the Iranians] are posturing
themselves with the capability to attempt to deny us the ability to operate in [the
Strait of Hormuz].” (General David Petraeus is scheduled to assume CENYCOM
command in September 2008.) During a visit to the Gulf, Vice President Cheney
warned Iran on May 11, 2007, not to try to restrict sea traffic, saying “[The United
States] will keep the sea lanes open.” In July 2008 Iran again claimed it could close
the Strait in a crisis but the then commander of U.S. naval forces in the Gulf, Admiral
Kevin Cosgriff, backed by Joint Chiefs Chairman Mullen, said U.S. forces could
quickly reopen the waterway.
Iran has nonetheless tried to demonstrate that it is a capable force in the Gulf.
It has conducted at least five major military exercises since August 2006, including
exercises simultaneous with U.S. exercises in the Gulf in March 2007. Iran has
repeatedly stated it is capable of closing the Strait of Hormuz and would do so, if
attacked. In early 2007, Iranian ships were widening their patrols, coming ever closer
to key Iraqi oil platforms in the Gulf. In February 2007, Iran seized 15 British sailors
that Iran said were patrolling in Iran’s waters, although Britain says they were in Iraqi
waters performing coalition-related searches. They were held until April 5, 2007. On
January 6, 2008, the U.S. Navy reported a confrontation in which five IRGC Navy
small boats approached three U.S. Navy ships to the point where they manned battle
stations. The IRGC boats veered off before any shots were fired, but the Bush
46 See also, Washington Institute for Near East Policy. The Last Resort: Consequences of
Preventive Military Action Against Iran, by Patrick Clawson and Michael Eisenstadt. June
2008.

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CRS-39
Administration called it a “provocative act” and filed a formal protest with Tehran.
The IRGC could have been testing U.S. rules of engagement following months of
U.S. criticism and the proliferation designations of the IRGC and its subunits.
Another incident occurred in April 2008 when a ship under U.S. contract fired a shot
to warn off Iranian boats in the Gulf. In October 2008, Iran announced it is building
several new naval bases along the southern coast, including at Jask, indicating
enhanced capability to threaten the entry and exit to the Strait of Hormuz.
If there were a conflict in the Gulf, some fear that Iran might try to use large
numbers of boats to attack U.S. ships, or to lay mines, in the Strait. In April 2006,
Iran conducted naval maneuvers, including test firings of what Iran claims are
underwater torpedos that can avoid detection, presumably for use against U.S. ships
in the Gulf, and a surface-to-sea radar-evading missile launched from helicopters or
combat aircraft. U.S. military officials said the claims might be an exaggeration. The
Gulf states fear that Iran will fire coastal-based cruise missiles at their oil loading or
other installations across the Gulf, as happened during the Iran-Iraq war.
Containment and the Gulf Security Dialogue. The Bush Administration
has tried to implement policies that strengthen U.S. regional allies and thereby
contain Iran strategically. An assertive military containment component of policy
was signaled in the January 10, 2007, Iraq “troop surge” statement by President Bush.
In that statement, he announced that the United States was sending a second U.S.
aircraft carrier group into the Gulf,47 extending deployment of Patriot anti-missile
batteries in the Gulf, reportedly in Kuwait and Qatar, and increasing intelligence
sharing with the Gulf states. Secretary of Defense Gates said at the time that he saw
the U.S. buildup as a means of building leverage against Iran that could be useful in
bolstering U.S. diplomacy. An April 2008 deployment of a second carrier group to
the Gulf was, according to Secretary Gates, a “reminder” to Iran of U.S. capabilities
in the Gulf.
The U.S. Gulf deployments build on a containment strategy inaugurated in mid-
2006 by the State Department, primarily the Bureau of Political-Military Affairs
(“Pol-Mil”). The State Department effort represented an effort to revive some of the
U.S.-Gulf state defense cooperation that had begun during the Clinton Administration
but had since languished as the United States focused on the post-September 11 wars
in Afghanistan and Iraq. In a December 8, 2007 speech in Bahrain, Secretary Gates
said the “Gulf Security Dialogue” has six key pillars, including:
! Defense cooperation (with the Gulf states).
! Developing a shared assessment and agenda on Iraq.
! Regional stability, especially with respect to Iran.
! Energy infrastructure security.
! Counter-proliferation
! Counter-terrorism
47 Shanker, Thom. “U.S. and Britain to Add Ships to Persian Gulf in Signal to Iran,” New
York Times, December 21, 2006.

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One goal of the initiative is on boosting Gulf state capabilities fueled
speculation about major new weapons sales to the GCC states. The emphasis of the
sales is to improve Gulf state missile defense capabilities, for example by sales of the
upgraded Patriot Advanced Capability-3 (PAC-3),48 as well as to improve border and
maritime security equipment through sales of combat littoral ships, radar systems,
and communications gear. The initial sales, including PAC-3 related sales to UAE
and Kuwait, and Joint Direct Attack Munitions (JDAMs) to Saudi Arabia and UAE
were notified to Congress in December 2007 and January 2008. A sale to UAE of
the very advanced “THAAD” (Theater High Altitude Area Defense) anti-missile
system is planned, according to press reports in September 2008.
Presidential Authorities and Legislation. A decision to take military
action might raise the question of presidential authorities. In the 109th Congress,
H.Con.Res. 391, introduced on April 26, 2006, called on the President to not initiate
military action against Iran without first obtaining authorization from Congress. A
similar bill, H.Con.Res. 33, was introduced in the 110th Congress. Other bills
requiring specific congressional authorization for use of force against Iran (or
prohibiting U.S. funds for that purpose) include S.Res. 356, H.J.Res. 14, H.R. 3119,
S.Con.Res. 13, S. 759, and H.R. 770. An amendment to H.R. 1585, the National
Defense Authorization Act for FY2008, was defeated 136 to 288. A provision that
sought to bar the Administration from taking military action against Iran without
congressional authorization was taken out of an early draft of an FY2007
supplemental appropriation (H.R. 1591) to fund additional costs for Iraq and
Afghanistan combat (which was vetoed on May 1, 2007). Other provisions,
including requiring briefings to Congress about military contingency planning related
to Iran’s nuclear program, is in the House-passed FY2009 defense authorization bill
(H.R. 5658).
Regime Change
A major feature of policy for part of 2006 — promotion of “regime change” —
later appeared to recede. Senior U.S. officials say that the democracy promotion
programs discussed below are intended to promote political evolution in Iran and
change regime behavior, not to overthrow the regime. Still, several high-ranking
U.S. officials, purportedly including Vice President Cheney, maintained that only
a change of regime would permanently reduce the threat posed by Iran. A few
accounts, such as “Preparing the Battlefield” by Seymour Hersh in the New Yorker
(July 7 and 14, 2008) say that President Bush authorized U.S. covert operations to
destabilize the regime,49 involving assistance to some of the ethnic-based armed
groups discussed above. CRS has no way to confirm assertions in the Hersh article
that up to $400 million was appropriated for such operations, or that any aid was
given to any of the groups mentioned in it.
48 “New Persian Gulf Security Effort Expected to Fuel Arms Sales in FY-07.” Inside the
Pentagon, November 9, 2006.
49 Ross, Brian and Richard Esposito. Bush Authorizes New Covert Action Against Iran.
[http://blogs.abcnews.com/theblotter/2007/05/bush_authorizes.html].

