Possible Additional Sanctions on Iran

Possible Additional Sanctions on Iran

January 8, 2018
Possible Additional Sanctions on Iran
Overview
would likely complicate U.S. relations with the parent
For nearly four decades, U.S. sanctions have constituted a
governments of foreign firms and entities.
key component of U.S. policy toward Iran. U.S. “secondary
sanctions” on foreign firms that conduct transactions with
Some of the U.N. Security Council resolutions that were in
Iran have been a significant feature of those sanctions since
effect before the JCPOA was implemented in January
1996. The July 2015 multilateral nuclear agreement with
2016—and were superseded by U.N. Security Council
Iran (Joint Comprehensive Plan of Action, JCPOA) resulted
Resolution 2231—called on, but did not require, member
in a broad easing of multilateral sanctions—and U.S.
states to undertake voluntary measures, such as exercising
secondary sanctions—on Iran’s core economic sectors.
restraint on providing loans and other credits to Iran. Some
Language in the JCPOA’s preamble, as well as in
of the possible additional Iran sanctions discussed below
Paragraph 26 of the document, commits the United States
would make such measures binding.
and other parties to the JCPOA to “refrain from” imposing
new “nuclear-related” sanctions similar to those that have
Possible Additional Sanctions
been lifted, or re-imposing sanctions lifted to implement the
Sanctioning Iranian Profiteers and Human Rights
JCPOA. “Nuclear-related sanctions” are widely interpreted
Abusers. Some experts believe that the international
to mean sanctions on Iran’s core economic sectors
community, or even the United States alone, should more
(banking, energy, shipping, insurance, auto production, and
aggressively target Iranians who are exploiting any special
other manufacturing), because the U.N. Security Council, in
privileges, monopolies, or political contacts for economic
Resolution 1929 (June 2010), authorized member states to
gain at the expense of average Iranians. In the context of the
impose sanctions on those sectors in order to compel Iran to
deaths of 21 persons during December 2017-January 2018
negotiate limitations on its nuclear program. To the extent
protests in Iran, Trump Administration officials have
that the possible sanctions discussed below target Iran’s
indicated they would back additional sanctions on Iranian
core economic sectors, other parties to the JCPOA could
human rights abusers and on foreign firms that help the
view many of them as imposing new “nuclear-related”
Iranian government suppress social media and other
sanctions on Iran.
communication outlets. There are already extensive U.S.
and EU sanctions in place against Iranian human rights
Sanctions tied to other issues, such as human rights or
abusers. The most recent enacted, the Countering
Iran’s sponsorship of terrorist groups, have not targeted
America’s Adversaries through Sanctions Act, signed on
Iran’s core civilian economic sectors and remain in force
August 2, 2017 (P.L. 115-44) authorizes, but does not
not only by the United States but by the European Union
require, U.S. sanctions on persons responsible for gross
(EU) and other powers as well, although the effect these
violations of human rights in Iran. A provision of the Iran
remaining sanctions have on Iranian behavior is widely
Freedom and Counter-Proliferation Act (Title XII, subtitle
assessed as limited. The existing or suspended sanctions
D, of the FY2013 National Defense Authorization Act, P.L.
discussed in this report are analyzed in substantially more
112-239) imposes U.S. sanctions on persons determined to
depth in CRS Report RS20871, Iran Sanctions, by Kenneth
have engaged in corruption or diverted or misappropriated
Katzman.
humanitarian goods or funds. Other countries, however,
generally have not imposed any sanctions on Iran for
Even before Iran accepted modest curbs on its nuclear
corruption or profiteering. In addition, provisions of the
program in a 2013 interim nuclear accord (Joint Plan of
Global Magnitsky Human Rights Accountability Act (title
Action, JPOA), the sanctions options discussed below did
XII, subtitle F of the FY2017 NDAA, P.L. 114-328) could
not receive broad international support and were not
be applied to named Iranian human rights abusers and
implemented. U.S. partners and other stakeholders are
corrupt government officials.
unlikely to impose many or all of the sanctions discussed
below unless Iran is seen to have abrogated the JCPOA.
Sanctioning All Trade with Iran. Some organizations,
The potential sanctions are materially different from - and
such as United against Nuclear Iran, as well as other
many are more extensive than - those sanctions imposed on
experts, advocate restrictions on most trade and investment
Iran from 2010-2016 and which were eased in the course of
with Iran and continue to try to persuade firms not to do
implementing the JCPOA. The imposition of such new
business with Iran. U.S. partners and many other countries
sanctions would presumably have increased effect if they
have consistently opposed a global Iran trade ban or any
are enshrined in a U.N. Security Council resolution that
U.S. measures that would try to compel firms from allied
would require member states to undertake such measures.
countries to end most general commerce with Iran.
Absent Security Council action, the United States could
impose secondary sanctions aimed at compelling foreign
Comprehensive Ban on Energy Transactions with Iran.
entities to take the specified actions against Iran. However,
Though short of a comprehensive global trade ban, a U.N.-
U.S. attempts to compel action through secondary sanctions
mandated, worldwide embargo on the purchase of any
Iranian crude oil would undoubtedly put significant
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Possible Additional Sanctions on Iran
pressure on Iran’s economy. A less extensive measure
Restricting Lending to Iran by International Financial
could ban all investment in and equipment sales to Iran’s
Institutions. U.N. Security Council Resolution 1747
energy sector. During 2012-2016, the European Union (EU)
(March 2007) called for U.N. member states to exercise
banned imports of Iranian oil, and Iran’s major oil
“restraint” on— but did not outright ban—international
customers in Asia sharply cut purchases from Iran. These
lending to Iran. The Resolution was superseded by U.N.
countries undertook these steps in part to comply with U.S.
Security Council Resolution 2231 when the JCPOA was
secondary sanctions but also in part because of the view,
implemented in January 2016 and thus no longer applies.
articulated by their leaders, that economic pressure on Iran
The United States retains the sanctions that bar the United
could compel it to bargain in earnest on limitations to its
States from voting for such international lending, but the
nuclear program.
United States can be, and sometimes has been, outvoted in
international lending institutions – allowing such loans to
Figure 1. GDP Growth and Oil Production in Iran
proceed. An option is for the U.N. Security Council to
Before and After Sanctions Relief
institute a mandatory ban on such international lending to
Iran. Some U.S. groups advocate for the International
Monetary Fund (IMF) to withdraw all its holdings in Iran’s
Central Bank and suspend Iran’s membership in the body.
Banning Official Credits for Trade Financing or
Investment in Iranian Sovereign Debt. Another option is
to mandate a worldwide ban on official trade credit
guarantees. U.N. Security Council Resolution 1803 (March
2008) called upon U.N. member states to “exercise
vigilance in entering into new commitments for public
provided financial support for trade with Iran, including the
granting of export credits guarantees, or insurance...”
However, few, if any, countries denied such credits to Iran
until the adoption of U.N. Security Council Resolution
1929 (June 2010) that gave U.N. endorsement for
worldwide sanctions on Iran’s core economic sectors. A
ban on investment in Iranian bonds reportedly was
Sources: EIA; IMF
considered during Security Council debate on that

