Policy Memo: Barriers to Lifting US Sanctions in a Final Deal with Iran

Introduction

The most commonly stated rationale behind U.S. sanctions has been to convince Iran’s government to enter negotiations and accept strict limits on its nuclear program in order to have sanctions lifted. But the sanctions now threaten negotiations by withholding from the President the ability to lift them should a deal with Iran be reached. Below, NIAC details the existing authorizations for the President to waive and terminate the sanctions and discusses the problems posed by these limited authorities.

For the past decade, the United States has imposed a wide array of sanctions on Iran motivated primarily by the nuclear issue. With the implementation of the Joint Plan of Action by Iran and the P5+1, negotiations are now underway towards a comprehensive nuclear agreement in which Iran resolves concerns about its nuclear program in exchange for lifting of all ‘nuclear-related’ sanctions.

However, lifting the U.S. sanctions will be no small task. While the President retains the authority to issue time-limited waivers as to most of the sanctions, in most cases terminating the sanctions will require an affirmative act of Congress. This presents problems that will require a solution should the negotiations lead to a nuclear deal.

Below, we detail the energy, financial, and trade-related U.S. sanctions in place and the statutory authorizations for waiver and termination that currently exist. The limited nature of these authorizations – particularly for lifting the sanctions – poses a significant obstacle to securing a strong nuclear deal with Iran. If the White House relies solely on offering temporary waivers that must be continually renewed and thus subject to domestic political considerations, a final deal is unlikely to inspire the confidence necessary for Iran to see meaningful sanctions relief. In such case, Iran is likely to reciprocate the U.S.’s limited and reversible sanctions relief with nuclear concessions that are similarly limited and reversible. This will not be a recipe for a successful deal.

To secure a truly comprehensive nuclear deal, it is critical that Congress and the administration reevaluate the current authorizations for sanctions relief and ensure that the necessary authorities exist to not just waive sanctions on a time-limited basis, but to terminate them completely. Doing so will allow U.S. negotiators to fully leverage sanctions relief at the negotiating table to procure significant and lasting nuclear concessions from Iran, and will make certain that the President has the tools needed to follow through on any agreement reached.

U.S. Sanctions

U.S. sanctions have targeted Iran’s energy and financial sectors and have exacted a de facto U.S. trade ban with Iran. Most of these sanctions will need to be lifted as part of a final deal that places limits and transparency measures over Iran’s nuclear program in exchange for sanctions relief.

Energy-Related Sanctions

Energy-related sanctions have limited Iran’s ability to develop and export its energy resources, thereby cutting Iran off from a significant source of revenue. Energy sanctions have included virtual bans on:

  • U.S. and foreign investment in Iran’s energy sector (ISA Sec. 5(a)(1))
  • The purchase of crude oil and petrochemical products from Iran (E.O. 13622 and NDAA 2012 Sec. 1245(d)(4)(C))
  • The provision of shipping services for the sale of crude oil from Iran (ISA Sec. 5(a)(7))
  • The sale of goods and services that aid Iran’s energy sector (ISA Sec. 5(a)(5))
  • The sale of refined petroleum products to Iran (i.e., gasoline) (ISA Sec. 5(a)(3))
  • The sale of goods and services that aid Iran’s domestic production of refined petroleum products (ISA Sec. 5(a)(2))
  • The provision of insurance for Iran’s oil entities (e.g., NIOC) (ITRA Sec. 212)

 

Termination Authorities: For the above Iran Sanctions Act (ISA)-related sanctions, the President can lift sanctions only if he makes the following certifications to Congress:

  1. Iran has ceased efforts to acquire WMD and ballistic missile technologies
  2. Iran has been removed from the list of state sponsors of terrorism
  3. Iran no longer poses a significant threat to U.S. national security or U.S. allies

It is highly improbable a final nuclear deal will enable the President to make these certifications. Nuclear negotiations are unlikely to address non-nuclear WMD; Iran’s ballistic missile program; Iran’s support for U.S.-designated terror groups like Hezbollah; or other issues unrelated to Iran’s nuclear program.

