Washington Tightens the Screws

An Overview of U.S. Statutes and Executive Orders Related to Iran
May 1, 2012

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The pace and severity of economic sanctions against Iran has increased in recent weeks, with the United States and its allies targeting Iran's primary source of revenue: crude oil sales. As a result of measures adopted in the past month, Europe and some Asian countries are expected to reduce or end oil imports from Iran by July. For countries and companies that fail to do so, the United States will be prepared to block foreign banks that continue to do business with Iran - including with its central bank and including oil trade - from maintaining a presence in the United States. The United States has also enacted measures that require blocking the property of Iranian government and financial institutions that are within U.S. jurisdiction, as well the property of entities that help Iran violate sanctions. There is a growing consensus that such harsh sanctions are now needed in order to have any hope of preventing Iran from crossing the nuclear weapon threshold.

In this context, it is worth recalling the breadth of U.S. laws restricting trade with and punishing proliferation to Iran, and the chronology of their implementation. These restrictions are an important part of the U.S. strategy to contain Iran's efforts to build mass destruction weapons, to limit its support for international terrorism, and to punish its human rights abuses. They have also served as guidance to other countries seeking to use sanctions to affect Iranian behavior. In July 2010, for instance, the European Union, and the governments of Australia and Canada adopted measures that target the development of Iran's energy sector and its ability to access the international financial system. These governments have also sanctioned hundreds of Iranian entities linked to Iran's nuclear and missile work, many of which had been previously identified by the United States.

U.S. restrictions on general trade and investment with Iran were successively tightened via executive orders in 1987, 1995 and 1997, culminating in the near total embargo that exists today. These efforts have been supplemented by laws that target proliferation to Iran specifically, such as the Iran-Iraq Nonproliferation Act and the statute passed in 2000 as the Iran Nonproliferation Act. In October 2006, the Iran Freedom Support Act (IFSA) amended a 1996 statute to include strong penalties for proliferation to Iran. IFSA also builds on a movement to block Iran from raising funds for proliferation by expanding an anti-terrorism money laundering statute to allow its use against entities involved in proliferation.

The Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA), signed into law in June 2010, authorizes penalties against firms that help Iran develop its petroleum and natural gas infrastructure, firms that sell gasoline to Iran, and firms that help Iran purchase gasoline by providing shipping, insurance or financing services. This Act also bars firms involved in sanctionable activity from U.S. government procurement contracts, and authorizes state and local governments to divest from firms involved in Iran's energy sector. More recently, Executive Order 13590 broadens sanctions to cover Iran's petroleum and petrochemical industries as a whole. And a measure attached to the National Defense Authorization Act of 2012 adds tools to penalize Iran's central bank and the foreign banks with which it does business.

Presented below are the U.S. laws that establish the trade and investment embargo and that punish those who support Iran's proliferation efforts, the development of its energy sector, and human rights abuses. Wherever possible, an entry contains information on laws that have been superseded or consolidated.

2012: Executive Order 13608
Authorizes sanctions on foreign entities determined to be complicit in violating or attempting to violate U.S. sanctions against Iran or Syria, or to have facilitated transactions on behalf of entities subject to U.S. sanctions concerning Iran or Syria. The Order prohibits transactions involving the sanctioned entity and bars their access to the U.S. commercial and financial systems. It also blocks sanctioned individuals from entering the United States.

2012: Executive Order 13606
Targets entities determined to be involved in or to have enabled "serious human rights abuses" by or on behalf of the Iranian or Syrian governments via information technology, including through the sale or provision of items "likely to be used to facilitate computer or networking disruption, monitoring, or tracking." The Order authorizes a freeze on all assets in the United States of designated entities, as well as on their assets controlled by U.S. persons, including foreign branches of U.S. companies. The Order also blocks sanctioned individuals from entering the United States. Pursuant to the Order, sanctions were imposed on Iran's Ministry of Intelligence and Security, Iran's Islamic Revolutionary Guard Corps (IRGC), Iran's Law Enforcement Forces, and Datak Telecom.

