- Since 2005, the United States has incrementally imposed financial sanctions on Iranian banks for helping finance Iran's nuclear and ballistic missile programs and terrorist groups. Sanctions are also a response to Iran's deceptive financial practices that threaten to undermine the stability of the international banking system.
- U.S. measures also include informal actions to leverage market forces by highlighting to foreign banks the reputational risk of doing business with an Iranian bank engaged in illicit financial conduct.
- In today’s globalized economy, even unilateral U.S. financial measures against Iranian banks or those doing business with Iranian banks engaged in illicit financial conduct complicate Tehran’s ability to engage in international business, commerce and finance. But multilateral efforts are still preferable for the international legitimacy they confer and their constricting effects.
- Banking sanctions alone did not solve the problem of Iran’s nuclear program. But, coupled with diplomatic and military tools, they disrupted Iran’s illicit activities and deterred third parties from facilitating those activities. Sanctions were also an important factor in bringing Iran to the negotiating table in 2013.
- In July 2015, Iran reached a final agreement on its controversial nuclear program with the world’s six major powers — Britain, China, France, Germany, Russia and the United States. Under the deal, the primary penalty for potential Iranian violations is the re-imposition of suspended sanctions. Preserving the viability of these financial tools is therefore important for the deal itself. Maintaining the viability of the U.S. sanctions architecture is also critical because sanctions proactively targeting Iran's sponsorship of terrorism, human rights abuses, and other illicit conduct are to remain in place.
- Iran remains one of the world's most deficient countries or jurisdictions in terms of money laundering and financing terrorism, which threatens both international and regional security, as well as the international financial system.
- Refused international inspections of its nuclear facilities
- Engaged in deceptive financial conduct harmful to the international financial system
- Rejected diplomatic overtures and negotiations.
- Denying Iran access to the U.S. financial system and the U.S. dollar
- Denying Iran access to the U-Turn transaction mechanism, through which it dollarized international oil transactions in the past (effectively forcing Iran to sell oil in other currencies)
- Aggressively enforcing CISADA's secondary sanctions on foreign entities doing business with entities that remain listed for supporting terrorism or human rights abuses
- Leveraging the snap-back clause to limit business with Iran by underscoring the fact that there is no grandfathering of business ventures that begin work after Implementation Day, under the terms of the deal. In the event of Iranian violations that trigger snap-back sanctions, even those business deals would be impacted. This reality significantly increases the business risk to entering the Iranian market even after Implementation Day.
One potential issue is that these actions are not explicitly laid out in the deal text, leaving some areas open to interpretation by other parties.
This chapter was originally published in 2010, and is updated as of November 2015.
Photo credits: Natanz via Iranian President's Office and The New York Times; P5+1 foreign ministers via U.S. State Department; Revolutionary Guards via Khamenei.ir; U.S. Dollars by 401kcalculator.org via Flickr (CC BY-SA 2.00); Hezbollah logo by Lurifox (Own work) [CC BY-SA 4.0 (http://creativecommons.org/licenses/by-sa/4.0)], via Wikimedia Commons; Qassem Soleimani via Khamenei.ir;
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