Sanctions against Iran


There have been a number of sanctions against Iran imposed by a number of countries, especially the United States, and international entities. The first sanctions were those imposed by the United States in November 1979 after a group of radical students seized the American Embassy in Tehran and took the people inside hostage. The sanctions by Executive Order 12170 included freezing about $12 billion in Iranian assets, including bank deposits, gold and other properties, and a trade embargo. These sanctions were lifted in January 1981 as part of the Algiers Accords, which was a negotiated settlement of the hostages’ release.
The second sanctions by the United States were imposed under Ronald Reagan in 1987 because of Iran's actions from 1981 to 1987 against the U.S. and other shipping vessels in the Persian Gulf and support for terrorism. The sanctions were expanded in 1995 to include firms dealing with the Iranian government.
The third sanctions were imposed in December 2006 pursuant to UNSC Resolution 1737 after Iran refused to comply with UNSC Resolution 1696 which demanded that Iran halt its uranium enrichment program. Initially, U.S. sanctions targeted investments in oil, gas, and petrochemicals, exports of refined petroleum products, and business dealings with the Islamic Revolutionary Guard Corps. It encompassed banking and insurance transactions, shipping, web-hosting services for commercial endeavors, and domain name registration services. Subsequent UN Resolutions have expanded sanctions against Iran.
Over the years, sanctions have taken a serious toll on Iran's economy and people. Since 1979, the United States has led international efforts to use sanctions to influence Iran's policies, including Iran's uranium enrichment program, which Western governments fear is intended for developing the capability to produce nuclear weapons. Iran counters that its nuclear program is for civilian purposes, including generating electricity and medical purposes.
When nuclear talks between Iran and Western governments were stalled and seen as a failure, US senators cited them as a reason to enforce stronger economic sanctions on Iran. On 2 April 2015, the P5+1 and Iran, meeting in Lausanne, Switzerland, reached a provisional agreement on a framework that, once finalized and implemented, would lift most of the sanctions in exchange for limits on Iran's nuclear programs extending for at least ten years. The final agreement, the Joint Comprehensive Plan of Action, was adopted on 18 October 2015. As a result, UN sanctions were lifted on 16 January 2016.
On 8 May 2018, U.S. President Donald Trump announced that the United States would withdraw from the Iran nuclear deal. Following the U.S. withdrawal, the EU enacted an updated blocking statute on 7 August 2018 to nullify US sanctions on countries trading with Iran.
The fourth sanctions by the United States came into effect in November 2018, and were intended to force Iran to dramatically alter its policies in the region, including its support for militant groups in the region and its development of ballistic missiles. In September 2019, a U.S. official stated that the United States will sanction whoever deals with Iran or purchases its oil. Also in September 2019, in response to a suspected Iranian attack on key Saudi Arabian oil facilities, Trump said that he directed the Treasury Department to "substantially increase" sanctions on Iran. The new sanctions targeted the Iranian national bank. A Senior Trump Administration official said the new sanctions targeted the financial assets of the Supreme leader's inner circle. However, according to the New York Times, Tehran has disclaimed playing any part in the attacks that affected the Saudi oil facilities.
On 21 February 2020, Iran was placed on the FATF blacklist.
As a response to US sanctions on persons who have visited Iran after 2011, while promoting tourism, Iran ceased affixing visas in passports and stamping passports on entry of foreigners. In November 2018, Iran again ceased stamping passports or putting visa stickers in passports of foreign tourists.

Sanctions of 1979

The United States sanctions against Iran were imposed in November 1979 after a group of radical students seized the American Embassy in Tehran and took the people inside hostage. The sanctions were imposed by Executive Order 12170, which included freezing about $12 billion in Iranian assets, including bank deposits, gold and other properties, and a trade embargo. These sanctions were lifted in January 1981 as part of the Algiers Accords, which was a negotiated settlement of the hostages’ release.
Some assets—Iranian officials say $10 billion, U.S. officials say much less—still remain frozen pending resolution of legal claims arising from the revolution.