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There has been some support in the United States for regime change since the
1979 Islamic revolution; the United States provided some funding to anti-regime
groups, mainly pro-monarchists, during the 1980s.50 The Administration’s attraction
to this option became apparent after the September 11, 2001, attacks, when President
Bush’s described Iran as part of an “axis of evil” in his January 2002 State of the
Union message. President Bush’s second inaugural address (January 20, 2005) and
his State of the Union messages of February 2, 2005, and January 31, 2006,
suggested a clear preference for a change of regime by stating, in the latter speech,
that “... our nation hopes one day to be the closest of friends with a free and
democratic Iran.” Indications of affinity for this option include increased public
criticism of the regime’s human rights record as well as the funding of Iranian pro-
democracy activists. However, the Administration shifted away from this option as
a strategy employing multilateral sanctions and diplomacy took form in 2006, in part
because U.S. partner countries believe regime change policies harm diplomacy.
President-elect Obama has not expressed support for a regime change option.
Legislation in the 109th Congress exemplified the preference of some Members
for regime change in Iran by authorizing funding for democracy promotion, among
other provisions. In the 109th Congress, H.R. 282 passed the House on April 26,
2006, by a vote of 397-21. A companion, S. 333, was introduced in the Senate. The
Administration supported the democracy-promotion sections of these bills. Major
provisions were included in H.R. 6198, which was introduced on September 27,
2006, passed by both chambers, and signed September 30, 2006 (P.L. 109-293).
Entitled the Iran Freedom Support Act, it authorizes funds (no specific dollar
amount) for Iran democracy promotion and modifies the Iran Sanctions Act.
Many question the prospects of U.S.-led Iran regime change through democracy
promotion or other means, short of all-out-U.S. military invasion, because of the
weakness of opposition groups. Providing overt or covert support to anti-regime
organizations, in the view of many experts, would not make them materially more
viable or attractive to Iranians. The regime purportedly also conducts extensive
regime surveillance of democracy activists or other internal dissidents. Iran has been
arresting civil society activists by alleging they are accepting the U.S. democracy
promotion funds, while others have refused to participate in U.S.-funded programs,
fearing arrest. The highest profile such arrest came in May 2007, when Iranian-
American scholar Haleh Esfandiari, of the Woodrow Wilson Center in Washington,
DC, who had been under house arrest and unable to leave Iran since late December
2006, was sent to Evin prison.51 Others argue that reformist groups such as students,
50 CRS conversations with U.S. officials responsible for Iran policy. 1980-1990. After a
period of suspension of such assistance, 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), 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.
51 Three other Iranian Americans were arrested and accused by the Intelligence Ministry of
actions contrary to national security in May 2007: U.S. funded broadcast (Radio Farda)
(continued...)

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women, labor leaders, intellectuals, and others might be able to galvanize regime
change unexpectedly despite the repression; all of these groups have conducted
various small protests during the past few years. Several congressional resolutions
called on Iran to release Esfandiari (S.Res.214, agreed to by the Senate on May 24;
H.Res. 430, passed by the House on June 5; and S.Res. 199).
The State Department is the implementer of U.S. democracy promotion
programs. In 2006, the Administration began increasing the presence of Persian-
speaking U.S. diplomats in U.S. diplomatic missions around Iran, in part to help
identify and facilitate Iranian participate in U.S. democracy-promotion programs. The
Iran unit at the U.S. consulate in Dubai has been enlarged significantly, and new
“Iran-watcher” positions have been added to U.S. diplomatic facilities in Baku,
Azerbaijan; Istanbul, Turkey; Frankfurt, Germany; London; and Ashkabad,
Turkmenistan, all of which have large expatriate Iranian populations and/or
proximity to Iran.52 An enlarged (six-person) “Office of Iran Affairs” has been
formed at State Department, and it is reportedly engaging in contacts with U.S.-based
exile groups such as those discussed earlier. The State Department has used funds
provided in recent appropriations to support pro-democracy programs run by 26
organizations based in the United States in Europe; the Department refuses to name
grantees for security reasons. Part of the program is to promote people-to-people
exchanges which might help alter the image of the United States in Iran; to date the
State Department has sponsored exchanges with about 150 Iranian academics,
professionals, athletes, artists, and medical professionals. The Department has also
formed a Persian-language website. Iran asserts that funding democracy promotion
represents a violation of the 1981 “Algiers Accords” that settled the Iran hostage
crisis and provide for non-interference in each others’ internal affairs.
Funding. As shown below, $67 million has been appropriated for Iran
democracy promotion ($19.6 million through DRL and $48.6 million through the
Bureau of Near Eastern Affairs/USAID). Of that, as of October 2008, $42.7 million
has been obligated, and $20.8 million disbursed. Additional funds, discussed in the
chart below, have been appropriated for cultural exchanges, public diplomacy, and
broadcasting to Iran.
51 (...continued)
journalist Parnaz Azima (who was not in jail but was not allowed to leave Iran); Kian
Tajbacksh of the Open Society Institute funded by George Soros; and businessman and
peace activist Ali Shakeri. All were released by October 2007.
52 Stockman, Farah. “‘Long Struggle’ With Iran Seen Ahead.” Boston Globe, March 9, 2006.

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Table 8. Iran Democracy Promotion Funding
FY2004
Foreign operations appropriation (P.L. 108-199) earmarked $1.5 million for
“educational, humanitarian and non-governmental organizations and individuals inside
Iran to support the advancement of democracy and human rights in Iran.” The State
Department Bureau of Democracy and Labor (DRL) gave $1 million to the IHDC
organization, see above; $500,000 to National Endowment for Democracy (NED).
FY2005
$3 million from FY2005 foreign aid appropriation (P.L. 108-447) for democracy
promotion. Priority areas: political party development, media development, labor
rights, civil society promotion, and human rights.
FY2006
$11.15 for democracy promotion from regular FY2006 foreign aid appropriation (P.L.
regular
109-102). $4.15 million administered by DRL and $7 million for the Bureau of Near
Eastern Affairs.
FY2006
Total of $66.1 million (of $75 million requested) from FY2006 supplemental (P.L.
supp.
109-234): $20 million for democracy promotion ($5 million above request); $5 million
for public diplomacy directed at the Iranian population (amount requested); $5 million
for cultural exchanges (amount requested); and $36.1 million for Voice of America-
TV and “Radio Farda” broadcasting ($13.9 million less than request). Of all FY2006
funds, the State Department said on June 4, 2007 that $16.05 million was obligated for
democracy promotion programs, as was $1.77 million for public diplomacy and $2.22
million for cultural exchanges (bringing Iranian professionals and language teachers
to the United States). Broadcasting funds provided through the Broadcasting Board
of Governors; began under Radio Free Europe/Radio Liberty (RFE/RL), in partnership
with the VOA, in October 1998.53 Farda (“Tomorrow” in Farsi) received $14.7
million of FY2006 funds; now broadcasts 24 hours/day. VOA Persian services (radio
and TV) combined cost about $10 million per year. VOA-TV began on July 3, 2003,
and now is broadcasting to Iran 12 hours a day.
FY2007
FY2007 continuing resolution provided $6.55 million for Iran (and Syria) to be
administered through DRL. $3.04 million was used for Iran. No funds were
requested.
FY2008
$60 million (of $75 million requested) is contained in Consolidated Appropriation
(H.R. 2764, P.L. 110-161), of which $21.6 million is ESF for pro-democracy
programs, including non-violent efforts to oppose Iran’s meddling in other countries.
$7.9 million is “Development Funds” for use by DRL. Appropriation also fully funds
additional $33.6 million requested for Iran broadcasting: $20 million for VOA Persian
service; and $8.1 million for Radio Farda; and $5.5 million for exchanges with Iran.
FY2009
Request is for $65 million in ESF “to support the aspirations of the Iranian people
for a democratic and open society by promoting civil society, civic participation,
media freedom, and freedom of information.” S. 3288 (FY09 foreign operations
appropriation) provides $20 million for democracy promotion in Iran to counter
Iranian influence in Lebanon and the West Bank and Gaza.
Engagement
Throughout 2008, the Administration has placed increased emphasis on direct
diplomacy with Iran on the nuclear and other issues. President-elect Obama, during
53 The service began when Congress funded it at $4 million in the FY1998
Commerce/State/Justice appropriation (P.L. 105-119). It was to be called Radio Free Iran
but was never formally given that name by RFE/RL.