2011: National Defense Authorization Act for Fiscal Year 2012 (NDAA)
Designates the financial sector of Iran, including the Central Bank of Iran, as a primary money laundering concern, and freezes the assets in the United States of Iranian financial institutions. Prohibits foreign financial institutions (including government-owned banks) from opening or in most cases maintaining in the United States a correspondent or payable-through account if the financial institution is determined to have "knowingly" conducted any "significant" transaction with Iran's central bank or any other U.S.-sanctioned Iranian financial institution. The law includes a 60 day reporting requirement on the availability and price of petroleum and petroleum products. Financial transactions related to the sale or purchase of petroleum may be exempt if a determination is made that there is insufficient supply from countries other than Iran, or if a country with primary jurisdiction over the foreign financial institution in question has significantly reduced its volume of petroleum purchases from Iran. The President may also waive sanctions for national security reasons in renewable increments of 120 days, after submitting a report to Congress that details the justification and concrete cooperation received or expected as a result of the waiver.

An Executive Order signed on February 6, 2012, implements section 1245(c) of the NDAA by blocking all Iranian government property, as well as the property of any Iranian financial institution, including Iran's central bank, that is in the United States or within control of U.S. persons. U.S. financial institutions are now required to freeze such transactions whereas previous measures only required rejecting them. The Order also delegates certain authorities to the Secretaries of the Treasury and State for implementing sanctions against foreign financial institutions that engage in "significant" financial transactions with any U.S.-sanctioned Iranian financial institution.

2011: Executive Order 13590
Authorizes the imposition of sanctions on entities determined to have knowingly provided goods, services, technology, or support that "directly and significantly" contribute to Iran's development of petroleum resources or to the maintenance or expansion of its petrochemical industry. Specifically, targets parties whose support for Iran's development of petroleum resources exceeds a fair market value of $1 million in a single transaction, or $5 million in one year; and parties whose support for the maintenance or expansion of Iran's petrochemical sector exceeds a fair market value of $250,000 in a single transaction, or $1 million in one year. Possible sanctions include prohibitions on banking transactions, foreign exchange transactions, property transactions in the United States, loans from U.S. financial institutions in excess of $10 million, U.S. government procurement, receiving U.S. export licenses and imports into the United States, U.S. Export-Import Bank financing, and serving as a primary dealer or as a repository of U.S. government funds.

2010: Executive Order 13553
Blocks the property and interests in property in the United States of Iranian government officials and other persons acting on behalf of the Government of Iran determined to be responsible for or complicit in "serious" human rights abuses. Also blocks the property of persons that have materially assisted in or provided support for such abuses.

2010: Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA)
Amends the Iran Sanctions Act of 1996 by adding three new penalties and requiring the imposition of at least three penalties on persons that knowingly invest in or support the development of petroleum resources in Iran, export refined petroleum products to Iran, or enhance Iran's ability to produce or import such products. Requires all prospective contractors for the U.S. government to certify that they are not involved in any sanctionable activities and prohibits heads of executive agencies from procuring goods or services from entities that export telecommunication and similar sensitive technology to Iran. Further restricts U.S. imports from and exports to Iran, with limited exceptions. Prohibits foreign financial institutions from maintaining accounts in the United States if these institutions knowingly facilitate the Iranian government's effort to develop mass destruction weapons or support designated terrorist organizations, or if these institutions facilitate "significant transactions" for Iran's Revolutionary Guard Corps. Bars any entity owned or controlled by a domestic financial institution from dealing with Iran's Revolutionary Guard Corps. Establishes criteria for U.S. states to prohibit the investment of public funds in entities that invest in Iran's energy sector. Requires the President to submit bi-annual reports on investments in Iran's energy sector to Congress as well as reports on the sanctionable activities of foreign export credit agencies and financing of those agencies by the Export-Import Bank of the United States. Requires the President to designate a country as a Destination of Diversion Concern if the country allows substantial diversion of U.S.-origin items, or of any sensitive good, service, or technology, to an Iranian end-user or intermediary. Creates a license requirement for U.S. exports to such designated countries, though this requirement can be waived annually for countries taking steps to end diversion to Iran. Requires the President to report to Congress the national security interests served by any waivers of sanctions or licensing requirements.

E.O. 13574, signed on May 23, 2011, provides enforcement authority for the implementation of the five sanctions regulating private conduct set forth in the Iran Sanctions Act, as amended by CISADA, including: prohibitions on the extension of credit or loans by any U.S. financial institution, foreign exchange transactions, banking transactions, property transactions in the United States, and restrictions or prohibitions on imports of goods, technology, or services into the United States.

2006: Iran Freedom Support Act
Renames the Iran and Libya Sanctions Act of 1996 as the Iran Sanctions Act of 1996, and extends it until 2011. Codifies restrictions on U.S. trade and investment in Iran imposed through Executive Orders 12957, 12959 and 13059. Amends an anti-terrorism money laundering statute to allow its use against entities involved in the proliferation of weapons of mass destruction.

