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May 27, 2016

Memo: Iran Ballistic Missile Sanctions Act of 2016

The Iranian Ballistic Missile Sanctions Act of 2016 – which Sen. Kelly Ayotte (R-NH) has offered as an amendment to the National Defense Authorization Act (“NDAA”) – evidences the continued fight by opponents of the Iran nuclear accord to kill the deal.  If included in the broader NDAA, this amendment would fatally undermine the U.S.’s ability to observe its sanctions-lifting commitments under the Joint Comprehensive Plan of Action (“JCPOA”). 

The bill would impose significant new sanctions on Iran, including sectoral sanctions designed to cut off large parts of Iran’s economy from the world.  In imposing such broad-based sectoral sanctions, this bill would eviscerate the practical benefit of the sanctions-lifting for Iran and would drag the United States  back to the path towards military conflict with Iran.     

Below, the bill’s substantive provisions are as follows:

Iran Sanctions Act Extension

The bill would extend the Iran Sanctions Act to December 31, 2031.  All previous ISA-related extensions have been for five-year periods.  This extension would last for 15 years.       

Ballistic Missile Sanctions

This bill would require the President to submit Congress a report identifying persons that have knowingly aided the Iranian government in the development of its ballistic missile program.  The President would be required to both impose blocking sanctions with respect to each such person identified and impose travel restrictions on such persons’ entry into the United States.  Moreover, the President would be required to sanction foreign banks that conduct significant financial transactions with such identified persons.

Moreover, the bill would impose blocking and secondary sanctions on persons or entities that are: owned 25% or more by Iran’s Aerospace Industries Organization (“AIO”), Shahid Hemmat Industrial Group (“SHIG”), the Shahid Bakeri Industrial Group (“SBIG”), and any agent or affiliate of the foregoing; persons that control, manage, or direct the foregoing entities; and persons on the board of directors of the foregoing entities.  Secondary sanctions include sanctions on foreign banks that conduct significant financial transactions with any person designated for sanctions under this provision.

The Secretary of the Treasury is also tasked with establishing and maintaining a list of entities in which the AIO, SHIG, SBIG, or any agent or affiliate of the foregoing has a greater than 0% interest but less than 25% interest or maintains a presence on the board of directors but has no ownership interest.  The Comptroller General is required to conduct a review of such list on a regular basis to determine whether persons not included on the list otherwise qualify for inclusion on such list.  The Comptroller General is authorized and encouraged to consult with NGOs in conducting its review.  Effectively, this would deputize outside anti-Iran hawks to oversee the work of the U.S. administration in designating persons and entities and including them on this list.   

The bill would also mandate the President to submit to Congress a certification that each person listed in the annexes to the United Nations Security Council resolutions – including those Council resolutions that have been superseded by UNSCR 2231 – are no longer facilitating, supporting, or involved with the development of or transfer to Iran of ballistic missiles or technology, parts, components, or technology information related to ballistic missiles.  If the President is unable to make such determination, then the President is required to impose blocking and secondary sanctions on such persons or entities.  This would contradict express provisions in the JCPOA de-listing such persons and entities.

The bill would also amend the Iran Sanctions Act to require ISA-related sanctions on persons that export, transfer, or otherwise provide to Iran any goods, services, technology, or other items that may contribute materially to the ability of Iran to acquire or develop ballistic missiles and the capability of launch ballistic missiles. 

Sectoral Sanctions

This bill would require the President to submit to Congress a list of the sectors of Iran’s economy that are facilitating, supporting, or otherwise involved with the development of or transfer to Iran of ballistic missiles or technology, parts, components, or technology information relating to ballistic missiles.  The President would also be required to provide Congress a determination as to whether certain sectors of Iran’s economy are involved in such activities, including the automotive, chemical, computer science, construction, electronic, energy, metallurgy, mining, petrochemical, research (including universities and research institutions) and telecommunications sectors.  If the President determines that any such sectors do meet the criteria established above, then the President will include them in such list provided to Congress and published in the Federal Register.

For sectors of Iran’s economy included on such list, the President shall impose blocking and secondary sanctions on persons that operate in designated sectors of Iran’s economy; persons that knowingly provide significant financial, material, technological, or other support to, or goods or services in support of, any activity or transaction on behalf or for the benefit of a person operating in designated sectors of Iran’s economy; and any person owned or controlled by a person operating in designated sectors of Iran’s economy.  Secondary sanctions include sanctions on foreign banks that conduct significant financial transactions with or provide significant financial services to such targeted persons.  This could lead to a sanctions program targeting dwarfing that imposed prior to the nuclear accord.

Moreover, the President is required to submit to Congress a list of all foreign persons that have facilitated, supported, or been involved with the development of ballistic missiles or technology, parts, components, or technology information related to ballistic missiles in certain sectors of Iran’s economy.  The Comptroller General is tasked with reviewing such a list to see whether foreign persons not include on the list otherwise qualify for inclusion on such list.  The Comptroller General is authorized and encouraged to consult with NGOs in conducting its review.  This would again effectively deputize outside anti-Iran hawks to oversee the work of the U.S. administration in designating persons and entities and including them on this list.  

Broader Banking Sanctions

This bill would broaden the scope of U.S. sanctions targeting foreign banks engaged in certain conduct with Iran or Iran-related entities by including, as the subjects of U.S. sanctions, foreign banks that conduct significant financial transactions with or provide significant financial services to persons designated for involvement in Iran’s development of ballistic missiles and capabilities or launch technology related to ballistic missiles.  The bill would also limit the Secretary of the Treasury’s waiver authorities with respect to the imposition of such financial sanctions under CISADA § 104(c)(2).

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