Waiver Authorities: The President can issue time-limited waivers of the above ISA-related sanctions under ISA Section 4(c) upon certification to Congress that such waiver is “vital to the national security interests of the United States.” Under this statutory provision, sanctions can be waived for a period of up to 180 days, with opportunities for successive renewal. (Non-ISA energy-related sanctions have similar provisions for presidential waiver.)

Financial Sanctions

U.S. sanctions have taken direct aim at Iran’s ability to access the international financial system. These sanctions are designed to limit Iran’s ability to either receive or access payments made from its sale of crude oil abroad, as well as curb Iran’s access to foreign exchange. Financial sanctions targeting Iran have:

  • Declared Iran a ‘jurisdiction of primary money laundering concern’ (NDAA 2012 Sec. 1245(b))
  • Blocked purchase of the sovereign debt of Iran and related bonds (ITRA Sec. 213)
  • Erected a ban on trade and accounts denominated in the Iranian rial (E.O 13645)
  • Prohibited the sale, supply, or transfer of precious metals (i.e., gold) to Iran (IFCA Sec. 1245, E.O. 13645)
  • Imposed sanctions on any foreign financial institution that:
    • Processes ‘significant’ financial transactions with designated Iranian entities (CISADA Sec. 104)
    • Processes payments to Iran’s Central Bank and other designated Iranian financial institutions (NDAA Sec. 1245)

 

Termination Authorities: With few exceptions, the President has no termination authority for financial sanctions. In some cases (as in the ITRA-related sanctions), the President may terminate the sanctions only by making certifications to Congress on subjects beyond the nuclear issue.

Waiver Authorities: The President retains discretion to temporarily waive several of the financial sanctions on a time-limited basis that would require subsequent renewal. For instance:

  • The imposition of sanctions on any foreign financial institution that processes payments to Iran’s Central Bank and other designated Iranian entities can be waived by the President for a period up to 120 days with the option for successive renewal, upon a determination that such waiver is “in the national security interest of the United States.”
  • With regard to purchasing, or facilitating the issuance of, the sovereign debt of Iran, the President can waive sanctions for a period up to 180 days upon certification that such waiver is “vital to the national security interests of the United States,” with the opportunity for successive periods of renewal.

The President does have the power to amend or revoke financial sanctions imposed through Executive Order and not tied to a legislative mandate, such as the prohibition on trade in the rial and the keeping of accounts denominated in the rial.

Trade-Related Sanctions

Since 1995, the United States has imposed a comprehensive ban on domestic trade with Iran. This ban has taken the form of several successive orders, as well as codification in Section 103 of the Comprehensive Iran Sanctions and Divestment Act. While the trade ban applies to U.S. persons and entities – and not non-U.S. persons in the way the energy and financial sanctions do – it may be in both the U.S. and Iran’s interest to lift these sanctions, especially if energy and financial sanctions are lifted on non-U.S. persons and firms.

Termination Authorities: U.S. sanctions on trade with Iran are located in a series of executive orders, which the President has the discretion to amend or revoke. However, the trade-related sanctions were codified into law in 2010. These sanctions are subject to a sunset provision (Sec. 401(a)), where the ban on trade terminates 30 days after presidential certification that Iran:

  • “Has ceased providing support for acts of international terrorism and no longer satisfies the requirements for designation as a state sponsor of terrorism” and
  • “Has ceased the pursuit, acquisition, and development of [WMD] and ballistic missiles and ballistic missile launch technology”

Because a final comprehensive nuclear deal is unlikely to address the topics of terrorism or Iran’s ballistic missile program, presidential certification triggering CISADA’s sunset provision (which is a de facto termination provision) is highly improbable. The President is thus limited to time-limited waiver of the trade ban.