2005: Executive Order 13382
Blocks the assets of entities that engaged in or attempted to engage in activities that made a material contribution, or that posed a risk of materially contributing to the proliferation of mass destruction weapons and their means of delivery. Also blocks the assets of agents and subsidiaries and those who aid such entities, and prohibits U.S. persons from dealing with them.

2000 et seq.: Iran, North Korea, and Syria Nonproliferation Act
Authorizes sanctions on foreign entities that knowingly traffic to or from Iran, North Korea or Syria in goods, services, or technology that materially contributes to those countries' development of nuclear, biological, or chemical weapons, or ballistic or cruise missiles. Sanctions include a ban on U.S. government assistance, on the sale of U.S. Munitions List items, and on U.S. government procurement, the denial of U.S. dual-use exports that require a license and the suspension of all such existing licenses. Sanctions on an entity are also applicable to any successor, subsidiary or subunit entity.

This Act was first passed as the Iran Nonproliferation Act of 2000, and included a prohibition on "extraordinary payments" to Russia associated with the International Space Station unless Russia demonstrated "a sustained commitment to seek out and prevent the transfer" of weapons of mass destruction related goods, services or technology to Iran. The Act's application was extended to Syria through the Iran Nonproliferation Amendments Act of 2005, which also authorized penalties against proliferators from the countries identified in the statute, loosened requirements to allow for U.S. payments to the Russian space agency and broadened the Act's penalties to also apply to foreign governments. The Act was broadened to include North Korea in 2006.

1997: Executive Order 13059
Consolidates and clarifies Executive Orders 12957 and 12959 to confirm that virtually all (with exceptions for some existing licenses) trade and investment activities with Iran by U.S. entities, wherever located, are prohibited. This includes indirect sales, sales through third countries and reexports to Iran. These restrictions on U.S. trade with Iran are administered by the Treasury Department through the Iranian Transaction Regulations.

E.O. 12957, published in early 1995, barred U.S. companies from developing petroleum resources in Iran. The Order declared a national emergency with respect to Iran pursuant to the International Emergency Economic Powers Act; the emergency has been renewed annually since then. Shortly thereafter, E.O. 12959 barred virtually all U.S. trade with and investment in Iran, as well as the reexport of U.S. goods to Iran through third nations. Restrictions in these three Executive Orders were also codified by the Iran Freedom Support Act in 2006.

1996: Iran Sanctions Act
Initially aimed at preventing Iran from using petroleum resources to fund its unconventional weapon programs and to support terrorism. Authorizes sanctions on entities that knowingly: invest over $20 million a year in the development of Iran's petroleum resources; provide goods, services, technology, information, or support valued at or above $1 million (or with an aggregate value of $5 million or more within one year), which allow Iran to maintain or expand its production of refined petroleum products; export to Iran refined petroleum products valued at or above $1 million (or with an aggregate value of $5 million or more within one year), or whose support enhances Iran's ability to import refined petroleum products (including insurance and shipping companies); or, make a material contribution to Iran's ability to acquire or develop mass destruction weapons or destabilizing amounts or types of conventional weapons. Barring certain exceptions, the President is required to impose three of nine penalties on the sanctioned entity. Penalties include the denial of any exports from the United States that require U.S. government review or an export license, a ban on U.S. government procurement, limits on loan assistance, transfers of credit, or payments from U.S. financial institutions, a prohibition on transactions in foreign exchange or relating to property subject to U.S. jurisdiction, and restrictions on imports to the United States. The act also prohibits (with exceptions) transfers of nuclear technology to countries with governments that have primary jurisdiction over a person or company sanctioned for nuclear weapon-related transfers to Iran. And it requires all prospective contractors for the U.S. government to certify that they are not involved in any sanctionable activities.

This Act was first passed in 1996 as the Iran and Libya Sanctions Act (ILSA) and was amended and extended in 2001. In 2006, the Act was extended until December 31, 2011, and was amended, among other things, to remove its application to Libya and to apply proliferation-related sanctions to Iran. In 2010, the Act was extended until December 31, 2016 and amended to create additional penalties and to inhibit Iran's ability to produce or import refined petroleum products.

