January 20, 2016 | Policy Brief

Congress Mulls Next Steps as Iran Sanctions Unwind

January 20, 2016 | Policy Brief

Congress Mulls Next Steps as Iran Sanctions Unwind

On January 16, the International Atomic Energy Agency (IAEA) verified that Iran had met its preliminary nuclear commitments under the Joint Comprehensive Plan of Action (JCPOA) nuclear deal. The IAEA report provides a checklist of measures Tehran has taken, including altering the Arak heavy water reactor, removing and placing under IAEA monitoring its excess centrifuges, shipping its stockpile of low-enriched uranium to Russia, and ceasing uranium enrichment at Fordow. While the report certifies that Iran has met its obligations, it does not provide details about the specific steps it took.

Following the IAEA’s report, the P5+1 negotiators released to Iran billions of dollars in frozen oil revenues that were previously locked in overseas accounts, and the U.S., EU, and UN have terminated many of their sanctions against Iran, as agreed under the JCPOA.

For its part, the Obama administration has suspended sanctions on key segments of the Iranian economy, including the financial, energy, petrochemical, automotive, and transportation sectors. Only Congress can formally lift many of these sanctions, but in less than one year, a critical foundation of the Iran sanctions architecture, the Iran Sanctions Act (ISA), is set to expire unless lawmakers act to reauthorize it. While the JCPOA waives the ISA’s provisions, the administration has pledged to “snap” sanctions back into place if Tehran violates the terms of the agreement. However, as Senator Robert Menendez (D-NJ) has noted, if ISA is not reauthorized, there will be nothing “to snapback to.”

Europe has similarly lifted sanctions on Iran’s finance, energy, shipping, precious metal, and insurance sectors. By lifting sanctions on major Iranian financial institutions, including the Central Bank of Iran, the EU is allowing the Islamic Republic’s banks back onto the SWIFT financial messaging system – a crucial means to move money worldwide.

The biggest winners in Iran appear to be those invested heavily in the energy sector and transportation. U.S. and EU sanctions relief will allow Tehran to sell significantly more oil around the world. The revenue will help to insulate Iran’s ruling regime from sanctions pressure in the future while simultaneously offering investment opportunities to European firms, among others.

The UN, meanwhile, terminated all previous United Nations Security Council resolutions that imposed sanctions on Iran’s nuclear and ballistic missile development, and replaced them with a weaker Resolution 2231 which “calls on” the regime not to engage in ballistic missile development. Iran, however, has insisted it would not be limited by UN restrictions on ballistic missiles, vowing instead to expand its program.

Without running afoul of the JCPOA, the U.S. can still implement “non-nuclear” measures to push back on Iran’s destabilizing activities. This week, for example, Treasury imposed new ballistic missile sanctions. Other actions, like sanctioning banks, construction companies, and engineering firms that finance or otherwise support Iran’s missile program, could help further counter the Iranian threat. Legislators from both sides of the aisle have expressed the need for such sanctions. The task before them is to craft new mechanisms that will mitigate the impact of Implementation Day and thereby curb Iran’s post-deal regional adventurism.

Tyler Stapleton is deputy director of congressional relations at the Foundation for Defense of Democracies. Annie Fixler is a policy analyst at FDD’s Center on Sanctions and Illicit Finance. 


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