Waiver Authorities: Under Section 401(b) of CISADA, the President is authorized to waive the imposition of sanctions upon a determination that such waiver is “in the national interest of the United States.” Unlike the waiver provisions for energy and financial sanctions, Sec. 401(b) does not have a time-limit for waiver and waiver can thus be indefinite.

Under Section 103(d) of CISADA, the President also has the authority to “prescribe regulations . . . which may include regulatory exceptions” to the trade-related sanctions. Such exceptions would act so as to permit certain trade with Iran, enabling the President to both open certain channels of trade with Iran and use the promise of open trade as leverage during the ongoing negotiations with Iran. The sole restriction on the President’s discretion is for the “commercial importation of an Iranian-origin good” that was prohibited at the time of CISADA’s passage under the ITR, in which case the President would need to certify to Congress that the exception is “in the national security interest of the United States.”

Appendix: Major U.S. sanctions on Iran

         
  Iran Sanctions Act (ISA)
  Section Sanctioned Person/Activity Waiver Authority Termination Authority
  Sec. 5 (a)(1) U.S. and foreign investment in Iran’s energy sector President can waive for up to 6 months the sanctions in ISA Section 5(a) with respect to a national of a country if the President certifies to Congress at least 30 days before such waiver is to take effect that such waiver is vital to national security interests of U.S. (Sec. 4(c)(1)) – President can renew waiver for up to 6 months at a time if President determines that waiver is appropriate (Sec. 4(c)(2)) President can terminate sanctions if he determines and certifies to Congress that Iran (Sec. 8(a)): – Has ceased efforts to design, develop, etc. a nuclear explosive device or related materials; chemical or biological weapons; and ballistic missiles and related technology (Sec. 8(a)(1)) – Has been removed from the list of state sponsors of terrorism (Sec. 8 (a)(2)) – Poses no significant threat to U.S. national security, interests, or allies (Sec. 8 (a)(3))
  Sec. 5 (a)(2) Provision of goods, services, etc., that aid Iran’s domestic production of refined petroleum products
  Sec. 5 (a)(3) Sale or provision of refined petroleum products to Iran
  Sec. 5 (a)(3) Provision of goods, services, etc., that aid Iran’s ability to import refined petroleum products, including: – Provision of insurance or reinsurance for provision of such goods, etc.;
  – Financing or brokering such sale or provision;
  – Providing shipping services to deliver refined petroleum products;
  – Bartering;
  – Purchasing, subscribing, or facilitating issuance of sovereign debt of Iran, including government bonds
  Sec. 5 (a)(4) Joint ventures with Iran for the development of petroleum resources outside of Iran
  Sec. 5 (a)(5) Provision of goods, services, etc., that aid Iran’s ability to develop petroleum resources located in Iran or Iran’s domestic production of refined petroleum products
  Sec. 5 (a)(6) Provision of goods, services, etc., that aid Iran’s domestic production of petrochemical products
  Sec. 5 (a)(7) Provision of shipping services used to transport crude oil from Iran to another country
  Sec. 5 (a)(8) Concealment of Iranian origin of crude oil or refined petroleum products transported on a vessel
  Sec. 5(b)(1) Export or transfer of any goods, services, technology, etc. to any person with knowledge that such would be transferred to Iran and would materially contribute to Iran’s ability to acquire WMD or destabilizing numbers of advanced conventional weapons The President can waive, on a case-by-case basis, sanctions imposed under section 5(b) for no longer than a year if the President determines and reports to the appropriate congressional committees that it is vital to the national security interests of the United States. (Sec. 9(c)(1)(B))  None
 