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the campaign, indicated support for enhanced efforts to engage Iran directly.
Observing that inclination, Ahmadinejad sent President-elect Obama a letter of
congratulation upon his election and called for “fundamental and fair” changes to
U.S. policy on Iran. It was the first such congratulatory message from Iran since the
revolution. However, Ahmadinejad subsequently said that the Obama
Administration would be judged by Iran; other Iranian leaders said that outreach by
the Obama Administration might represent deception. Still others said that any U.S.
violation of Iranian airspace would be opposed militarily.
Some expert studies, such as one released by the Council on Foreign Relations
in September 2008, believe that direct engagement with Iran is likely the only
realistic means to reach an agreement that prevents Iran from becoming a nuclear
state. Some view the participation of Undersecretary William Burns at the July 19,
2008 Geneva meeting between Iran and the P5+1 representatives as a dropping of the
Bush Administration precondition against meeting with Iran until it suspends
uranium enrichment, although the Administration characterized the decision as a
show of support for the P5+1 diplomatic process. The Bush Administration
reportedly has considered opening a new interests section in Iran staffed by U.S.
personnel in Tehran, which would mostly process Iranian visas and help facilitate
U.S.-Iran people-to-people contacts. Some press reports in late October 2008 said
the Bush Administration has decided on the idea and might announce this step before
President Bush leaves office, but others say such a step might be left to the Obama
Administration which appears inclined toward that step as well. Some Iranian
leaders, including Ahmadinejad, have said they might accept the interests section, but
others have said this will not be approved by the Iranian side.
Prior to 2008, the Bush Administration directly engaged Iran on specific issues
(Afghanistan and Iraq), viewing such dialogue as helpful to the stabilization missions
in those countries. The United States had a dialogue with Iran on Iraq and
Afghanistan from late 2001 until May 2003, when the United States broke off the
talks following the May 12, 2003, terrorist bombing in Riyadh. At that time, the
United States and Iran publicly acknowledged that they were conducting direct talks
in Geneva on those two issues,54 the first confirmed direct dialogue between the two
countries since the 1979 revolution. The United States briefly resumed some
contacts with Iran in December 2003 to coordinate U.S. aid to victims of the
December 2003 earthquake in Bam, Iran, including a reported offer to send a high-
level delegation to Iran. Iran rebuffed that offer. Recent meetings on Iraq were
discussed above.
Regarding a broader dialogue with Iran on nuclear and other issues, since 2006
— and prior to the July 2008 decision to have Undersecretary Burns attend the July
19 nuclear issues meeting — the Bush Administration maintained it would join
multilateral nuclear talks, or even potentially engage in direct bilateral talks, only if
Iran first suspends uranium enrichment. Some believe the Administration position
was based on a view that offering to participate in a nuclear dialogue with Iran would
later increase international support for sanctions and other pressure mechanisms by
demonstrating the willingness of the Administration to resolve the issue
54 Wright, Robin. “U.S. In ‘Useful’ Talks With Iran.” Los Angeles Times, May 13, 2003.

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diplomatically. Others believe that this precondition lessened the likelihood of a
positive response by Iran and should be unambiguously dropped. In a related form
of the option, former senior U.S. diplomat Thomas Pickering and other experts said
in April 2008 that U.S. and Iranian former officials and academics have been meeting
to discuss formulas under which Iran might continue to enriched uranium to non
bomb-grade levels under monitoring. In the 110th Congress, H.R. 5056 called on the
President to name an envoy to conduct negotiations with Iran on outstanding issues.
As part of the U.S. declared openness to talk with Iran if it complies on nuclear
issues, the Administration indicated that it considers Iran a great nation and respects
its history; such themes have been prominent in speeches by President Bush such as
at the Merchant Marine Academy on June 19, 2006, and his September 18, 2006,
speech to the U.N. General Assembly. Secretary of State Rice said in late January
2008 that the United States does not consider Iran a “permanent enemy.” An
amendment by Senator Biden (adopted June 2006) to the FY2007 defense
authorization bill (P.L. 109-364) supported the Administration’s offer to join nuclear
talks with Iran.
“Grand Bargain Concept”. Some argue that the issues that divide the
United States and Iran cannot be segregated, and that the key to resolving the nuclear
issue is striking a “grand bargain” on all outstanding issues. U.S. officials have not,
to date, offered an unconditional, direct U.S.-Iran bilateral dialogue on all issues of
U.S. concern: nuclear issues, Iranian support of militant movements, involvement in
Iraq, and related issues. Some view this as a “missed opportunity,” saying that U.S.
officials rebuffed a reported overture from Iran just before the May 12, 2003, Riyadh
bombing to negotiate all outstanding U.S.-Iran issues as part of a so-called “grand
bargain” that has been reported in various press articles. The Washington Post
reported on February 14, 2007 (“2003 Memo Says Iranian Leaders Backed Talks”),
that the Swiss Ambassador to Iran in 2003, Tim Guldimann, had informed U.S.
officials of a comprehensive Iranian proposal for talks with the United States.
However, State Department officials and some European diplomats based in Tehran
at that time question whether that proposal represented an authoritative
communication from the Iranian government. Others argue that the offer was
unrealistic because an agreement would have required Iran to abandon key tenets of
its Islamic revolution, including support for Hezbollah.
There are some indications that even the most senior Iranian leaders might be
receptive to restoring relations with the United States. On January 3, 2008, Supreme
Leader Khamene’i said he would support resumed relations with the United States
at the right time and under the right circumstances, but not at the present because the
United States would use relations to insert spies into Iran.
Further International and Multilateral Sanctions
Should Iran continue to refuse any proposed compromises on its nuclear
program, the following represent sanctions that the Security Council might impose,
along with some discussion of key positions expressed by some Security Council or
other nations on those ideas. Administration officials say these or other additional
sanctions might also be considered by a “coalition” of countries, outside Security
Council authorization — a possibility that reportedly was discussed at a meeting of

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Security Council permanent members at the U.S. State Department on September 21,
2007.55 On the other hand, some U.S. allies, such as Germany, oppose sanctions
outside Council action on the grounds that doing so would undermine the Security
Council process.56 Among the further U.N. or multilateral sanctions widely
discussed are the following:
! Mandating Reductions in Diplomatic Exchanges with Iran or
Prohibiting Travel by Iranian Officials. As noted above, Resolution
1803 imposes a ban on travel by some named Iranian officials. One
option is to expand the list of those Iranians whose travel abroad
would be banned. A further option is to limit sports or cultural
exchanges with Iran, such as Iran’s participation in the World Cup
soccer tournament. However, many experts oppose using sporting
events to accomplish political goals.
! Banning International Flights to and from Iran. Bans on flights to
and from Libya were imposed on that country in response to the
finding that its agents were responsible for the December 21, 1988,
bombing of Pan Am 103 (now lifted). There are no indications that
a passenger aircraft flight ban is under consideration among the
P5+1. As noted above, inspections of Iranian international cargo
flights and shipping is authorized in Resolution 1803.
! A Ban on Exports to Iran of Refined Oil Products or of Other
Products. Some members of the U.N. Security Council oppose this
sanction as likely to halt prospects for a diplomatic solution to Iran’s
nuclear program, and the sanction does not appear to be under
current Security Council consideration. A gas exports ban would
almost certainly hurt Iran’s economy because Iran does not refine
enough gasoline to meet demand and must import gasoline, although
some experts believe Iran would be able to circumvent this sanction
by offering premium prices to suppliers. Some countries that
supply gasoline to Iran, such as those listed in Table 3, might oppose
this sanction. A bill, H.R. 2880, would apply the Iran Sanctions Act
(see below) to entities that sell gasoline to Iran. H.Con.Res. 362 and
S.Res. 580 call for (but do not mandate) that sanction.
! Financial and Trade Sanctions, Such as a Freeze on Iran’s
Financial Assets Abroad. Existing U.N. resolutions do not freeze all
Iranian assets abroad, and such a broad freeze does not appear to be
under Security Council consideration at this time. Resolution 1803
authorizes countries to curtail banking relationships with Iran’s Bank
Melli and Bank Saderat. A future resolution could add more Iranian
banks to those under sanction, or even entirely ban transactions with
55 Wright, Robin. “U.S., Europeans Planning Own Iran Sanctions.” Washington Post,
September 22, 2007.
56 Berlin Says U.S. and France Guilty of Hypocrisy. Spiegel Online, September 24, 2007.
[http://www.spiegel.de/international/world/0,1518,507443,00.html]

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CRS-47
any Iranian banks. Fearing that possibility, Iran reportedly moved
$75 billion out of European banks in May 2008.
! Limiting Lending to Iran by Banks or International Financial
Institutions. Another option is to ban lending to Iran by international
financial institutions, or to mandate a reduction of official credit
guarantees. British Prime Minister Brown indicated British support
a limitation of official credits on November 12, 2007. As discussed
below, EU countries and their banks have begun taking these steps,
even without a specific U.N. mandate.
! Banning Worldwide Investment in Iran’s Energy Sector. This option
would represent an internationalization of the U.S. “Iran Sanctions
Act,” which is discussed below and in CRS Report RS20871. In his
November 12, 2007 comments, Brown expressed support for a
worldwide financing of energy projects in Iran as a means of cutting
off energy development in Iran. Others oppose this step at a time of
relatively high world energy prices.
! Banning Insurance for Iranian Shipping. One option, reportedly
under consideration by the P5+1, is to ban the provision of
insurance for Iran’s tanker fleet. Shipments of Iranian oil require
insurance against losses from military action, accidents, or other
causes. A broad ban on provision of such insurance could make it
difficult for Iran to Islamic Republic of Iran Shipping Lines to
operate and force Iran to rely on more expensive shipping options.
Iran said in September 2008 that it would have ways to circumvent
the effect of this sanction if it is imposed.
! Imposing a Worldwide Ban on Sales of Arms to Iran. Resolution
1747 called for — but did not require — U.N. member states to
exercise restraint in selling arms to Iran. A future resolution might
mandate such an arms sales ban. Another option under discussion is
to eliminate the Resolution 1737 exemption from sanctions for the
Bushehr nuclear reactor project, although Russian support for such
a move is in doubt.
! Imposing an International Ban on Purchases of Iranian Oil or Other
Trade. This is widely considered the most sweeping of sanctions that
might be imposed, and would be unlikely to be considered in the
Security Council unless Iran was found actively developing an actual
nuclear weapon. Virtually all U.S. allies conduct extensive trade
with Iran, and would oppose sanctions on trade in civilian goods
with Iran. A ban on oil purchases from Iran is unlikely to be
imposed because world oil prices remain nearly $100 per barrel and
could go far higher if such sanctions were imposed on Iran.
European/Japanese/Other Foreign Country Policy on Sanctions
and Trade Agreements. Although the United States and its allies are now mostly
aligned on Iran policy, some philosophical differences remain. Most U.S. allies still