1994 et seq.: Executive Order 12938
Consolidates and supersedes previous Executive Orders regarding proliferation. Gives the Secretaries of State and Commerce the power to control exports that help countries "develop, produce, stockpile, deliver, or use" mass destruction weapons and their means of delivery, and authorizes penalties against foreign entities for mass destruction weapon and missile proliferation. Penalized foreign persons are barred from selling their goods in the United States and to the U.S. government, and from receiving U.S. assistance. Foreign countries that acquire or use chemical or biological weapons are barred from receiving U.S. assistance and U.S. defense and national security-sensitive goods, and are restricted from receiving U.S. exports and from selling their goods in the United States.

E.O. 12938 superseded and revoked the 1990 Executive Order 12735, which declared the proliferation of chemical and biological weapons a national emergency. That Order provided the authority to sanction foreign persons for contributing to chemical and biological weapons proliferation and foreign countries that have used, prepared to use, or developed such weapon. E.O. 12938 was itself amended and expanded in 1998 by E.O. 13094, which clarified that foreign entities would be penalized for proliferation of all mass destruction weapons or missiles, and added a ban on U.S. government assistance to such entities.

1994: Nuclear Proliferation Prevention Act
Prohibits U.S. government procurement from entities found to have materially contributed (through exports) to the efforts of another entity or non-nuclear weapon state to acquire a nuclear weapon or unsafeguarded special nuclear material. Sanctions are also applicable to any successor entity, as well as parents, subsidiaries or affiliates knowingly assisting in the proliferation activities.

1994 et seq.: Nuclear proliferation sanctions of the Arms Export Control Act
Prohibits economic assistance to countries which provide or receive nuclear enrichment goods or technology outside multilateral auspices; to countries which provide or receive nuclear reprocessing goods or technology; and to non-nuclear weapon states that receive illegal U.S. exports intended to make a material contribution to building a nuclear weapon. Also bans U.S. financial assistance, and military and dual-use exports, to countries knowingly involved in helping a non-nuclear weapon state make or use a nuclear weapon.

1992: Iran-Iraq Nonproliferation Act
Authorizes the President to sanction persons or countries that knowingly and materially contribute to efforts by Iran or Iraq to acquire weapons of mass destruction and advanced conventional weapons. Mandatory sanctions against persons include a ban on U.S. government contracts and on buying or selling goods that require a U.S. export license. Foreign countries are barred from receiving U.S. government assistance, from purchasing items on the U.S. Munitions List, and are suspended from military and dual-use technical cooperation agreements with the United States. Also prohibits military and commercial arms sales and exports of controlled dual-use and nuclear goods to Iran. Sanctions are also applicable to any successor, parent or subsidiary.

1991: Chemical or biological weapons proliferation sanctions
of the Arms Export Control Act

Authorizes sanctions against foreign persons who knowingly and materially contribute to the use, development, production, acquisition or stockpiling of chemical or biological weapons by certain countries or entities. Sanctions must be applied for at least one year and include a ban on contracts with the U.S. government and a prohibition on imports to the United States. Sanctions are also applicable to any successor or affiliate, as well parents who knowingly assist in the proliferation activities.

1990 et seq.: Missile proliferation sanctions of the Arms Export Control Act
Authorizes sanctions against foreign entities (or U.S. entities acting illegally) and any successor entities that knowingly transfer, conspire or attempt to transfer, or facilitate the transfer of missile technology to countries that are not members of the Missile Technology Control Regime (MTCR). Sanctions for MTCR category I transfers include a ban on U.S. government contracts and on purchases of U.S. Munitions List items for at least two years. Sanctions for MTCR category II transfers include a two year ban on U.S. government contracts relating to missiles and a ban on purchases of missile-related technology. A sanctioned foreign entity may also be barred from selling its goods in the United States for at least two years, if its activities "substantially contributed" to missile development in a non-MTCR country.

1987: Executive Order 12613
Bans imports of Iranian goods and services, because of Iran's support for terrorism and its military action against neutral shipping in the Persian Gulf. The import ban and other restrictions on U.S. trade with Iran are administered by the Treasury Department through the Iranian Transaction Regulations.

1984: Iran designated as a state sponsor of terrorism
Countries so designated by the Secretary of State are subject to restrictions on U.S. foreign assistance, to a ban on U.S. defense exports and sales, to controls over U.S. exports of dual use items, and to various financial and other restrictions. The State Sponsors of Terrorism list currently includes Cuba, Iran, North Korea, Sudan and Syria.

1981: Algiers Accords
Trade restrictions are relaxed with the signing of an agreement to release the hostages and to create an Iran-U.S. Claims Tribunal in the Hague.

1979: Executive Order 12170
Declares a national emergency during the hostage crisis and blocks property interests linked to the government of Iran. The emergency has been renewed annually since that time.