  Sec. 5 (b)(2) Joint ventures with Iran for mining, production, or transportation of uranium President can renew this waiver on a case-by-case basis for an additional one year period, not later than 30 days before the waiver expires. (Sec. 9 (c)(1)(C))  None
  Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA)
  Section Sanctioned Person/Activity Waiver Authority Termination Authority
  Sec. 103 (b)(1) Imports of Iranian-origin goods and services President can waive the application of sanctions under Section 103(b), the requirement to impose sanctions with respect to a person under Section 105(a), the requirement to include a person on the list required by section 105(b), the application of the prohibition under section 106(a), etc., if the President determines that such waiver is in the national interest of the United States (Sec. 401(b)) *President can prescribe regulatory exceptions to the sanctions described in Section 103(b), though the commercial importation of Iranian-origin goods may require certification to Congress that such exception would be in national interest of the United States (Sec. 103(d)) Sanctions terminate upon President’s certification that:
  Sec. 103 (b)(2) Exports of U.S.-origin goods, services, and technology to Iran – Iran has ceased providing support for acts of international terrorism and no longer satisfies the requirements for designation as a state sponsor of terrorism
  Sec. 104 (c)(2) Foreign financial institutions that: – Facilitate Iran’s efforts to acquire or develop WMD or to provide support for organizations designated as FTOs Secretary of Treasury can waive application of prohibitions or conditions imposed with respect to foreign financial institution in Sec. 104(c) if: – Secretary determines such waiver is necessary to the national interest of the United States and submits to Congress a report describing reasons for determination (Sec. 104(f)) – Iran has ceased the pursuit, acquisition, and development of nuclear, biological, and chemical weapons and ballistic missiles and ballistic missile launch technology (Sec. 401(a))
  – Facilitate activities of person subject to financial sanctions under UN Res. 1737, 1747, 1803, or 1929  
  – Engage in money laundering to carry out above activities  
  – Facilitate efforts by Central Bank of Iran or any other Iranian financial institution to carry out above activities  
  – Facilitate significant transaction or provide significant financial services for Iran’s Revolutionary Guard Corps or a financial institution whose property is blocked pursuant to IEEPA  
  Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (cont.)
  Section Sanctioned Person/Activity Waiver Authority Termination Authority
  Sec. 105(b) Persons who are officials of Iran’s Government or persons acting on behalf of the Government that President determines are responsible for the commission of serious human rights abuses against citizens of Iran President can waive the application of sanctions under Section 103(b), the requirement to impose sanctions with respect to a person under Section 105(a), the requirement to include a person on the list required by section 105(b), the application of the prohibition under section 106(a), etc., if the President determines that such waiver is in the national interest of the United States (Sec. 401(b)) Sanctions imposed under Sec. 105 can terminate upon President’s certification that Iran has (Sec. 105(d)):
  – Released all political prisoners (Sec. 105(d)(1))
  – Ceased its practices of violence, unlawful detention, torture, and abuse of citizens of Iran while engaging in peaceful political activity (Sec. 105 (d)(2))
  – Conducted transparent investigation into killings, arrests, and abuse of peaceful political activists in aftermath of June 2009 elections and prosecuted individuals responsible for such killings, arrests, and abuse (Sec. 105 (d)(3))
  – Made public commitment to establishing an independent judiciary and respecting human rights recognized in UDHR (Sec. 105(d)(4))
  Sec. 106(a) Head of U.S. executive agency may not enter into a contract for the procurement of goods or services with a person that exports sensitive technology (i.e., hardware, software, etc., that President determines to be used specifically to restrict the flow of information in Iran or to disrupt, monitor, or restrict Iranians’ speech) to Iran President can waive the application of sanctions under Section 103(b), the requirement to impose sanctions with respect to a person under Section 105(a), the requirement to include a person on the list required by section 105(b), the application of the prohibition under section 106(a), etc, if the President determines that such waiver is in the national interest of the United States (Sec. 401(b)) Sanctions terminate upon President’s certification that:
