Academic journal article Current Politics and Economics of the Middle East

Iran Sanctions *

Academic journal article Current Politics and Economics of the Middle East

Iran Sanctions *

Article excerpt

OVERVIEW

This report analyzes various U.S. sanctions in place against Iran, and their relationship to each other as well as to U.N. sanctions imposed since 2006 because of Iran's continued nuclear program development. A particular focus of this report is the Iran Sanctions Act (ISA), which has been the focus of differences of opinion between the United States and its European allies. Some of the congressional proposals, over the past few years, to expand ISA's application have also been the basis of discussion between the United States and other countries (-P5+1" multilateral working group on Iran-United States, France, Britain, Russia, China, plus Germany)-about possible new U.N. sanctions against Iran's energy sector. These sanctions are under consideration because Iran has refused to accept details of a plan, reached during October 1, 2009, talks between Iran and the P5+1, to send most of its enriched uranium out of Iran for reprocessing into medical uses.

Although the Obama Administration has emphasized potential benefit of direct engagement with Iran, it has not altered any U.S. sanctions on Iran. President Obama renewed for another year the U.S. trade and investment ban on Iran (Executive Order 12959) in March 2009. Section 7043 of P.L. 111-8, the FY09 omnibus appropriation, (signed March 8, 2009) required, within 180 days, an Administration report on U.S. sanctions, including which companies are believed to be violators, and what the Administration is doing to enforce sanctions on Iran. That deadline was October 8, 2009; the required report has not been published to date. A provision of the FY2010 National Defense Authorization Act (P.L. 111-84) requires an Administration report, not later than January 31, 2010, on U.S. enforcement of sanctions against Iran, and the effect of those sanctions on Iran.

The Iran Sanctions Act (ISA)

The Iran Sanctions Act (ISA) is one among many U.S. sanctions in place against Iran. However, it has attracted substantial attention because it authorizes penalties against foreign firms, and because several bills pending in the 111th Congress propose amending the Act to curtail additional types of activity, such as selling gasoline to Iran or associated shipping services. In the past, the parent countries of such firms, many of which are incorporated in Europe, have tended to object to sanctions such as ISA, even though European countries generally share the U.S. goal of ensuring that Iran does not become a nuclear power. American firms are restricted from trading with or investing in Iran under separate U.S. executive measures.

Originally called the Iran and Libya Sanctions Act (ILSA), ISA was enacted to complement other measures-particularly Executive Order 12959 of May 6, 1995, that banned U.S. trade with and investment in Iran-intended to deny Iran the resources to further its nuclear program and to support terrorist organizations such as Hizbollah, Hamas, and Palestine Islamic Jihad. Iran's petroleum sector generates about 20% of Iran's GDP, but its onshore oil fields and oil industry infrastructure are aging and need substantial investment. Its large natural gas resources (940 trillion cubic feet, exceeded only by Russia) were undeveloped when ISA was first enacted. Iran has 136.3 billion barrels of proven oil reserves, the third largest after Saudi Arabia and Canada.

In 1995 and 1996, U.S. allies did not join the United States in enacting trade sanctions against Iran, and the Clinton Administration and Congress believed that it might be necessary for the United States to try to deter their investment in Iran. The opportunity to do so came in November 1995, when Iran opened its energy sector to foreign investment. To accommodate its ideology to retain control of its national resources, Iran used a -buy-back" investment program in which foreign firms recoup their investments from the proceeds of oil and gas discoveries but do not receive equity. With input from the Administration, on September 8, 1995, Senator Alfonse D'Amato introduced the -Iran Foreign Oil Sanctions Act" to sanction foreign firms' exports to Iran of energy technology. …

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