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CRS-48
favor engagement and incentives — not just economic or political punishments —
as tools to change Iran’s behavior. During 1992-1997, when the United States was
tightening its own sanctions against Iran, the European Union (EU) countries
maintained a policy of “critical dialogue” with Iran, and the EU and Japan refused
to join the 1995 U.S. trade and investment ban on Iran. The European dialogue with
Iran was suspended in April 1997 in response to the German terrorism trial
(“Mykonos trial”) that found high-level Iranian involvement in killing Iranian
dissidents in Germany, but resumed in May 1998 during Khatemi’s presidency.
With Iran defiant on nuclear issues, the European countries, Japan, and other
countries have moved closer to the U.S. position. The EU is no longer negotiating
new trade agreements and other economic interaction with Iran, but rather it has
begun to implement some sanctions that exceed those mandated in Security Council
resolutions. For example, several EU countries are discouraging their companies
from making any new investments in or soliciting any new business with Iran. In
addition, several EU countries report that civilian trade with Iran is down because
Iran’s defiance on the nuclear issue is introducing more perceived risk to trading with
Iran. Negotiations with Iran on a “Trade and Cooperation Agreement” (TCA) are no
longer being held; such an agreement would have lowered the tariffs or increased
quotas for Iranian exports to the EU countries. During the active period of talks,
which began in December 2002, there were working groups focused not only on the
TCA terms and proliferation issues but also on Iran’s human rights record, Iran’s
efforts to derail the Middle East peace process, Iranian-sponsored terrorism, counter-
narcotics, refugees, migration issues, and the Iranian opposition PMOI.
Similarly, there is insufficient international support to grant Iran membership
in the World Trade Organization (WTO) until there is progress on the nuclear issue.
Iran first attempted to apply to join the WTO in July 1996. On 22 occasions after
that, representatives of the Clinton and then the Bush Administration blocked Iran
from applying (applications must be by consensus of the 148 members). As discussed
above, as part of an effort to assist the EU-3 nuclear talks with Iran, the
Administration announced on March 11, 2005, that it would drop opposition to Iran’s
applying for WTO membership. At a WTO meeting in May 2005, no opposition to
Iran’s application was registered, and Iran formally began accession talks.

As noted above, some EU countries say they have reduced credit guarantee
exposure to Iran since Resolution 1737 was passed in December 2006. The table at
the beginning of this paper lists some countries that have dramatically cut back credit
guarantees for Iran. Previously, the EU countries and their banks maintained that
financing for purely civilian goods is not banned by any U.N. resolution and that
exporters of such goods should not be penalized. In the 1990s, European and
Japanese creditors — over U.S. objections — rescheduled about $16 billion in
Iranian debt. These countries (governments and private creditors) rescheduled the
debt bilaterally, in spite of Paris Club rules that call for multilateral rescheduling.
Iran’s improved external debt led most European export credit agencies 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.

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CRS-49
World Bank Loans. The EU and Japan appear to have made new
international lending to Iran contingent on Iran’s response to international nuclear
demands. This represents a narrowing of past differences between the United States
and its allies on this issue. Acting under provisions of successive foreign aid laws,
in 1993 the United States voted its 16.5% share of the World Bank against loans to
Iran of $460 million for electricity, health, and irrigation projects, but the loans were
approved. To block that lending, the FY1994-FY1996 foreign aid appropriations
(P.L. 103-87, P.L. 103-306, and P.L. 104-107) cut the amount appropriated for the
U.S. contribution to the Bank by the amount of those loans. The legislation
contributed to a temporary halt in new Bank lending to Iran. During 1999-2005,
Iran’s moderating image had led the World Bank to consider new loans over U.S.
opposition. In May 2000, the United States’ allies outvoted the United States to
approve $232 million in loans for health and sewage projects. During April 2003-
May 2005, a total of $725 million in loans were approved for environmental
management, housing reform, water and sanitation projects, and land management
projects, in addition to $400 million in loans for earthquake relief. (A provision of
H.R. 1400 and S. 970, introduced in the 110th Congress, would impose a new
restriction on U.S. contributions to the World Bank in proportion to the Bank’s
lending to Iran.)
U.S. Sanctions
Any international or multilateral sanctions would add to the wide range of U.S.
sanctions in place since the November 4, 1979, seizure of the U.S. hostages in
Tehran.57 Some experts believe that, even before U.S. allies have begun to impose
some sanctions on Iran, U.S. sanctions alone were slowing Iran’s economy.58
However, a report on U.S. sanctions by the Government Accountability Office
(GAO), published December 2007 (GAO-08-58: Iran Sanctions: Impact in Furthering
U.S. Objectives Is Unclear and Should Be Reviewed ) found that the extent of the
impact on Iran is “difficult to determine.” The GAO studied said that, despite the
U.S. sanctions, Iran’s global trade has continued to expand from 1987 (when
sanctions first began to be imposed) to 2006, and that Iran had signed $20 billion in
energy investment deals with foreign firms, although these agreements might not
ultimately be carried out, as discussed below.
Terrorism/Foreign Aid Sanctions. In January 1984, following the October
1983 bombing of the U.S. Marine barracks in Lebanon (believed perpetrated by
Hezbollah) Iran was added to the “terrorism list.” The list was established by Section
6(j) of the Export Administration Act of 1979, sanctioning countries determined to
have provided repeated support for acts of international terrorism.
! The terrorism list designation restricts sales of U.S. dual use items
(Export Administration Act, as continued by executive order), and,
under other laws, bans direct U.S. financial assistance (Foreign
Assistance Act, FAA) and arms sales (Arms Export Control Act),
57 On November 14, 1979, President Carter declared a national emergency with respect to
Iran, renewed every year since 1979.
58 “The Fight Over Letting Foreigners Into Iran’s Oilfields.” The Economist, July 14, 2001.

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CRS-50
and requires the United States to vote to oppose multilateral lending
to the designated countries (Anti-Terrorism and Effective Death
Penalty Act of 1996, P.L. 104-132). Waivers are provided under
these laws, but successive foreign aid appropriations laws since the
late 1980s ban direct assistance to Iran (loans, credits, insurance,
Eximbank credits) without providing for a waiver.
! Section 307 of the FAA (added in 1985) names Iran as unable to
benefit from U.S. contributions to international organizations, and
require proportionate cuts if these institutions work in Iran. No
waiver is provided for.
! Under the Anti-Terrorism and Effective Death Penalty Act, the
President is required to withhold U.S. foreign assistance to any
country that provides to a terrorism list country foreign assistance or
arms. Waivers are provided.
! U.S. sanctions laws do not bar disaster aid and the United States
donated $125,000, through relief agencies, to help victims of two
earthquakes in Iran (February and May 1997), and another $350,000
worth of aid to the victims of a June 22, 2002 earthquake. (The
World Bank provided some earthquake related lending as well.) The
United States provided $5.7 million in assistance (out of total
governmental pledges of about $32 million, of which $17 million
have been remitted) to the victims of the December 2003 earthquake
in Bam, Iran, which killed as many as 40,000 people and destroyed
90% of Bam’s buildings. The United States flew in 68,000
kilograms of supplies to Bam with U.S. military aircraft.
! Executive Order 13324 (September 23, 2001) authorizes the
President to freeze the assets of and transactions with entities
determined to be supporting international terrorism. Iranian entities
named and sanctioned under this order are in the tables at the end of
this paper.
Proliferation Sanctions. Iran is prevented from receiving advanced
technology from the United States under relevant and Iran-specific anti-proliferation
laws.59 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, now called the Iran-Syria Non-Proliferation Act, or ISNA) 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 its control had not transferred any WMD or missile technology to
59 Such laws include the Atomic Energy Act of 1954 and the Energy Policy Act of 2005
(P.L. 109-58).