US sanctions since 1984

While the Iran–Iraq War, which began in September 1980, was in progress, in 1984, United States sanctions prohibited weapon sales and all U.S. assistance to Iran.
In 1995, in response to the Iranian nuclear program and Iranian support of terrorist organisations, Hezbollah, Hamas, and Palestine Islamic Jihad, President Bill Clinton issued several executive orders with respect to Iran. of 15 March 1995, banned U.S. investment in Iran's energy sector, and of 6 May 1995, banned U.S. trade with and investment in Iran.
The Iran and Libya Sanctions Act was signed on 5 August 1996. On 31 July 2013, members of the United States House of Representatives voted 400 to 20 in favor of toughened sanctions.

UN sanctions against Iran

The UN Security Council passed a number of resolutions imposing sanctions on Iran, following the report by the International Atomic Energy Agency Board of Governors regarding Iran's non-compliance with its safeguards agreement and the Board's finding that Iran's nuclear activities raised questions within the competency of the Security Council. Sanctions were first imposed when Iran rejected the Security Council's demand that Iran suspend all enrichment-related and reprocessing activities. Sanctions will be lifted when Iran meets those demands and fulfills the requirements of the IAEA Board of Governors. Most UN sanctions were lifted 16 January 2016, following the Joint Comprehensive Plan of Action.
The UN sanctions against Iran do not include oil exports from Iran. As of 2019, an estimated one third of all oil traded at sea passes through the Strait of Hormuz. In August 2018, EU High Representative Mogherini, speaking at a briefing with New Zealand's Foreign Minister Winston Peters, challenged U.S. sanctions on Iran, stating that the EU are encouraging small and medium size enterprises in particular to increase business with and in Iran as part of something that is for the EU a "Security Priority".
In September 2019, the US government announced, unilaterally, that it would begin to sanction certain Chinese entities that imported oil from Iran.
The U.N. arms embargo on Iran is set to expire on 18 October 2020.

Non-UN-mandated sanctions against Iran

SectorsU.S. E.U. U.N.
Missile/arms industry
Islamic Revolutionary Guard Corps
Nuclear industry
Energy/petroleum industry
Banking
Central Bank of Iran
Shipping industry
International trade
Insurance
Foreign firms dealing with Iran

The European Union has imposed restrictions on cooperation with Iran in foreign trade, financial services, energy sectors and technologies, and banned the provision of insurance and reinsurance by insurers in member states to Iran and Iranian-owned companies. On 23 January 2012, the EU agreed to an oil embargo on Iran, effective from July, and to freeze the assets of Iran's central bank. The next month, Iran symbolically pre-empted the embargo by ceasing sales to Britain and France, though some Iranian politicians called for an immediate sales halt to all EU states, so as to hurt countries like Greece, Spain and Italy who were yet to find alternative sources.
On 17 March 2012, all Iranian banks identified as institutions in breach of EU sanctions were disconnected from the SWIFT, the world's hub of electronic financial transactions.
On 10 November 2018 Gottfried Leibbrandt, chief executive of SWIFT said in Belgium that some banks in Iran would be disconnected from this financial messaging service.
One side effect of the sanctions is that the global shipping insurers based in London are unable to provide cover for items as far afield as Japanese shipments of Iranian liquefied petroleum gas to South Korea.
In 2012, the U.S. Department of State stated:
The website of the U.K. government states:

On 16 October 2012, the EU adopted a further set of restrictive measures against Iran as announced in Council Decision 2012/635/CFSP. These measures are targeted at Iran’s nuclear and ballistic programmes and the revenues made from these programmes by the Iranian government.
In response to the deteriorating human rights situation in Iran, the EU have also adopted Council Regulation No 359/2011 of 12 April 2011. This regulation has been amended by Council Regulation No 264/2012, which includes the Annex III list of equipment which might be used for internal repression and related services and internet monitoring and telecommunications equipment and related services.

