Iran and Special Drawing Rights (SDRs)

Iran and Special Drawing Rights (SDRs)

link to page 1

December 8, 2023
Iran and Special Drawing Rights (SDRs)
The October 7, 2023, attack by Hamas (a U.S.-designated
Iran’s SDRs
foreign terrorist organization) on Israel and the ensuing
Since 2001, Iran has held more SDRs than it has been
conflict have increased U.S. government scrutiny on Iran, a
allocated (Figure 1). Countries with surplus SDRs (where
longtime backer of Hamas. The United States maintains
holdings exceed allocation) have purchased SDRs from
broad economic sanctions against Iran and, following the
other members in exchange for hard currencies—that is,
attacks on Israel, some Members have taken renewed
countries with surplus SDRs have provided liquidity
interest in further limiting the government of Iran’s access
support to other countries. The data suggests that Iran has
to international sources of financing.
not liquidated its SDRs for at least two decades, in order to
The government of Iran’s holdings of about $6.6 billion in
gain hard currencies.
special drawing rights (SDRs) at the International Monetary
Fund (IMF) have emerged as a particular interest for
Figure 1. Iran’s Holdings and Allocations of SDRs
Congress. Some Members have expressed concerns about
Iran’s SDRs through proposed legislation, letters to the
Biden Administration, congressional hearings, and public
statements.
What are Special Drawing Rights?
Created by IMF members in 1969, SDRs are international
reserve assets. SDRs are different from other reserve assets,
however, because SDRs are not physical assets (like gold or
silver) and SDRs are not a currency (like dollars or euros,
which governments can use to buy things).
Instead, SDRs are claims to the freely-useable currencies
(like dollars and euros, also called hard currencies) of IMF

members. If a government cannot access hard currency
Source: Figure created by CRS using data from the IMF’s
through international markets at a reasonable rate, it can sell
International Financial Statistics.
some or all of its SDRs to another government in exchange
Notes: Abrupt upticks in 2009 and 2021 reflect new SDR al ocations.
for hard currency. In this way, SDRs provide liquidity
As of end-October 2023, Iran’s SDR holdings totaled about
support to governments.
$6.6 billion, while its SDR allocation totaled about $6.4
To date, IMF members have created SDRs totaling about
billion. Iran’s share of SDRs is 0.73%.
$878 billion. The IMF generally allocates SDRs in
proportion to the size of a member’s economy. The United
Countries with surplus SDR holdings earn interest on these
holdings. In August 2023, the IMF paid Iran a quarterly
States has the largest SDR allocation, about $153 billion
interest payment of about $1.8 million on Iran’s surplus
(17.4%).
SDR holdings and added it to its SDR holdings. The data
The SDR as a Unit of Account
suggests that the Iranian government has not converted that
interest into useable currencies.
The IMF sets the value of an SDR using a basket of major
currencies, currently the U.S. dol ar, the euro, the renminbi
U.S. Policy
(RMB), the yen, and the pound sterling. The IMF publishes the
Two provisions in U.S. law require the Secretary of the
exchange rate between SDRs and other currencies daily.
Treasury to instruct the U.S. Executive Director (USED) at
The IMF uses the SDR as a unit of account—meaning that the
the IMF to oppose SDR transactions with any government
IMF reports monetary values in SDRs, rather than dol ars,
that supports acts of international terrorism (often referred
euros, or other currency. For example, the IMF reports the
to as state-sponsors of terrorism [SSOTs]; see text box on
size of its loans in terms of SDRs rather than dol ars.
next page). The State Department has designated the
The values discussed throughout this report are based on
government of Iran as an SSOT since 1984.
values reported by the IMF in SDRs and converted to U.S.
Additionally, in 2021, the Treasury Department emphasized
dol ars by CRS using the SDR/$ exchange rate of 1.329 on
that it retains the right to refuse SDR transactions with any
December 7, 2023. Values noted in dol ars are
country whose policies run counter to U.S. interests.
approximations because they fluctuate with exchange rates.
The United States cannot prohibit another country from
engaging in SDR transactions with Iran. U.S. sanctions on
Iran, however, authorize sanctions on foreign entities that
https://crsreports.congress.gov