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CRS-51
Iran within the year prior. 60 (A provision of a Continuing Resolution for FY2009,
which would fund the U.S. government until March 2009, essentially waives this law
to allow NASA to continue to use Russian vehicles to access the International Space
Station.)
Reflecting a Bush Administration decision to impose sanctions for violations,
the Bush Administration has sanctioned numerous entities as discussed below. These
entities were sanctioned under the INA, the Iran-Iraq Arms Non-Proliferation Act of
1992 (P.L. 102-484), and another law, the Chemical and Biological Warfare
Elimination Act of 1991, for sales to Iran. Those entities are listed in Table 8.
As with previous years’ appropriations, the FY2008 foreign aid appropriation
(H.R. 2764, included in the omnibus appropriation, P.L 110-161) punishes the
Russian Federation for assisting Iran by withholding 60% of any U.S. assistance to
the Russian Federation unless it terminates technical assistance to Iran’s nuclear and
ballistic missiles programs. A provision of H.R. 1400 and of S. 970 would restrict
nuclear cooperation with Russia, under the Atomic Energy Act of 1954, if it
continues to assist Iran’s nuclear or advanced conventional weapons capabilities.
(The two bills refer to different sections of the Atomic Energy Act, however.)
Executive Order 13382 (June 28, 2005), allows the President to block the assets
of proliferators of weapons of mass destruction (WMD) and their supporters under
the authority granted by the International Emergency Economic Powers Act (IEEPA,
50 U.S.C. 1701 et seq.), the National Emergencies Act (50 U.S.C. 1601 et seq.), and
Section 301 of Title 3, United States Code. Iranian entities designated under E.O.
13382 are listed in Table 9 at the end of this paper.
Targeted Financial Measures by Treasury Department. U.S.
officials, particularly Undersecretary of the Treasury Stuart Levey, said the
Administration is having substantial success in separate unilateral efforts (“targeted
financial measures”) to persuade European governments and companies to stop
financing commerce with Iran on the grounds that doing so entails financial risk and
furthers terrorism and proliferation. Treasury and State Departments officials, in
April 17, 2008, testimony before the House Foreign Affairs Committee, said they had
persuaded at least 40 banks not to provide financing for exports to Iran or to process
dollar transactions for Iranian banks. Among those that have pulled out of Iran are
UBS and Credit Suisse (Switzerland), HSBC (Britain), Germany’s Commerzbank
A.G and Deutsche Bank AG. U.S. pressure has reportedly convinced Kuwaiti banks
to stop transactions with Iranian accounts,61 and South Korean banks are considering
doing the same. The International Monetary Fund and other sources report that these
measures are making it more difficult to fund energy industry and other projects in
60 The provision contains certain exceptions to ensure the safety of astronauts, but it
nonetheless threatened to limit U.S. access to the international space station after April
2006, when Russia started charging the United States for transportation on its Soyuz
spacecraft. Legislation in the 109th Congress (S. 1713, P.L. 109-112) amended the provision
in order to facilitate continued U.S. access and extended INA sanctions provisions to Syria.
61 Mufson, Steven and Robin Wright. “Iran Adapts to Economic Pressure.” Washington
Post, October 29, 2007.

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CRS-52
Iran, and particularly hurting small Iranian businesses who have to pay new fees and
premiums in order to collect on accounts earned by outside trade. The Organization
for Economic Cooperation and Development (OECD) in 2006 raised the financial
risk rating for Iran.
Some of these moves by European banks have come about by U.S. pressure. In
2004, the Treasury Department fined UBS $100 million for the unauthorized
movement of U.S. dollars to Iran and other sanctioned countries, and in December
2005, the Treasury Department fined Dutch bank ABN Amro $80 million for failing
to fully report the processing of financial transactions involving Iran’s Bank Melli
(and another bank partially owned by Libya).
In action intended to cut Iran off from the U.S. banking system, on September
8, 2006, the Treasury Department barred U.S. banks from handling any indirect
transactions (“U-turn transactions, meaning transactions with non-Iranian foreign
banks that are handling transactions on behalf of an Iranian bank) with Iran’s Bank
Saderat (see above), which the Administration accuses of providing funds to
Hezbollah.62 Bank Sepah is subject to asset freezes and transactions limitations as
a result of their naming as sanctionable entities under Resolution 1737 and 1747.
The Treasury Department extended that U-Turn restriction to all Iranian banks on
November 6, 2008.
Thus far, the Treasury Department has not gone so far as to sanction any bank
for dealing with Iran by designating it a “money laundering entity” under Section 311
of the USA Patriot Act, although some say that step has been threatened at times.
Nor has Treasury imposed any specific sanctions against Bank Markazi (Central
Bank) which, according to a February 25, 2008, Wall Street Journal story, is helping
other Iranian banks circumvent the U.S. and U.N. banking pressure. However, the
European countries reportedly oppose such a sanction as an extreme step with
potential humanitarian consequences, for example by preventing Iran from keeping
its currency stable. S. 3445, a Senate bill in the 110th Congress, and a counterpart
passed by the House on September 26, 2008 (H.R. 7112), call for this sanction.
U.S. Trade Ban/Subsidiaries. On May 6, 1995, President Clinton issued
Executive Order 12959 banning U.S. trade and investment in Iran.63 This followed
an earlier March 1995 executive order barring U.S. investment in Iran’s energy
sector. The trade ban was intended to blunt criticism that U.S. trade with Iran made
U.S. appeals for multilateral containment of Iran less credible. Each March since
1995, the U.S. Administration has renewed a declaration of a state of emergency that
triggered the investment ban. Some modifications to the trade ban since 1999 account
for the trade that does exist between the United States and Iran. (H.R. 1400, S. 970,
S. 3445, and H.R. 7112, see below, would reimpose many of the restrictions.)
62 Kessler, Glenn. “U.S. Moves to Isolate Iranian Banks.” Washington Post, September 9,
2006.
63 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.

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CRS-53
The following conditions and modifications, as administered by the Office of
Foreign Assets Control (OFAC) of the Treasury Department, apply:
! Some goods related to the safe operation of civilian aircraft may be
licensed for export to Iran, and as recently as September 2006, the
Bush Administration, in the interests of safe operations of civilian
aircraft, permitted a sale by General Electric of Airbus engine spare
parts to be installed on several Iran Air passenger aircraft (by
European airline contractors). H.R. 1400 would ban such sales of
spare parts.
! OFAC regulations do not permit U.S. firms to negotiate investment
deals with Iran or to trade Iranian oil overseas.
! Since April 1999, commercial sales of food and medical products to
Iran have been allowed, on a case-by-case basis and subject to
OFAC licensing. According to OFAC in April 2007, licenses for
exports of medicines to treat HIV and leukemia are routinely
expedited for sale to Iran, and license applications are viewed
favorably for business school exchanges, earthquake safety seminars,
plant and animal conservation, and medical training in Iran. Private
letters of credit can be used to finance approved transactions, but no
U.S. government credit guarantees are available, and U.S. exporters
are not permitted to deal directly with Iranian banks. The FY2001
agriculture appropriations law (P.L. 106-387) contained a provision
banning the use of official credit guarantees for food and medical
sales to Iran and other countries on the U.S. terrorism list, except
Cuba, although allowing for a presidential waiver to permit such
credit guarantees. Neither the Clinton Administration nor the Bush
Administration provided the credit guarantees. Iran bills in the 110th
Congress, such as H.R. 7112, do not ban such exports to Iran.
! In April 2000, the trade ban was further eased to allow U.S.
importation of Iranian nuts, dried fruits, carpets, and caviar. The
United States was the largest market for Iranian carpets before the
1979 revolution, but U.S. anti-dumping tariffs imposed on Iranian
products in 1986 dampened of many Iranian products. The tariff on
Iranian carpets is now about 3% - 6%, and the duty on Iranian caviar
is about 15%. In December 2004, U.S. sanctions were further
modified to allow Americans to freely engage in ordinary publishing
activities with entities in Iran (and Cuba and Sudan). As of mid-
2007, the product most imported from Iran by U.S. importers is
pomegranate juice concentrate. H.R. 1400, S. 970, S. 3445, and H.R.
7112 would re-impose the ban on importation of such goods.
! The 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.