resolution. Resolution 1929 was superseded by Resolution
2231 to implement the JCPOA.
Mandating Reductions in Diplomatic and Other
Exchanges with Iran or Prohibiting Travel by Iranian
Restricting Operations of and Insurance for Iranian
Officials. One option could be to impose a worldwide ban
Shipping. One option, reportedly under consideration
on travel by senior Iranian civilian officials, a pullout of all
during 2010-2016, was to impose a mandatory worldwide
diplomatic missions in Tehran, and expulsion of Iranian
ban on provision of insurance or reinsurance for any
diplomats worldwide. The EU reportedly considered this
shipping to or from Iran. Many of the world’s major
option after the November 2011 attack on the British
shipping insurers are based in Europe, and the EU banned
Embassy in Tehran. This tool has recently been used in an
such insurance during 2012-2016. A call for restraint in
effort to pressure North Korea on its nuclear and missile
providing such insurance (non-mandatory) was contained in
programs: in late 2017, the U.N. Security Council adopted a
U.N. Security Council Resolution 1929. For comparison,
requirement for all member states to severely limit the
the U.N. Security Council prohibits member states from
number of diplomats, staff size, banking activities, and use
insuring North Korea-flagged vessels, and further prohibits
of physical property of North Korean diplomatic facilities.
states from owning, leasing, operating, chartering, or
A related option is to limit sports or cultural exchanges with
providing certification services to North Korean vessels.
Iran, such as Iran’s participation in the World Cup soccer
tournament or the Olympics. Whereas some observers
Creating an “Iran Oil-Free Zone.” Prior to the EU
assert that Iran should be isolated to the extent possible,
imposition of a ban on oil purchases from Iran in 2012,
many oppose using sports to advance political goals.
experts were discussing the possibility of closing the
loophole in the general U.S. ban on imports from Iran under
Banning Passenger Flights to and from Iran. An option
which U.S. refiners could import oil that had some Iranian
is a worldwide ban on international passenger flights to and
content because it is mixed with other countries’ oils at
from Iran. Such bans have been imposed on other countries,
foreign refineries. Although this is a sanction that the
including Libya for issues related to the 1988 downing of
United States could implement unilaterally, EU and other
Pan Am 103 by Libyan agents. A variation of this idea
countries might perceive such a step as deterring them from
could be the imposition of a ban on international flights by
purchasing Iranian oil, and major buyers of Iranian oil
only Iran-owned airlines, or sanctions against airlines that
might argue that it is inconsistent with the JCPOA.
are in joint ventures or codeshare arrangements with Iranian
airlines.
Kenneth Katzman, Specialist in Middle Eastern Affairs
IF10801
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Possible Additional Sanctions on Iran

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Possible Additional Sanctions on Iran

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