On April 2, 2015, the United States, its P5+1 partners (China, France, Germany, the Russian Federation, and the United Kingdom), and Iran issued a Joint Statement, evidencing that the two sides “[had] taken a decisive step” and “reached solutions on key parameters of the Joint Comprehensive Plan of Action.”
As one component of this “political framework,” the United States agreed to “cease the application of all nuclear-related secondary economic and financial sanctions [on Iran], simultaneously with the IAEA-verified implementation by Iran of its key nuclear commitments.” The White House’s “Fact-Sheet” affirmed this understanding, noting “U.S. nuclear-related sanctions [would] be suspended after the IAEA has verified that Iran has taken all of its key nuclear-related steps.”
Question has arisen, however, as to how the United States would meet this obligation, especially at a time in which Congress is unlikely to take any affirmative action to lift the sanctions imposed on Iran. Some have expressed doubt whether the President can provide Iran significant sanctions relief solely on the basis of his own authority.
Such doubt should be put to rest. Under current U.S. law, Congress has provided the President substantial authorities to provide Iran significant sanctions relief as part of a comprehensive nuclear deal. As detailed below, these authorities include the power to do any and all of the following three things:
- Suspend the operation of sanctions
- License otherwise prohibited transactions
- De-designate Iranian persons and entities from OFAC’s SDN List
Taken together, these authorities allow the President to fulfill U.S. obligations and provide Iran significant sanctions relief pursuant to a comprehensive nuclear deal. With these powers in tow, the need for Congress to take affirmative action in support of a deal is considerably reduced, as the President can faithfully implement U.S. commitments on the basis of his own authorities.
Suspending the Operation of Sanctions
Generally speaking, U.S. sanctions on Iran are either imposed by Congress acting via its legislative powers or by the President acting pursuant to his authorities under the International Emergency Economic Powers Act (“IEEPA”). For those sanctions solely imposed under the President’s own authorities, the President retains ultimate discretion as to their disposition. He can suspend or terminate their implementation at any given time.
The vast majority of the sanctions imposed by the President, however, have been codified in later legislation, thus withdrawing from the President the power to lift sanctions at his sole discretion. Nonetheless, even as to these sanctions imposed or codified by Congress via its legislative powers, the President retains substantial authorities to suspend their operation under current law and to thus grant Iran significant sanctions relief.
Pursuant to existing sanctions legislation, the President is authorized to waive the application or imposition of sanctions for renewable time-limited periods measuring between 120-180 days. These authorities were utilized, for instance, during the period of the Joint Plan of Action to provide Iran limited sanctions relief. Likewise, these waiver provisions will play a key role should a comprehensive nuclear deal be reached in the months ahead and sanctions relief be part of the quid pro quo arrangement reached with Iran. The President will utilize these waiver provisions in order to suspend the operation of nuclear-related sanctions and provide Iran significant sanctions relief.
Some in Congress have expressed wariness over the President’s utilization of these authorities to provide sanctions relief to Iran without first coming to Congress. However, waiver provisions were included in each successive piece of sanctions legislation for this express purpose: to provide the President the flexibility to reach a settlement with Iran on its nuclear program and to trade sanctions relief in return for Iranian nuclear concessions. By suspending the operation of sanctions rather than terminating them, the United States is able to maintain significant leverage over Iran throughout the duration of a nuclear deal, all the while fulfilling U.S. obligations pursuant to such a deal. Congress will have a role to play in lifting (i.e., terminating) the nuclear-related sanctions imposed on Iran, but that role need not be an immediate one in order for a nuclear settlement to work.
Licensing Otherwise Prohibited Transactions
Besides suspending the operation of sanctions, the President also retains the power to license transactions that would be otherwise prohibited as a matter of current law. This power is either an express or implied one, depending on the source of the sanctions prohibition. However, OFAC, which is typically delegated the power to administer U.S. sanctions prohibitions by the President, has utilized this licensing power in each sanctions program that it enforces. For example, under the President’s new opening to Cuba, sanctions were relaxed via OFAC’s licensing authorities, which authorized U.S. persons to engage in transactions that otherwise would be prohibited.
The President could utilize these same authorities to generally authorize transactions that are otherwise prohibited under the Iranian Financial Sanctions Regulations (31 C.F.R. Part 561), which implement the financial sanctions prohibitions contained in the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”), Section 1245 of the National Defense Authorization Act of 2012 (“Section 1245”), and the Iran Threat Reduction Act of 2012 (“TRA”). Such a licensing scheme, for instance, could permit foreign financial institutions to engage in significant financial transactions with Iranian banks that had been designated for their facilitation of Iran’s nuclear program. This would be a means of providing Iran significant sanctions relief pursuant to a comprehensive nuclear deal, all the while retaining the “architecture of sanctions” as described in the White House’s “Fact-Sheet” on the political framework.
De-Designating Iranian Persons and Entities from the SDN List
OFAC administers and enforces U.S. sanctions prohibitions pursuant to Presidential and statutory authorities. As part of these duties, OFAC maintains a Specially Designated Nationals and Blocked Persons List (“SDN List”), which lists foreign persons and entities that are designated for sanctions under the various U.S. sanctions programs. Typically, sanctions include an asset freeze on designated parties, as well as a prohibition on U.S. persons from engaging in any transactions with them. However, in the case of Iran, sanctions prohibitions are far more extensive, including sanctions relating to third-parties dealing with designated persons or entities. For this reason, U.S. and foreign financial institutions, as well as a host of other foreign businesses, have incorporated OFAC’s SDN List into their OFAC compliance programs to screen against designated parties so as to ensure that they are not engaging in transactions prohibited under U.S. sanctions laws.
Generally speaking, the President, acting through OFAC, retains the power to designate and de-designate Iranian persons and entities from OFAC’s SDN List. By de-designating an Iranian person from the SDN List, the President would lift the block on the person’s assets held in the United States, as well as any secondary sanctions prohibitions. For instance, most of Iran’s largest banks are designated as part of the Iranian Financial Sanctions Regulations (“IFSR”), which prohibits foreign financial institutions from facilitating significant transactions with Iranian parties so designated. By removing the underlying designation on these Iranian banks and thus de-designating such banks from OFAC’s SDN List, the President lifts the prohibition on foreign financial institutions from engaging in transactions with the previously-designated Iranian banks.
Based on existing authorities, the President is in a strong position to provide Iran significant sanctions relief as part of a comprehensive nuclear deal. The President can suspend the operation of sanctions via his waiver authorities; license otherwise prohibited transactions via his express or implied powers; and de-designate Iranian persons or entities from OFAC’s SDN List. Taken together, these authorities allow the President to implement U.S. commitments under a nuclear deal without the need for Congress to take affirmative action to lift sanctions.
 The U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) is responsible for administering the Specially Designated Nationals and Blocked Persons List (“SDN List”). Generally speaking, parties designated on OFAC’s SDN List are subject to asset-blocking and a prohibition on U.S. parties from dealing with them. However, in the Iran case, U.S. and foreign persons are prohibited from engaging in a range of transactions with designated Iranian persons and entities.
 According to former NSC official and President of the Council on Foreign Relations, Richard N. Haass, such waiver provisions are “needed if international relationships are not to become hostage to one interest and if the executive is to have the flexibility needed to explore whether the introduction of limited incentives can bring about a desired policy goal.” Richard N. Haass, “Sanctions Almost Never Work,” Wall Street Journal, June 19, 1998, p. A14.Back to top