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CRS-54
Subsidiaries. The trade ban does not bar subsidiaries of U.S. firms from
dealing with Iran, as long as the subsidiary has no operational relationship to the
parent company. Some U.S. companies have come under scrutiny for dealings by
their subsidiaries with Iran., S. 970, S. 3227, S. 3445, and three House-passed bills
(H.R. 1400, H.R. 7112, and H.R. 957) — would apply sanctions to the parent
companies of U.S. subsidiaries if those subsidiaries are directed or formed to trade
with Iran. Among subsidiaries of U.S. firms that trade with Iran are the following.
! On January 11, 2005, Iran said it had contracted with U.S. company
Halliburton, and an Iranian company, Oriental Kish, to drill for gas
in Phases 9 and 10 of South Pars. Halliburton reportedly provided
$30 million to $35 million worth of services per year through
Oriental Kish, leaving unclear whether Halliburton would be
considered in violation of the U.S. trade and investment ban or the
Iran Sanctions Act (ISA)64 — because the deals involved a
subsidiary of Halliburton (Cayman Islands-registered Halliburton
Products and Service, Ltd, based in Dubai). On April 10, 2007,
Halliburton announced that its subsidiaries had, as promised in
January 2005, completed all contractual commitments with Iran and
that it is no longer operating there, but Halliburton has said it is
setting up a headquarters in Dubai to pursue business in the region.
! General Electric (GE) announced in February 2005 that it would
seek no new business in Iran, and it reportedly is expected to wind
down the already agreed contracts by July 2008. GE was selling Iran
equipment and services for hydroelectric, oil and gas services, and
medical diagnostic projects through Italian, Canadian, and French
subsidiaries. The trade ban appears to bar any Iranian company from
buying a foreign company that has U.S. units.
! Subsidiaries of several other U.S. energy equipment firms are
apparently still in the Iranian market. These include Foster Wheeler,
Dresser Rand, Schlumberger, Natco Group, and Overseas
Shipholding Group. 65
! An Irish subsidiary of the Coca Cola company provides syrup for the
U.S.-brand soft drink to an Iranian distributor, Khoshgovar. Local
versions of both Coke and of Pepsi (with Iranian-made syrups) are
also marketed in Iran by distributors who licensed the recipes for
those soft drinks before the Islamic revolution and before the trade
ban was imposed on Iran.
64 “Iran Says Halliburton Won Drilling Contract.” Washington Times, January 11, 2005.
65 Prada, Paulo, and Betsy McKay. Trading Outcry Intensifies. Wall Street Journal, March
27, 2007; Brush, Michael. Are You Investing in Terrorism? MSN Money, July 9, 2007.

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The Iran Sanctions Act (ISA). The Iran Sanctions Act penalizes foreign (or
U.S.) investment of more than $20 million in one year in Iran’s energy sector.66 In the
109th Congress, H.R. 6198 was passed and then signed on September 30, 2006 (P.L.
109-293). This “Iran Freedom Support Act” extends ISA until December 31, 2011,
and dropped Libya from the law. It codified existing Iran sanctions, made exports
to Iran of WMD or advanced conventional weapons technology sanctionable, and
recommended (but did not mandate) a 180-day time limit for the Administration to
determine whether a project violates ISA. It did not change the menu of available
sanctions. As noted above, it also authorized additional funding for promoting
democracy in Iran. (See CRS Report RS20871, The Iran Sanctions Act, by Kenneth
Katzman.)
No projects have actually been sanctioned under ISA, and numerous investment
agreements with Iran since its enactment have helped Iran slow deterioration of its
energy export sector. (A chart illustrating the list of publicly announced investments
and investment decisions is contained in CRS Report RS20871, The Iran Sanctions
Act).
H.R. 1400, passed by the House on September 25, 2007, would remove the
Administration’s ability to waive application of sanctions under ISA. A companion
Senate measure, S. 970, does not contain a similar provision, nor do S. 3445 or H.R.
7112. The Administration opposes that provision on the grounds that requiring
sanctions on allied companies would divide the United States and its allies on Iran
policy. However, H.R. 1400 does not impose on the Administration a time limit to
determine whether a project is sanctionable. H.R. 1400, S. 970, S. 3227, S. 3445,
H.R. 7112, and H.R. 957 would amend the definitions of sanctionable entities to
include official credit guarantee agencies, such as France’s COFACE and Germany’s
Hermes, and both bills would also clearly apply ISA sanctions to pipeline and
liquified natural gas (LNG) projects. H.R. 1400 would require the president to select
a ban procurement from a sanctioned entity as one of the two sanctions to impose.
Divestment. A growing trend not only in Congress but in several states is to
require or call for or require divestment of shares of firms that have invested in Iran’s
energy sector (at the same levels considered sanctionable under the Iran Sanctions
Act).67 Pending legislation, H.R. 1400, does not require divestment, but requires a
presidential report on firms that have invested in Iran’s energy sector. Another bill,
H.R. 1357, would require government pension funds to divest of shares in firms that
have made ISA-sanctionable investments in Iran’s energy sector and bar government
and private pension funds from future investments in such firms. Two other bills,
H.R. 2347 (passed by the House on July 31, 2007) and S. 1430, would protect mutual
fund and other investment companies from shareholder action for any losses that
66 Originally called the Iran-Libya Sanctions Act, or ILSA; P.L. 104-172, August 5, 1996.
It was renewed by P.L. 107-24, August 3, 2001; renewed again for two months by P.L. 109-
267; and renewed and amended by P.L. 109-293.
67 For information on the steps taken by individual states, see National Conference of State
Legislatures. State Divestment Legislation.

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CRS-56
would occur from divesting in firms that have investing in Iran’s energy sector. S.
3445 and H.R. 7112 contain extensive provisions to encourage divestment from Iran.
110th Congress Comprehensive Sanctions Legislation: H.R. 1400,
S. 970, S. 3227, S. 3445, H.R. 7112, H.Con.Res. 362, and S.Res. 580.
Legislation pending in the 110th Congress — primarily the Iran Counter-Proliferation
Act of 2007, H.R. 1400 and S. 970, and variants such as S. 3227, S. 3445, and H.R.
7112 (a House version of S. 3445) — would attempt to compel foreign adoption of
tighter sanctions against Iran. Their provisions on the Iran Sanctions Act were noted
above. In addition, these bills would broaden the types of foreign entities (to include
official credit guarantee agencies, for example) and projects (liquified natural gas,
LNG) that could be sanctioned by the United States for dealings with Iran. Versions
of some of these bills might, according to observers, be introduced in the 111th
Congress.
H.R. 1400, passed by the House on September 25, 2007 by a vote of 397-16,
would remove presidential waiver authority to avoid sanctioning such companies.
It would also mandate cuts in U.S. contributions to the World Bank for lending to
Iran and preventing Russia from obtaining a nuclear agreement with the United States
if it continues supplying nuclear technology to Iran. S. 3445 and H.R. 7112 seek
instead to prevent the diversion of WMD-related technology via such countries as the
UAE. H.R. 1400, S. 970, S. 3445, and H.R. 7112 would would rescind the easing
of the U.S. trade ban with Iran. H.R. 7112 was passed by the House on September
26, 2008, by unanimous consent but was not taken up in the Senate.
H.Con.Res. 362 expresses the sense of Congress for imposition of strong
additional sanctions, including sanctioning Iran’s Central Bank, imposing sanctions
under the Iran Sanctions Act, banning gasoline exports to Iran, and strict inspections
for all cargo, vehicles, and persons leaving or entering Iran. Some consider this
provision as tantamount to committing aggression against Iran, since Iran would view
such a strict embargo as an act of war. It has not been brought to a floor vote. S.Res.
580 does not call for a ban on gasoline exports to Iran or for a comprehensive
inspections regime.
Counter-Narcotics. 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. This exempts Iran from the annual certification process that kept drug-
related U.S. sanctions in place on Iran. According to several governments, over the
past few years Iran has augmented security on its border with Afghanistan in part to
prevent the flow of narcotics from that country into Iran. Britain has sold Iran some
night vision equipment and body armor for the counter-narcotics fight. Iran also
reportedly is providing aid to Afghan farmers to grow crops other than poppy.
Travel-Related Guidance. Use of U.S. passports for travel to Iran is
permitted. Iranians entering the United States are required to be fingerprinted, and
Iran has imposed reciprocal requirements. In May 2007, the State Department