The BBC, in answering "Why are there sanctions?" wrote in 2015:
In November 2011 the IAEA reported "serious concerns regarding possible military dimensions to Iran's nuclear programme" and indications that "some activities may still be ongoing."
According to the Supreme leader of Iran, the real objective of sanctions is "to prevent Iran from reaching a prominent civilizational status". The United States said the sanctions were not made to topple the Iranian government, but convince it to change several of its policies.

Legal challenges to the sanctions

The European Union's General Court overturned EU sanctions against two of Iran's biggest banks ; the two banks had filed suit with the European court to challenge those sanctions.

Misuse by Iran's officials

11 December 2019, Mehdi Mirashrafi director of Iran's state customs office, said that the fund allocated to import medicine for the use of Iranian people is used by government agents for import of cars, mobiles, nutrients and other lucrative commodities.

Effects

The sanctions bring difficulties to Iran's $483 billion, oil-dominated economy. Data published by the Iranian Central Bank show a declining trend in the share of Iranian exports from oil-products. The sanctions have had a substantial adverse effect on the Iranian nuclear program by making it harder to acquire specialized materials and equipment needed for the program. The social and economic effects of sanctions have also been severe, with even those who doubt their efficacy, such as John Bolton, describing the EU sanctions, in particular, as "tough, even brutal." Iranian foreign minister Ali Akhbar Salehi conceded that the sanctions are having an impact. China has become Iran's largest remaining trading partner.
Sanctions have reduced Iran's access to products needed for the oil and energy sectors, have prompted many oil companies to withdraw from Iran, and have also caused a decline in oil production due to reduced access to technologies needed to improve their efficiency.According to Undersecretary of State William Burns, Iran may be annually losing as much as $60 billion in energy investment. Many international companies have also been reluctant to do business with Iran for fear of losing access to larger Western markets. .As well as restricting export markets, the sanctions have reduced Iran's oil income by increasing the costs of repatriating revenues in complicated ways that sidestep the sanctions; Iranian analysts estimate the budget deficit for the 2011/2012 fiscal year, which in Iran ends in late March, at between $30bn to $50bn. The effects of U.S. sanctions include expensive basic goods for Iranian citizens, and an aging and increasingly unsafe civil aircraft fleet. According to the Arms Control Association, the international arms embargo against Iran is slowly reducing Iran's military capabilities, largely due to its dependence on Russian and Chinese military assistance. The only substitute is to find compensatory measures requiring more time and money, and which are less effective. According to at least one analyst, the market for imports in Iran is dominated by state enterprises and state-friendly enterprises, because the way to get around the sanctions is smuggling, and smuggling requires strong connections with the government. This has weakened Iranian civil society and strengthened the state.
The value of the Iranian rial has plunged since autumn 2011, it is reported to have devalued up to 80%, falling 10% immediately after the imposition of the EU oil embargo since early October 2012, causing widespread panic among the Iranian public. In January 2012, the country raised the interest rate on bank deposits by up to 6 percentage points in order to curtail the rial's depreciation. The rate increase was a setback for Ahmadinejad, who had been using below-inflation rates to provide cheap loans to the poor, though naturally Iranian bankers were delighted by the increase. Not long after, and just a few days after Iran's economic minister declared that "there was no economic justification" for devaluing the currency because Iran's foreign exchange reserves were "not only good, but the extra oil revenues are unprecedented," the country announced its intention to devalue by about 8.5 percent against the U.S. dollar, set a new exchange rate and vowed to reduce the black market's influence. The Iranian Central Bank desperately tried to keep the value of the rial afloat in the midst of the late 2012 decline by pumping petrodollars into the system to allow the rial to compete against the US dollar. Efforts to control inflation rates were set forth by the government through a three-tiered-multiple-exchange-rate; this effect has failed to prevent the rise in cost of basic goods, simultaneously adding to the public's reliance on the Iranian black-market exchange rate network. Government officials attempted to stifle the black-market by offering rates 2% below the alleged black-market rates, but demand seems to be outweighing their efforts.
Sanctions tightened further when major supertanker companies said they would stop loading Iranian cargo. Prior attempts to reduce Iran's oil income failed because many vessels are often managed by companies outside the United States and the EU; however, EU actions in January extended the ban to ship insurance. This insurance ban will affect 95 percent of the tanker fleet because their insurance falls under rules governed by European law. "It's the insurance that's completed the ban on trading with Iran," commented one veteran ship broker. This completion of the trading ban left Iran struggling to find a buyer for nearly a quarter of its annual oil exports.
Another effect of the sanctions, in the form of Iran's retaliatory threat to close the Strait of Hormuz, has led to Iraqi plans to open export routes for its crude via Syria, though Iraq's deputy prime minister for energy affairs doubted Iran would ever attempt a closure.
After Iranian banks blacklisted by the EU were disconnected from the SWIFT banking network, then Israeli Finance Minister Yuval Steinitz stated that Iran would now find it more difficult to export oil and import products. According to Steinitz, Iran would be forced to accept only cash or gold, which is impossible when dealing with billions of dollars. Steinitz told the Israeli cabinet that Iran's economy might collapse as a result.
The effects of the sanctions are usually denied in the Iranian press. Iran has also taken measures to circumvent sanctions, notably by using front countries or companies and by using barter trade. At other times the Iranian government has advocated a "resistance economy" in response to sanctions, such as using more oil internally as export markets dry up and import substitution industrialization of Iran.
In October 2012, Iran began struggling to halt a decline in oil exports which could plummet further due to Western sanctions, and the International Energy Agency estimated that Iranian exports fell to a record of 860,000 bpd in September 2012 from 2.2 million bpd at the end of 2011. The results of this fall led to a drop in revenues and clashes on the streets of Tehran when the local currency, the rial, collapsed. The output in September 2012 was Iran's lowest since 1988.
Iranian Foreign Ministry spokesman Ramin Mehmanparast has said that the sanctions were not just aimed at Iran's nuclear program and would continue even if the nuclear dispute was resolved.

