Iran Sanctions

Successive Administrations have used economic sanctions to try to change Iran’s behavior. U.S. sanctions, including “secondary sanctions” on firms that conduct certain transactions with Iran, have adversely affected Iran’s economy but have had little observable effect on Iran’s pursuit of core strategic objectives such as its support for regional armed factions and its development of ballistic and cruise missiles.

During 2012-2015, when the global community was relatively united in pressuring Iran economically, Iran’s economy shrank as its crude oil exports fell by more than 50%, and Iran had limited access to its $120 billion in assets abroad. Iran accepted the 2015 multilateral nuclear accord (Joint Comprehensive Plan of Action, JCPOA) in part because it brought broad relief through the waiving of relevant sanctions, revocation of relevant executive orders (E.O.s), and the lifting of U.N. and EU sanctions. Remaining in place were a U.S. sanctions on trade with Iran, Iran’s support for regional governments and armed factions, its human rights abuses, its efforts to acquire missile and advanced conventional weapons capabilities, and the Islamic Revolutionary Guard Corps (IRGC).

Under U.N. Security Council Resolution 2231, which enshrined the JCPOA, there were nonbinding U.N. restrictions on Iran’s development of nuclear-capable ballistic missiles and a binding ban on its importation or exportation of arms remained in place. The later ban expires on October 18, 2020.

The sanctions relief enabled Iran to increase its oil exports to nearly pre-sanctions levels, regain access to foreign exchange reserve funds and reintegrate into the international financial system, achieve about 7% yearly economic growth (2016-17), attract foreign investment, and buy new passenger aircraft. Sanctions are at the core of Trump Administration policy to apply “maximum pressure” on Iran, with the stated purpose of compelling Iran to negotiate a revised JCPOA that takes into account the broad range of U.S. concerns about Iran.

On May 8, 2018, President Trump announced that the United States would no longer participate in the JCPOA and all U.S. secondary sanctions were reimposed as of November 6, 2018. The effect of the reinstatement has been to drive Iran’s economy into severe recession as major companies have exited the Iranian economy. Iran’s oil exports have decreased dramatically—particularly after the Administration in May 2019 ended sanctions exceptions for the purchase of Iranian oil—and the value of Iran’s currency has declined sharply.

Since the summer of 2019, the Administration has sanctioned numerous entities that are supporting Iran’s remaining oil trade, added sanctions on Iran’s Central Bank, and sanctioned several senior Iranian officials. In 2019, the Administration ended several of the waivers under which foreign governments provided technical assistance to some JCPOA-permitted aspects of Iran’s nuclear program. The European Union and other countries have sought to keep the economic benefits of the JCPOA flowing to Iran in order to persuade Iran to remain in the accord.

In January 2019, the European countries created a trading mechanism (Special Purpose Vehicle) that circumvents U.S. secondary sanctions, and the EU countries are contemplating providing Iran with $15 billion in credits, secured by future oil deliveries, to facilitate the use of that mechanism. However, the vehicle has not succeeded, to date, in its economic objectives, and Iran has responded by decreasing its compliance with some of the nuclear commitments of the JCPOA and by conducting provocations in the Persian Gulf. Iran has, to date, refused to begin talks with the United States on a revised JCPOA.    Purchase this volume