September 20, 2014
The following is a summary from the Congressional Research Service’s latest edition of its report on Iran sanctions by Kenneth Katzman.
Strict sanctions on Iran’s key energy and financial sectors harmed Iran’s economy. The economic pressure— coupled with the related June 14, 2013, election of the relatively moderate Hassan Rouhani as Iran’s president—contributed to Iran’s accepting a November 24, 2013, six-month interim agreement (“Joint Plan of Action,” JPA) that halts expansion of its nuclear program in exchange for modest sanctions relief. On July 18, 2014, the interim agreement was extended until November 24, 2014. The economic pressure of sanctions included the following:
• Oil exports fund nearly half of Iran’s government expenditures and, by late 2013, sanctions had reduced Iran’s oil exports to about 1 million barrels per day—far below the 2.5 million barrels per day Iran exported during 2011.
• During 2012-2013, the loss of revenues from oil, coupled with the cut-off of Iran from the international banking system, caused a sharp drop in the value of Iran’s currency, the rial; raised inflation to over 50%; and cut off Iran’s access to most of its hard currency held outside the country. Iran’s economy shrank by about 5% in 2013 as many Iranian firms reduced operations and loans became delinquent.
The JPA agreement, including the approximately $7 billion in sanctions relief during the interim period, of which $4.2 billion ($700 million per month) was access to hard currency from oil sales, began implementation on January 20, 2014, and provisions of several laws and executive orders were waived or suspended that day. The JPA extension until November 24, 2014, continues all sanctions relief provisions, including $2.8 billion in access to hard currency ($700 million per month multiplied by four months of extension).
Citing some improvements in Iran’s economy and renewed international business contacts with Iran, some in Congress believe that economic pressure on Iran needs to increase to shape a final nuclear deal and ensure that the Iran sanctions architecture does not collapse. On the other hand, many economic assessments indicate that the sanctions relief of the JPA has halted further deterioration in Iran’s economy but has not caused dramatic economic improvement.
Sanctions have, to some extent, slowed Iran’s nuclear and missile programs and reduced its military power by hampering its acquisition of foreign technology and weaponry. However, the sanctions have not halted Iran’s provision of arms to the Assad government in Syria, the Iraqi government, and to pro-Iranian factions in the Middle East. Nor have sanctions altered Iran’s repression of dissent or monitoring of the Internet.
A comprehensive nuclear agreement, if reached, would undoubtedly require significant easing of U.S. and third country sanctions on Iran—particularly those sanctions imposed since 2010 that are intended primarily to compel Iran to reach a nuclear agreement. The Administration has said that sanctions relief under a comprehensive deal would be implemented stepwise as Iran fulfills the terms of an agreement. Although it might be able to act on its own authority to suspend most sanctions on Iran to implement a comprehensive deal, the Administration has said it would work with Congress on longer term sanctions relief.
Click here for the full text.