"Resistance economy"

In the face of increased economic pressure from the United States and Europe and a marked decrease of oil exports, Iran has sought to manage the impact of international sanctions and limit capital outflows by seeking to build a "resistance economy," replacing imports with domestic goods and banning luxury imports such as computers and mobile phones. This is predicted to lead to an increase in smuggling, as "people will find a way to smuggle in what the Iranian consumer wants." To sustain oil imports, Iran has also provided domestic insurance for tankers shipping Iranian oil. Iran had hoped to sell more to Chinese and Indian refiners, though such attempts seem unlikely to succeed, particularly since China—the single-largest buyer of Iranian crude—has been curtailing its oil imports from Iran down to half their former level.
On 20 October 2018 Association of German Banks stated that exports from Germany to Iran dropped 4% to 1.8 billion Euros since January.

Political effects

94 Iranian Parliamentarians signed a formal request to have Ahmadinejad appear before the Majles to answer questions about the currency crisis. The Supreme Leader terminated the parliament's request in order to unify the government in the face of international pressure. Nonetheless, Ahmadinejad has been called to questioning by parliament on a number of occasions, to justify his position on issues concerning domestic politics. His ideologies seem to have alienated a large portion of the parliament, and stand in contrast to the standpoint of the Supreme Leader.
A report by Dr. Kenneth Katzman, for the Congressional Research Service, listed the following factors as major examples of economic mismanagement on the part of the Iranian government:
According to the U.S., Iran could reduce the world price of crude petroleum by 10%, saving the United States annually $76 billion. Opening Iran's market place to foreign investment could also be a boon to competitive U.S. multinational firms operating in a variety of manufacturing and service sectors.
In 2012, the U.S. Energy Department warned that imposing oil embargoes on Iran would increase world oil prices by widening the gap between supply and demand.
On the other side, according to a 2012 study by former U.S. officials writing for the Bipartisan Policy Center, oil prices "could double" if Iran is permitted to obtain a nuclear weapon. U.S. gross domestic product could fall by about 0.6% in the first year—costing the economy some $90 billion—and by up to 2.5% by the third year. This is enough, at 2012 growth rates, to send the U.S. into recession.
In September 2018, Iranian oil minister Bijan Zanganeh warned U.S. President Donald Trump to stop interfering in Middle East if he wants the oil prices to stop increasing. Zanganeh said "If he wants the price of oil not to go up and the market not to get destabilized, he should stop unwarranted and disruptive interference in the Middle East and not be an obstacle to the production and export of Iran’s oil."