  – Iran has ceased providing support for acts of international terrorism and no longer satisfies the requirements for designation as a state sponsor of terrorism
  – Iran has ceased the pursuit, acquisition, and development of nuclear, biological, and chemical weapons and ballistic missiles and ballistic missile launch technology (Sec. 401(a))
  National Defense Authorization Act of 2012 (NDAA 2012)
  Section Sanctioned Person/Activity Waiver Authority Termination Authority
  Sec. 1245(b) Designated Iran’s financial sector a primary money laundering concern   None
  Sec. 1245 (d)(1) Foreign financial institution that conducts a significant financial transaction with the Central Bank of Iran or a designated Iranian financial institution President can waive the imposition of sanctions for up to 120 days if the President determines that such waiver is in the national security interest of the United States and submits to Congress a report justifying waiver and including cooperation President has received or expects to receive as result of waiver
  Sec. 1245 (d)(3) Foreign financial institution owned or controlled by a foreign country, if that financial institution conducts a significant financial transaction for the sale or purchase of petroleum products to or from Iran – Waiver is renewable for periods of up to 120 days *(Sec. 1245(d)(5)) Sanctions imposed shall not apply to a financial institution if the President determines and reports to Congress, not later than 90 days after the President makes the determination required and every 180 days thereafter, that the country with primary jurisdiction over the foreign financial institution has significantly reduced its volume of crude oil purchases from Iran (Sec. 1245 (d)(4)(D))
  Iran Threat Reduction and Syrian Human Rights Act of 2012 (ITRA)
  Section Sanctioned Person/Activity Waiver Authority Termination Authority
  Sec. 211(a) Provision of vessels or insurance or reinsurance for the transportation to or from Iran of goods that could aid Iran with respect to WMD proliferation or support for acts of international terrorism President can waive imposition of sanctions with respect to a person under Sec. 211 if President determines that such waiver is in the national security interests of the United States (Sec. 211(c) Sections 211, 212, 220, 221, and 501 terminate upon President’s certification that:
  Sec. 212(a) Provision of underwriting services or insurance or reinsurance for NIOC or NITC Waiver provisions of ISA Section 4(c) apply with respect to Sec. 212 (Sec. 212(d)(1)) – Iran has ceased providing support for acts of international terrorism and no longer satisfies the requirements for designation as a state sponsor of terrorism
  Sec. 220(b) Provision of specialized financial messaging services to the Central Bank of Iran or a designated Iranian financial institution *President not required impose sanctions under Sec. 220 – Iran has ceased the pursuit, acquisition, and development of nuclear, biological, and chemical weapons and ballistic missiles and ballistic missile launch technology (Sec. 605, referencing CISADA Sec. 401(a))
  Sec. 221 (a)(1) Senior officials of Iran’s Government involved in: President can waive imposition of restrictions on individuals listed under Sec. 221 if President determines waiver essential to U.S. national security interests (Sec. 221(e))  
  – Illicit nuclear activities or proliferation of WMD  
  – Support for international terrorism, or  
  – Serious human rights abuses against citizens of Iran  
  Iran Threat Reduction and Syrian Human Rights Act of 2012 (cont.)
  Section Sanctioned Person/Activity Waiver Authority Termination Authority
  Sec. 301(a) Foreign persons who are officials, agents, or affiliates of the IRGC President can waive imposition of sanctions under Sec. 301 if President determines waiver to be vital to U.S. national security interests (Sec. 301(e))  None
  Sec. 302(a) Foreign persons who: President can waive imposition of sanctions under Sec. 302 if President determines that person has ceased the activity for which sanctions would be imposed or determines waiver to be essential to U.S. national security interests (Sec. 302(d) and (e)) *President not required to identify foreign persons for sanctions under Sec. 302 if he notifies Congress that it would cause damage to U.S. national security interests President can terminate a sanction imposed on a foreign person pursuant to subsection (b) if the President determines that the person no longer engages in the activity for which the sanction was imposed and can assure that the person will not engage in any activity in section (a)(1) in the future (Sec. 302(c))
