The Iran Sanctions Act (ISA), which first passed Congress in 1996, provides the basic architecture of the sanctions regime imposed on Iran, playing the essential role in American efforts to prevent Tehran from achieving a nuclear weapons capability. The crippling sanctions that Congress envisioned took years to build, and required several additions to the legislation to be fully implemented. With Iran’s economy virtually in free fall as a result of sanctions, Iran was finally compelled to come to the negotiating table in November 2013 to limit its nuclear program.
The Iran Sanctions Act law, however, expires in December 2016 unless Congress votes to extend it; reauthorization is crucial to ensure that sanctions waived under the Joint Comprehensive of Action (JCPOA) will be on the books should a “snap back” of sanctions be necessary as a result of Iran violations of the deal. ISA reauthorization would also provide Congress with leverage in situations that merit sanctions, in turn ensuring more robust enforcement. The legislation’s history demonstrates that the executive branch has often been reticent to bring the full weight of sanctions against Iran. Subsequent Congressional efforts to strengthen the bill played a key role in compelling the U.S. government to fully enforce ISA.
The Iran Sanctions Act was conceived and introduced in 1995 as a response to Iran’s burgeoning nuclear program, its support for international terrorism, and its ballistic missile program. At that time, the Iranian-backed terrorist organization Hezbollah was known to have carried out the 1994 bombing of a Jewish community center in Buenos Aires. Iran was also believed to have played a role in a spate of terrorist attacks targeting Israeli civilians perpetrated by Hamas and Palestinian Islamic Jihad in opposition to the Oslo peace process.
The final version of the bill passed in 1996 as the Iran-Libya Sanctions Act (ILSA), which subjected to sanctions foreign entities investing over $40 million in one year in support of Iran’s energy sector (and after a year’s time, $20 million), as well as those aiding Tehran’s attempts to acquire weapons of mass destruction and advanced conventional weapons.
The European Union (EU) immediately posed a stumbling block to ILSA implementation, which they viewed as an extraterritorial imposition of U.S. law. Seeking to avoid a trade dispute, the Clinton administration waived ILSA sanctions on the first project determined to violate the bill—a $2 billion contract for Total SA (France) and its minority partners, Gazprom (Russia) and Petronas (Malaysia), to develop two phases of Iran’s South Pars gas field. In exchange, the EU pledged to enhance counter-proliferation and counter-terrorism cooperation with the United States. The waiver set a negative precedent—other EU companies sought similar waivers, and subsequent projects in Iran commenced without incurring U.S. Treasury Department sanctions determinations.
In 2006, ILSA was renamed the Iran Sanctions Act (ISA), as sanctions against Libya were dropped. Congress also adopted companion legislation—the Iran Freedom Support Act (IFSA)—that was intended to bolster ISA. IFSA extended for five years existing sanctions on foreign companies investing more than $20 million per year in Iran’s petroleum sector. It also codified executive orders barring U.S. firms from doing business in and with Iran, strengthened U.S. authority to sanction entities aiding Iran’s nuclear program, urged the administration to probe investments in Iran’s petroleum sector, and discouraged the signing of nuclear cooperation pacts with countries assisting Iran’s atomic program.
But it was not until 2010 that Congress passed significant sanctions legislation that led to ISA enforcement. The Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) of 2010 identified a key vulnerability in the sanctions regime: Iran was a net importer of refined petroleum for its domestic needs due to its lack of sufficient refining capacity. CISADA amended ISA by making it a sanctionable offense to export more than $5 million of refined petroleum to Iran. It also broadened the definition of investment in Iran’s oil sector to include goods, services, or provision of technology.
In 2011, President Barack Obama imposed the first sanctions under ISA, targeting the sale of technology and refined petroleum to Iran. President Obama also enacted a special rule to allow companies to end their investments in Iran’s energy sector without facing penalties for their violations.
And in 2012, Congress passed the Iran Threat Reduction and Syria Human Rights Act, which, coupled with previously passed legislation, placed virtually Iran’s entire energy and financial sector under sanction. The law prevented Tehran from repatriating any of its earnings from oil sales back to Iran and sanctioned any shipping company for helping Iran evade sanctions.
The strengthened sanctions legislation and the Obama Administration’s nascent enforcement efforts soon began to take a crippling toll on Iran’s economy. Energy investment dried up and Iran was unable to make desperately needed repairs to its oil and gas infrastructure. Oil exports fell below 1979 levels. Iran faced hyperinflation and dramatically rising unemployment as a result of the U.S.-led international sanctions effort. By November 2013, the Iranian regime was desperate for sanctions relief, spurring its decision to come to the negotiating table to resolve the nuclear impasse with the P5+1 (the United States, United Kingdom, France, Russia, China and Germany).
The resulting agreement, known as the Joint Comprehensive Plan of Action (JCPOA), placed significant restrictions on Iran’s nuclear program for up to 15 years in exchange for waiving energy-related sanctions targeting foreign entities. The JCPOA provides a mechanism for re-imposing sanctions, “snap-back”, should Iran violate its commitments. U.S. companies, however, are still prohibited from doing almost any kind of business transactions with Iran.
Today, it is crucial that Congress reauthorize ISA to ensure that the sanctions architecture remains in place so that there is something to snap-back to if Iran violates the deal. In addition to targeting Iran’s nuclear program, ISA sanctions Iran for its support of terrorism and ballistic missile program—ISA provides key legal underpinnings to enable Congress to sanction Iran for its malign non-nuclear related activities and to target its suppliers of advanced conventional arms. These provisions will expire and go off the books if ISA is not renewed by the end of this year.
Reauthorizing ISA will send the clearest possible signal to Tehran that Congress is vigilantly scrutinizing its actions, and that there is a steep price to pay for failing to fulfill its nuclear commitments. However, failure to reauthorize would signal that the United States may not respond effectively or quickly to Iranian violations of the JCPOA.
It took crippling sanctions to compel Iran to restrain its nuclear program. The United States must maintain the leverage ISA offers as the best prospect that Tehran will honor the JCPOA. ISA renewal is the strongest guarantor that the full weight of U.S. sanctions policy will be applied if Iran attempts to abrogate the agreement.
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