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increased its warnings about U.S. travel to Iran, based largely on the arrests of the
dual Iranian-American nationals discussed earlier.
Status of Some U.S.-Iran Assets Disputes. A U.S.-Iran Claims Tribunal
at the Hague continues to arbitrate cases resulting from the 1980 break in relations
and freezing of some of Iran’s assets. Major cases yet to be decided center on
hundreds of Foreign Military Sales (FMS) cases between the United States and the
Shah’s regime, which Iran claims it paid for but were unfulfilled. About $400 million
in proceeds from the resale of that equipment was placed in a DOD FMS account,
and about $22 million in Iranian diplomatic property remains blocked, although U.S.
funds have been disbursed — credited against the DOD FMS account — to pay
judgments against Iran for past acts of terrorism against Americans. Other disputes
include the mistaken U.S. shoot-down on July 3, 1988, of an Iranian Airbus
passenger jet (Iran Air flight 655), for which the United States, in accordance with
an ICJ judgment, paid Iran $61.8 million in compensation ($300,000 per wage
earning victim, $150,000 per non-wage earner) for the 248 Iranians killed. The
United States has not compensated Iran for the airplane itself. As it has in past similar
cases, the Administration has opposed a terrorism lawsuit against Iran by victims of
the U.S. Embassy Tehran seizure on the grounds of diplomatic obligation.68
Conclusion
Mistrust between the United States and Iran’s Islamic regime has run deep for
over two decades. Many experts say that all factions in Iran are united on major
national security issues and that U.S.-Iran relations might not improve unless or until
the Islamic regime is removed or moderates substantially, even if a nuclear deal is
reached and implemented. The Administration and many experts believe that Iran
has become emboldened by the installation of pro-Iranian regimes in Iraq and
Afghanistan, and the new strength of Hezbollah in Lebanon, and that Iran now seeks
to press its advantage to strengthen regional Shiite movements and possibly drive the
United States out of the Gulf. Others reach an opposite conclusion, stating that Iran
now feels more encircled than ever by pro-U.S. regimes and U.S. forces guided by
a policy of pre-emption, and Iran is redoubling its efforts to develop WMD and other
capabilities to deter the United States. Some say that, despite Ahmadinejad’s
presidency, the United States and Iran have a common interest in stability in the
Persian Gulf and South Asia regions in the aftermath of the defeat of the Taliban and
the regime of Saddam Hussein and that major diplomatic overtures to Iran should be
explored.
68 See CRS Report RL31258, Suits Against Terrorism States by Victims of Terrorism, by
Jennifer K. Elsea.

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CRS-58
Figure 1. Structure of the Iranian Government

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CRS-59
Figure 2. Map of Iran
Source: Map Resources. Adapted by CRS (April 2005).

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CRS-60
Table 9. Entities Sanctioned Under U.N. Resolutions and
U.S. Laws and Executive Orders
(Persons listed are identified by the positions they held when designated;
some have since changed.)
Entities Named for Sanctions Under Resolution 1737
Atomic Energy Organization
Mesbah Energy Company (Arak
Kalaye Electric
of Iran (AEIO)
supplier)
(Natanz supplier)
Pars Trash Company
Farayand Technique
Defense Industries
(centrifuge program)
(centrifuge program)
Organization (DIO)
7th of Tir
Shahid Hemmat Industrial Group
Shahid Bagheri
(DIO subordinate)
(SHIG) — missile program
Industrial Group
(SBIG)
missile program
Fajr Industrial Group
Mohammad Qanadi, AEIO Vice
Behman Asgarpour
(missile program)
President
(Arak manager)
Dawood Agha Jani
Ehsan Monajemi
Jafar Mohammadi
(Natanz official)
(Natanz construction manager)
(adviser to AEIO)
Ali Hajinia Leilabadi
Lt. Gen. Mohammad Mehdi Nejad
Gen Hosein Salimi
(director of Mesbah Energy)
Nouri
(Commander, IRGC
(Malak Ashtar University of
Air Force)
Defence Technology rector)
Ahmad Vahid Dastjerdi
Reza Gholi Esmaeli
Bahmanyar Morteza
(head of Aerospace
(AIO official)
Bahmanyar
Industries Org., AIO)
(AIO official)
Maj. Gen. Yahya Rahim
Safavi (Commander in Chief,
IRGC)
Entities Added by Resolution 1747
Ammunition and Metallurgy
Esfahan Nuclear Fuel Research and
Kavoshyar Company
Industries Group
Production Center and Esfahan
(subsidiary of AEIO)
(controls 7th of Tir)
Nuclear Technology Center
Parchin Chemical Industries
Karaj Nuclear Research Center
Novin Energy
(branch of DIO)
Company
Cruise Missile Industry
Bank Sepah
Sanam Industrial Group
Group
(funds AIO and subordinate
(subordinate to AIO)
entities)
Ya Mahdi Industries Group
Qods Aeronautics Industries
Pars Aviation Services
(produces UAV’s, para-gliders for
Company
IRGC asymmetric warfare)
(maintains IRGC Air
Force equipment)
Sho’a Aviation
Fereidoun Abbasi-Davani
Mohasen Fakrizadeh-
(produces IRGC light aircraft
(senior defense scientist)
Mahabai
for asymmetric warfare)
(defense scientist)
Seyed Jaber Safdari
Amir Rahimi
Mohsen Hojati
(Natanz manager)
(head of Esfahan nuclear facilities)
(head of Fajr Industrial
Group)
Mehrdada Akhlaghi
Naser Maleki
Ahmad Derakshandeh
Ketabachi (head of SBIG)
(head of SHIG)
(head of Bank Sepah)

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CRS-61
Brig. Gen. Morteza Reza’i
Vice Admiral Ali Akbar Ahmadiyan
Brig. Gen. Mohammad
(Deputy commander-in-chief,
(chief of IRGC Joint Staff)
Reza Zahedi
IRGC)
(IRGC ground forces
commander)
Rear Admiral Morteza Safari
Brig. Gen. Mohammad Hejazi
Brig. Gen. Qasem
(commander, IRGC Navy)
(Basij commander)
Soleimani
(Qods Force
commander)
Gen. Mohammad Baqr
Zolqadr
(IRGC officer serving as
deputy Interior Minister
Entities Added by Resolution 1803
Thirteen Iranians named in
Abzar Boresh Kaveh Co.
Barzaganin Tejaral
Annex 1 to Resolution 1803;
(centrifuge production)
Tavanmad Saccal
all reputedly involved in
various aspects of nuclear
program
Electro Sanam Co.
Ettehad Technical Group
Industrial Factories of
(AIO front co.)
Precision
Jabber Ibn Hayan
Joza Industrial Co.
Khorasan Metallurgy
Industries
Niru Battery Manufacturing
Pshgam (Pioneer) Energy Industries
Safety Equipment
Co.
Procurement
(Makes batteries for Iranian
(AIO front, involved in
military and missile systems)
missiles)
Tamas Co.
(involved in uranium
enrichment)
Entities Designated Under U.S. Executive Order 13382
(many designations coincident with designations under U.N. resolutions)
Entity
Date Named
Shahid Hemmat Industrial Group (Iran)
June 2005, Sept. 07
Shahid Bakeri Industrial Group (Iran)
June 2005
Atomic Energy Organization of Iran
June 2005
Novin Energy Company (Iran)
January 2006
Mesbah Energy Company (Iran)
January 2006
Four Chinese entities: Beijing Alite Technologies, LIMMT
June 2006
Economic and Trading Company, China Great Wall Industry Corp,
and China National Precision Machinery Import/Export Corp.
Sanam Industrial Group (Iran)
July 2006
Ya Mahdi Industries Group (Iran)
July 2006
Bank Sepah (Iran)
January 2007
Defense Industries Organization (Iran)
March 2007
Pars Trash (Iran, nuclear program)
June 2007
Farayand Technique (Iran, nuclear program)
June 2007
Fajr Industries Group (Iran, missile program)
June 2007