Impact on regional economies

Iran relies on regional economies for conducting private as well as state-sponsored business. In 2018, after the U.S. re-imposed secondary sanctions, the trade relations with neighboring countries, such as Afghanistan and Iraq, which had increased significantly prior to 2016, took a significant hit.
In November 2019, when financial sanctions were further tightened by the Trump administration and the Rial devaluation continued, a subsequent increase in energy prices caused widespread protests and violent confrontations in Tehran and other major cities. The economies of border regions with urban areas, such as Zahedan, felt the most drastic impact as traders had to pay more for imports, e.g. electronic appliances, while at the same time, the export value for manufactured goods, such as Persian rugs, decreased. Iraq's economy was also seriously affected by the continued financial sanctions since Iran is a major exporter of wheat to Iraq, and food prices increased in Iraq after 2016.
In early May 2020, with the parliamentary election of a new Iraqi prime minister, the U.S. extended Iraq's sanction waiver for the import of refined Iranian fuels and electricity from 30 days to 4 months in order to increase the political and economic stability in the region.

Humanitarian impact

Pharmaceuticals and medical equipment do not fall under international sanctions, but Iran is facing shortages of drugs for the treatment of 30 illnesses—including cancer, heart and breathing problems, thalassemia and multiple sclerosis —because it is not allowed to use international payment systems. A teenage boy died from haemophilia because of a shortage of medicine caused by the sanctions. Deliveries of some agricultural products to Iran have also been affected for the same reasons.
Drug imports to Iran from the U.S. and Europe decreased by approximately 30 percent in 2012, according to a report by the Woodrow Wilson International Center for Scholars. In 2013, The Guardian reported that some 85,000 cancer patients required forms of chemotherapy and radiotherapy that had become scarce. Western governments had built waivers into the sanctions regime to ensure that essential medicines could get through, but those waivers conflicted with blanket restrictions on banking, as well as bans on "dual-use" chemicals that might have a military as well as a medical application. An estimated 40,000 haemophiliacs could not get blood-clotting medicines, and operations on haemophiliacs were been virtually suspended because of the risks created by the shortages. An estimated 23,000 Iranians with HIV/AIDS had severely restricted access to the drugs they need. The society representing the 8,000 Iranians suffering from thalassemia, an inherited blood disorder, said its members were beginning to die because of a lack of an essential drug, deferoxamine, used to control the iron content in the blood. Further, Iran could no longer buy medical equipment such as autoclaves, essential for the production of many drugs, because some of the biggest Western pharmaceutical companies refused to do business with the country.
Journalists reported on the development of a black market for medicine. Though vital drugs were not affected directly by the sanctions, the amount of hard currency available to the ministry of health was severely limited. Marzieh Vahid-Dastjerdi, Iran's first female government minister since the Iranian Revolution, was dismissed in December 2012 for speaking out against the lack of support from the government in times of economic hardship. Furthermore, Iranian patients were at risk of amplified side effects and reduced effectiveness because Iran was forced to import medicines, and chemical building blocks for other medicines, from India and China, as opposed to obtaining higher-quality products from Western manufacturers. Because of patent protections, substitutions for advanced medicines were often unattainable, particularly when it came to diseases such as cancer and multiple sclerosis.
China, the UK, the Group of 77 and experts are pressing the US to ease sanctions on Iran to help it fight the growing coronavirus outbreak. “There is no doubt that Iran’s capacity to respond to the novel coronavirus has been hampered by the Trump administration’s economic sanctions, and the death toll is likely much higher than it would have been as a result,” Center for Economic and Policy Research Co-Director Mark Weisbrot said. “There can also be no question that the sanctions have affected Iran’s ability to contain the outbreak, leading in turn to more infections, and possibly to the virus’ spread beyond Iran's borders.”
On 6 April 2020, Human Rights Watch released a report urging the United States to ease sanctions on Iran "to ensure Iran access to essential humanitarian resources during the pandemic." The impact of sanctions on Iran made the COVID-19 management a difficult issue in Iran.