Iran and Special Drawing Rights (SDRs)
engage in transactions with Iran’s central bank. SDR
(whereby new SDRs are created and allocated to all
transactions usually occur between central banks, and a
members in proportion to IMF quota) below a certain
country whose central bank engages in an SDR transaction
threshold (currently about $633 billion), without
with Iran could potentially face U.S. sanctions.
congressional authorization (22 USC 286q(a)). Congress
could require congressional authorization for the United
SDRs and State-Sponsors of Terrorism
States to support any SDR allocation that would include
Section 1621 of the International Financial Institutions
increasing Iran’s SDR allocation. Congress could also go
Act (P.L. 95-118, added by P.L. 104-132; 22 USC 262p-4q)
further and prohibit U.S. support for such an allocation. The
requires the Secretary of the Treasury to instruct the U.S.
United States has unique veto power over all SDR
Executive Director at each international financial institution
allocations; as a result, SDR allocations cannot go forward
(including the IMF) to use the voice and vote of the United
without U.S. support.
States to oppose “any loan or other use of the funds” to an
Some Members have introduced legislation in the 118th
SSOT.
Congress related to some of these options (see text box).
Sec. 7090(a) of the Department of State, Foreign
Operations, and Related Programs Act, 2010 (division F
Iran and SDRS: Select Legislation in the
of P.L. 111-117) requires the Secretary of the Treasury to
118th Congress
instruct the U.S. Executive Director at the IMF to oppose
No Dollars for Dictators Act of 2023 (S. 3057). Would
providing hard currencies in exchange for SDR assets to an
amend the Special Drawing Rights Act to require Congress’
SSOT. Congress has since extended this requirement annually,
authorization for the United States to support an increase in
most recently in P.L. 117-328 at section 7054(a) (136 Stat.
SDRs for SSOTs or perpetrators of genocide.
5076).
IMF Accountability Act of 2023 (S. 3150). Would amend
the Special Drawing Rights Act to require Congress’
Options for Congress
authorization for the United States to vote to allocate SDRs
to specific countries of concern, including Iran.
Although the data suggests that Iran has not liquidated its
SDR holdings in at least two decades, some Members are
Hamas Sanctions Act of 2023 (S. 3166). Would require
seeking additional assurances that Iran cannot utilize its
reporting and sanctions on entities engaging in SDR
SDR resources. Congress would have several options for
transactions with Iran.
pursuing such assurances, including:
Special Drawing Rights Oversight Act of 2023 (H.R.
605). Would require congressional authorization for the
Make permanent Sec. 7090(a) of the Department of
United States to support an allocation of SDRs to SSOTs or
State, Foreign Operations, and Related Programs Act,
perpetrators of genocide.
2010. To remain in force, this provision currently needs to
be renewed annually. Congress could incorporate the
No Support for Terror Act (H.R. 689). Would amend
requirement permanently into legislation that governs U.S.
the Bretton Woods Agreements Act to require the Secretary
participation in the international financial institutions (IFIs).
of the Treasury to instruct the U.S. Executive Director to the
IMF to oppose SDR allocations for SSOTs or perpetrators of
Require real-time notification of any countries
genocide.
transacting SDRs with Iran. The IMF publishes data on
No U.S. Financing for Iran Act of 2023 (H.R. 5921).
SDR holdings at the end of each month. The Administration
Would direct the Secretary of the Treasury to instruct the
may have more timely insight into SDR transactions
U.S. Executive Director to the IMF to oppose the allocation of
through its interactions with the Fund. Congress could
new SDRs to Iran and to work with other IMF members to
require the Administration to report to Congress, upon
block Iran’s access to its SDR holdings.
discovery, any SDR transactions involving Iran.
No Funds for Iran-Backed Terror Act (H.R. 5994).
Require the Administration to report to Congress on the
Would clarify that Section 1621 of the International Financial
United States’ Voluntary Trade Arrangement (VTA)
Institutions Act applies to SDRs, and would direct the
with the IMF. VTAs are bilateral agreements between an
Treasury Secretary to instruct the USED of the IMF to use its
SDR participant and the IMF to buy or sell SDRs within
voice and vote to prevent Iran from using its SDRs.
certain limits. Congress could request details from the
Administration about how the United States’
End Financing for Hamas and State Sponsors of
VTA
Terrorism Act (H.R. 6322). Amends permanent law stated
addresses potential SDR transactions with countries of
in 31 U.S.C. to prohibit the Secretary of the Treasury from
concern, including Iran.
using U.S. SDRs for transactions with any SSOT.
Explicitly link SDR transactions with Iran and
secondary sanctions. Congress could pass legislation

requiring the Administration to impose sanctions on the
central bank of a foreign government that engages in an
Rebecca M. Nelson, Specialist in International Trade and
SDR transaction with Iran, or report to Congress on why
Finance
such sanctions have not been imposed.
Martin A. Weiss, Specialist in International Trade and
Require congressional authorization for the allocation of
Finance
new SDRs to Iran. Under current U.S. law, the
IF12541
Administration can support “general” SDR allocations
https://crsreports.congress.gov

Iran and Special Drawing Rights (SDRs)

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.

https://crsreports.congress.gov | IF12541 · VERSION 1 · NEW