Specialist in Middle Eastern Affairs
August 7, 2018
The multilateral nuclear accord (Joint Comprehensive Plan of Action, or JCPOA) provided Iran broad relief from U.N. and multilateral sanctions, as well as U.S. secondary sanctions (sanctions on foreign firms that do business with Iran) on Iran’s civilian economic sectors. Upon the January 16, 2016, implementation of the JCPOA, U.S. Administration waivers of relevant sanctions laws took effect, relevant executive orders (E.O.s) were revoked, and corresponding U.N. and EU sanctions were lifted. Remaining in place were a general ban on U.S. trade with Iran and U.S. secondary sanctions imposed on Iran’s support for regional governments and armed factions, its human rights abuses, its efforts to acquire missile and advanced conventional weapons capabilities, and the Islamic Revolutionary Guard Corps (IRGC). Some additional sanctions on these entities and activities were made mandatory by the Countering America’s Adversaries through Sanctions Act (CAATSA, P.L. 115-44), which also increases sanctions on Russia and North Korea.
Under U.N. Security Council Resolution 2231, nonbinding U.N. restrictions on Iran’s development of nuclear-capable ballistic missiles and a binding ban on its importation or exportation of arms remain in place for several years. However, Iran has continued to support regional armed factions and to develop ballistic missiles despite the U.N. restrictions, and did so even when strict international economic sanctions were in place during 2010-2015.
On May 8, 2018, President Trump announced that the United States would no longer participate in the JCPOA and that all U.S. secondary sanctions suspended to implement the JCPOA would be reimposed after a maximum “wind-down period” of 180 days (November 4, 2018). Some of the sanctions, but not on energy or banking transactions, went back into effect after a 90 day wind down period (August 6). The Administration has indicated it will not look favorably on requests by foreign governments or companies for exemptions to allow them to avoid penalties for continuing to do business with Iran after that time. U.S. licenses for the sale by Airbus and Boeing of commercial aircraft to Iran Air and other Iranian airlines have been revoked, causing cancellations of sales.
It remains uncertain whether reimposed U.S. sanctions based on the U.S. unilateral exit from the JCPOA will damage Iran’s economy to the extent sanctions did during 2012-2015, when the global community was relatively united in pressuring Iran. During that timeframe, Iran’s economy shrank by 9% per year, crude oil exports fell from about 2.5 million barrels per day (mbd) to about 1.1 mbd, and Iran could not repatriate more than $120 billion in Iranian reserves held in banks abroad. JCPOA sanctions relief enabled Iran to increase its oil exports to nearly presanctions levels, regain access to foreign exchange reserve funds and reintegrate into the international financial system, achieve about 7% yearly economic growth, attract foreign investments in key sectors, and buy new passenger aircraft. The sanctions relief contributed to Iranian President Hassan Rouhani’s reelection in the May 19, 2017, vote. Yet, perceived economic grievances still sparked protests in December 2017-January 2018.
Even though the U.S. exit from the JCPOA was supported by only a few countries in the region, the reimposition of U.S. sanctions has begun to harm Iran’s economy because numerous major companies have announced decisions to exit the Iranian economy rather than risk being penalized by the United States. As an indicator of the effects, the value of Iran’s currency sharply declined in June 2018, and economic-based unrest has continued, although not nearly to the point where the regime’s grip on power is threatened. If the European Union and other countries are unwilling or unable to keep at least the bulk of the economic benefits of the JCPOA flowing to Iran, there is substantial potential for Iranian leaders to decide to cease participating in the JCPOA.
See also CRS Report R43333, Iran Nuclear Agreement and U.S. Exit, by Paul K. Kerr and Kenneth Katzman; and CRS Report R43311, Iran: U.S. Economic Sanctions and the Authority to Lift Restrictions, by Dianne E. Rennack.