Civil movement against sanctions

The "Civil Movement" was initiated by two prominent Iranian economists—Dr. Mousa Ghaninejad, of Tehran's Petroleum University of Technology, and Dr. Mohammad Mehdi Behkish, of Tehran's Allameh Tabatabaei University—on 14 July 2013. They described the sanctions as an "unfair" and "illogical" tool, arguing that a freer economy would lead to less political enmity and encourage amicable relationships between countries. They also noted that sanctions against one country punish not only the people of that country, but also the people of its trade partners.
The movement was supported by a large group of intellectuals, academics, civil society activists, human rights activists and artists. In September 2013, the International Chamber of Commerce-Iran posted an open letter by 157 Iranian economists, lawyers and journalists criticizing the humanitarian consequences of sanctions and calling on their colleagues across the world to pressure their governments to take steps to resolve the underlying conflict.

Frozen assets

After the Iranian Revolution in 1979, the United States ended its economic and diplomatic ties with Iran, banned Iranian oil imports and froze approximately 11 billion 1980-US dollars of its assets.
In the years of 2008 to 2013, billions of dollars of Iranian assets abroad were seized or frozen, including a building in New York City, and bank accounts in Great Britain, Luxembourg, Japan and Canada.
In 2012, Iran reported that the assets of Guard-linked companies in several countries were frozen but in some cases the assets were returned.
The chairman of the Majlis Planning and Budget Committee says $100 billion of Iran's money was frozen in foreign banks because of the sanctions imposed on the country. In 2013, only $30 billion to $50 billion of its foreign exchange reserves was accessible because of sanctions.

Sanctions relief

When the Joint Comprehensive Plan of Action between Iran and the P5+1 was implemented in early 2016, sanctions relief affected the economy of Iran in four principal ways:
  1. Release of Iran's frozen funds abroad, estimated at $29 billion, representing approximately one third of Iran's foreign held reserves.
  2. The removal of sanctions against exports of Iranian oil.
  3. Allow foreign firms to invest in Iran's oil and gas, automobiles, hotels and other sectors.
  4. Allow Iran to trade with the rest of the world and use the global banking system such as SWIFT.
According to the Central Bank of Iran, Iran would use funds unfrozen by its nuclear deal mainly to finance domestic investments, keeping the money abroad until it was needed.
According to the Washington Institute in 2015: "The pre-deal asset freeze did not have as great an impact on the Iranian government as some statements from Washington suggested. And going forward, the post-deal relaxation of restrictions will not have as great an impact as some critics of the deal suggest."
On 16 January 2016, it was announced by the International Atomic Energy Agency that Iran had adequately dismantled its nuclear weapons program, allowing for the United Nations to lift sanctions immediately.
In February 2019, France, Germany and the United Kingdom announced that they have created a payment channel named INSTEX to bypass the newly-reimposed sanctions by the United States, following the unilateral withdrawal from the JCPOA by the Trump administration. The Trump Administration warned that countries engaging in financial transactions with Iran could face secondary U.S sanctions.