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CRS-62
Mizan Machine Manufacturing Group (Iran, missile prog.)
June 2007
Aerospace Industries Organization (AIO) (Iran)
Sept. 2007
Korea Mining and Development Corp. (N. Korea)
Sept. 2007
Islamic Revolutionary Guard Corps (IRGC)
October 21, 2007
Ministry of Defense and Armed Forces Logistics
October 21, 2007
Bank Melli (Iran’s largest bank, widely used by the Guard); Bank
October 21, 2007
Melli Iran Zao (Moscow); Melli Bank PC (U.K.)
Bank Kargoshaee
October 21, 2007
Arian Bank (joint venture between Melli and Bank Saderat). Based
October 21, 2007
in Afghanistan
Bank Mellat (provides banking services to Iran’s nuclear sector);
October 21, 2007
Mellat Bank SB CJSC (Armenia). Reportedly has $1.4 billion in
assets in UAE
Persia International Bank PLC (U.K.)
October 21, 2007
Khatam ol Anbiya Gharargah Sazendegi Nooh (Revolutionary Guard
October 21, 2007
construction, contracting arm, with $7 billion in oil, gas deals
Oriental Oil Kish (Iranian oil exploration firm)
October 21, 2007
Ghorb Karbala; Ghorb Nooh (synonymous with Khatam ol Anbiya)
October 21, 2007
Sepasad Engineering Company (Guard construction affiliate)
October 21, 2007
Omran Sahel (Guard construction affiliate)
October 21, 2007
Sahel Consultant Engineering (Guard construction affiliate)
October 21, 2007
Hara Company
October 21, 2007
Gharargahe Sazandegi Ghaem
October 21, 2007
Bahmanyar Morteza Bahmanyar (AIO, Iran missile official, see
October 21, 2007
above under Resolution 1737)
Ahmad Vahid Dastjerdi (AIO head, Iran missile program)
October 21, 2007
Reza Gholi Esmaeli (AIO, see under Resolution 1737)
October 21, 2007
Morteza Reza’i (deputy commander, IRGC) See also Resolution
October 21, 2007
1747
Mohammad Hejazi (Basij commander). Also, Resolution 1747
October 21, 2007
Ali Akbar Ahmadian (Chief of IRGC Joint Staff). Resolution 1747
October 21, 2007
Hosein Salimi (IRGC Air Force commander). Resolution 1737
October 21, 2007
Qasem Soleimani (Qods Force commander). Resolution 1747
October 21, 2007
Future Bank (Bahrain-based but allegedly controlled by Bank Melli)
March 12, 2008
Yahya Rahim Safavi (former IRGC Commander in Chief
July 8, 2008
Mohsen Fakrizadeh-Mahabadi (senior Defense Ministry scientist)
July 8, 2008
Dawood Agha-Jani (head of Natanz enrichment site)
July 8, 2008
Mohsen Hojati (head of Fajr Industries, involved in missile program)
July 8, 2008
Mehrdada Akhlaghi Ketabachi (heads Shahid Bakeri Industrial
July 8, 2008
Group)
Naser Maliki (heads Shahid Hemmat Industrial Group)
July 8, 2008

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CRS-63
Tamas Company (involved in uranium enrichment)
July 8, 2008
Shahid Sattari Industries (makes equipment for Shahid Bakeri)
July 8, 2008
7th of Tir (involved in developing centrifuge technology)
July 8, 2008
Ammunition and Metallurgy Industries Group (partner of 7th of Tir)
July 8, 2008
Parchin Chemical Industries (deals in chemicals used in ballistic
July 8, 2008
missile programs)
Karaj Nuclear Research Center
August 12, 2008
Esfahan Nuclear Fuel Research and Production Center (NFRPC)
August 12, 2008
Jabber Ibn Hayyan (reports to Atomic Energy Org. of Iran, AEIO)
August 12, 2008
Safety Equipment Procurement Company
August 12, 2008
Joza Industrial Company (front company for Shahid Hemmat
August 12, 2008
Industrial Group, SHIG)
Islamic Republic of Iran Shipping Lines (IRISL) and 18 affiliates,
September 10, 2008
including Val Fajr 8; Kazar; Irinvestship; Shipping Computer
Services; Iran o Misr Shipping; Iran o Hind; IRISL Marine Services;
Iriatal Shipping; South Shipping; IRISL Multimodal; Oasis; IRISL
Europe; IRISL Benelux; IRISL China; Asia Marine Network;
CISCO Shipping; and IRISL Malta
Firms affiliated to the Ministry of Defense, including Armament
September 17, 2008
Industries Group; Farasakht Industries; Iran Aircraft Manufacturing
Industrial Co.; Iran Communications Industries; Iran Electronics
Industries; and Shiraz Electronics Industries
Export Development Bank of Iran. Provides financial services to
October 22, 2008
Iran’s Ministry of Defense and Armed Forces Logistics
Entities Sanctioned Under Executive Order 13224 (Terrorism Entities)
Qods Force
October 21, 2007
Bank Saderat (allegedly used to funnel Iranian money to Hezbollah,
October 21, 2007
Hamas, PIJ, and other Iranian supported terrorist groups)
Entities Sanctioned Under the Iran Non-Proliferation Act and other U.S. Proliferation
Laws
Norinco (China). For alleged missile technology sale to Iran.
May 2003
Taiwan Foreign Trade General Corporation (Taiwan)
July 4, 2003
Tula Instrument Design Bureau (Russia). For alleged sales of laser-
September 17, 2003
guided artillery shells to Iran.
13 entities sanctioned including companies from Russia, China,
April 7, 2004
Belarus, Macedonia, North Korea, UAE, and Taiwan.
14 entities from China, North Korea, Belarus, India (two nuclear
September 29, 2004
scientists, Dr. Surendar and Dr. Y.S.R. Prasad), Russia, Spain, and
Ukraine.
14 entities, mostly from China, for alleged supplying of Iran’s missile
December 2004 and
program. Many, such as North Korea’s Changgwang Sinyong and
January 2005
China’s Norinco and Great Wall Industry Corp, have been sanctioned
several times previously. Newly sanctioned entities included North
Korea’s Paeksan Associated Corporation, and Taiwan’s Ecoma
Enterprise Co.

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CRS-64
9 entities, including those from China (Norinco yet again), India (two
December 26, 2005
chemical companies), and Austria. Sanctions against Dr. Surendar of
India (see September 29, 2004) were ended, presumably because of
information exonerating him.
7 entities. Two Indian chemical companies (Balaji Amines and Prachi
August 4, 2006
Poly Products); two Russian firms (Rosobornexport and aircraft
manufacturer Sukhoi); two North Korean entities (Korean Mining and
Industrial Development, and Korea Pugang Trading); and one Cuban
entity (Center for Genetic Engineering and Biotechnology).
9 entities. Rosobornesksport, Tula Design, and Komna Design Office
January 2007
of Machine Building, and Alexei Safonov (Russia); Zibo Chemical,
China National Aerotechnology, and China National Electrical (China).
Korean Mining and Industrial Development (North Korea) for WMD
or advanced weapons sales to Iran (and Syria).
14 entities, including Lebanese Hezbollah. Some were penalized for
April 23, 2007
transactions with Syria. Among the new entities sanctioned for assisting
Iran were Shanghai Non-Ferrous Metals Pudong Development Trade
Company (China); Iran’s Defense Industries Organization; Sokkia
Company (Singapore); Challenger Corporation (Malaysia); Target
Airfreight (Malaysia); Aerospace Logistics Services (Mexico); and Arif
Durrani (Pakistani national).
13 entities: China Xinshidai Co.; China Shipbuilding and Offshore
October 23, 2008
International Corp.; Huazhong CNC (China); IRGC; Korea Mining
Development Corp. (North Korea); Korea Taesong Trading Co. (NK);
Yolin/Yullin Tech, Inc. (South Korea); Rosoboronexport (Russia sate
arms export agency); Sudan Master Technology; Sudan Technical
Center Co; Army Supply Bureau (Syria); R and M International FZCO
(UAE); Venezuelan Military Industries Co. (CAVIM);
Entities Designated as Threats to Iraqi Stability under Executive Order 13438
Ahmad Forouzandeh. Commander of the Qods Force Ramazan
January 9, 2008
Headquarters, accused of fomenting sectarian violence in Iraq and of
organizing training in Iran for Iraqi Shiite militia fighters
Abu Mustafa al-Sheibani. Iran based leader of network that funnels
January 9, 2008
Iranian arms to Shiite militias in Iraq.
Isma’il al-Lami (Abu Dura). Shiite militia leader, breakaway from Sadr
January 9, 2008
Mahdi Army, alleged to have committed mass kidnapings and planned
assassination attempts against Iraqi Sunni politicians
Mishan al-Jabburi. Financier of Sunni insurgents, owner of pro-
January 9, 2008
insurgent Al-Zawra television, now banned
Al Zawra Television Station
January 9, 2008

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