  – Provide financial, material, or technological support for, or goods and services in support of, the IRGC or any of its blocked agents
  – Engage in significant transaction with IRGC, etc.
  – Engage in significant transaction with person subject to UN financial sanctions or person acting on behalf of such person
  Sec. 501(a) Citizens of Iran that seek to enter the U.S. to study in preparation for a career in Iran’s energy sector or in nuclear science or nuclear engineering  None Sections 211, 212, 220, 221, and 501 terminate upon President’s certification that:
  – Iran has ceased providing support for acts of international terrorism and no longer satisfies the requirements for designation as a state sponsor of terrorism
  – Iran has ceased the pursuit, acquisition, and development of nuclear, biological, and chemical weapons and ballistic missiles and ballistic missile launch technology (Sec. 605, referencing CISADA Sec. 401(a))
  National Defense Authorization Act of 2013, Subtitle D (NDAA 2013)
  Section Sanctioned Person/Activity Waiver Authority Termination Authority
  Sec. 1244 (c)(2)(A) Persons part of the energy, shipping or shipbuilding sectors of Iran President can waive imposition of sanctions for period of up to 180 days if President determines such waiver is vital to U.S. national security and submits report to Congress (Sec. 1244(i))  
  Sec. 1244 (c)(2)(B) Persons operating a port in Iran  
  Sec. 1244 (c)(2)(C) Provision of significant financial, material, technological support to, or goods and services in support of, any activity of transaction on behalf of:  
  – Persons part of the energy, shipping, or shipbuilding sectors of Iran,  
  – Person operating a port in Iran, or  
  – Iranian persons included on list of SDNs and blocked persons  
  Sec. 1244 (d)(1)(A) Sells, supplies, or transfers to or from Iran of goods and services used in connection with energy, shipping, or shipbuilding sectors of Iran  
  Sec. 1245 (a)(1) Sells, supplies, or transfers to or from Iran of: President can waive imposition of sanctions for period of up to 180 days, with periods of successive waiver, if President determines such waiver is vital to the national security interest of the U.S. and submits report to Congress (Sec. 1245(g))  None
  – Precious metal  
  – Graphite, raw or semi-finished metals like aluminum, steel, coal, and software for integrating industrial processes (either for barter, swap, or any other transaction, or to be used in connection with the energy, shipping, or shipbuilding sectors of Iran, etc.)  
  Sec. 1246 (a)(1) Provision of underwriting services or insurance or reinsurance to or from any person with respect to the energy, shipping, or shipbuilding sectors of Iran for which sanctions are imposed, etc. President can waive imposition of sanctions for period of up to 180 days, with periods of successive waiver, if President determines such waiver is vital to the national security of the U.S. and submits report to Congress (Sec. 1246(e))  
  Sec. 1247 (a) Facilitation of a significant financial transaction on behalf of Iranian person included on list of SDNs and blocked persons President can waive imposition of sanctions for period of up to 180 days, with periods of successive waiver, if President determines such waiver is vital to the national security of the U.S. and submits report to Congress (Sec. 1247(f))  
  Sec. 1248 (b)(1) Islamic Republic of Iran Broadcasting and President of the IRIB Waiver under CISADA Sec. 401(b) applies to Sec. 1248 above (also President has discretionary authorities to impose sanctions under this section similar to CISADA Sec. 105(d)) (Sec. 1248(b)(3))

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About Author

Jamal AbdiJamal AbdiJamal Abdi joined the National Iranian American Council as Policy Director in November 2009, directing NIAC’s efforts to monitor policies and legislation, and to educate and advocate on behalf of the Iranian-American community. Abdi joined NIAC’s team following his work in the US Congress as Policy Advisor to Representative Brian Baird (D-WA). Jamal tweets at @jabdi.
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Tyler CullisTyler CullisTyler Cullis joined NIAC in March 2014 as a Policy Associate. In this position, he provides legislative and advocacy outreach, research and writing, and legal analysis. Tyler is a recent law graduate of the Boston University School of Law, where he specialized in the U.S. sanctions on Iran and the Iran nuclear issue. Tyler tweets at @TylerCullis.
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