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Sanctions against Iran

This article outlines economic, trade, scientific and military sanctions against Iran, which have been imposed by the U.S. government, or under U.S. pressure. Currently the sanctions include a total embargo on dealings with Iran by U.S. citizens, threatening the world's oil and gas companies against investment in Iran, and a ban on selling aircraft and repair parts to Iranian aviation companies.

Under Mosaddeq government

Although all of the current sanctions were imposed after the Iranian Revolution, the United States along with the U.K. had previously imposed a worldwide boycott of Iranian oil in early 1950s. The boycott was a response to the election of Prime Minister Mohammed Mosaddeq, who had promised to nationalize Iran's oil industry. The incident submerged the country into a financial crisis. As a result of Operation Ajax, Mosaddeq was deposed, and the exiled Shah was re-installed.

Hostage crisis

The first U.S. economic sanctions against Iran after the Iranian Revolution were in 1979. In response to rumors of another U.S. backed coup and re-installation of the Shah, a group of radical students seized the American Embassy in Tehran. The United States responded by freezing about $12 billion in Iranian assets, including bank deposits, gold and other properties. 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.

Iran–Iraq War

After invasion of Iran by Iraq, the United States intensified Iran's sanctions. In 1984, sanctions were approved to oppose all loans to Iran from international financial institutions, prohibit weapons sales, and prohibit all assistance to Iran. In 1987, the U.S. further prohibited the importation and exportation of any goods or services from Iran, and U.S. naval and air forces struck Iranian naval units in response to Iranian efforts to disrupt the flow of Iraqi oil from the Persian Gulf with naval mines and missile attacks.

Rafsanjani and Khatami governments

Pragmatist President Rafsanjani, a critic of President Ahmadinejad, says that he had tried to reduce tensions between Iran and the West, although his term was marked by some of the toughest sanctions against Iran. In April 1995, President Bill Clinton issued a total embargo on dealings with Iran, prohibiting all commercial and financial transactions with Iran. Trade with the U.S., which had been growing following the end of the Iran–Iraq War ended abruptly.

The next year, the American Congress passed the Iran and Libya Sanctions Act of 1996 (ILSA) which threatened even non-U.S. countries making certain investments in Iran. Under ILSA, all foreign companies that provide investments over $20 million for the development of petroleum resources in Iran will be imposed two out of seven possible sanctions, by the U.S.:

  • denial of Export-Import Bank assistance;
  • denial of export licenses for exports to the violating company;
  • prohibition on loans or credits from U.S. financial institutions of over $10 million in any 12-month period;
  • prohibition on designation as a primary dealer for U.S. government debt instruments;
  • prohibition on serving as an agent of the United States or as a repository for U.S. government funds;
  • denial of U.S. government procurement opportunities (consistent with WTO obligations); and
  • a ban on all or some imports of the violating company.

In response to the election of Iranian reformist President Mohammad Khatami, President Clinton eased sanctions on Iran. A debate in the US Congress on whether to allow the expiration of ILSA, which some legislators argued hindered bilateral relations, and others argued would be seen as a concession on an effective program, ended on August 5 2001, with its renewal by the Congress and signing into law by President George W. Bush. Furthermore, in January 2002, IEEE stripped Iranian members from full membership privileges and support of activities, and without notice, blocked Iranian members from accessing their e-mail accounts. In February 2004, during the final year of the reformist era, the U.S. Department of the Treasury ruled against editing or publishing scientific manuscripts from Iran, and stated that U.S. scientists collaborating with Iranians could be prosecuted. Khatami government could only manage to reduce the sanctions for some items like pharmaceuticals, medical equipment, caviar or Persian rugs, in 2000.

Ahmadinejad government

After election of President Ahmadinejad in 2005, he stopped the retroactive nuclear policy and the suspension of uranium enrichment, which was put in place by the reformists. This has infuriated the United States, and it is currently pushing for international sanctions against Iran over its atomic ambitions. The U.S. government imposed sanctions on an Iranian bank on September 8 2006, barring it from dealing with U.S. financial institutions, even indirectly. The move against Bank Saderat Iran was announced by Stuart Levey, the undersecretary for treasury, who accused the major state-owned bank in Iran of transferring funds for certain groups, including Hezbollah. While Iranian financial institutions are barred from directly accessing the U.S. financial system, they are permitted to do so indirectly through banks in other countries. But the latest move severs that access for Bank Saderat and Levey said the action does not apply to other Iranian banks. Levey said since 2001 a Hezbollah-controlled organization had received 50 million U.S. dollars directly from Iran through Bank Saderat. He said the U.S. government will also persuade European banks and financial institutions not to deal with Iran. Florida enacted a boycott on companies trading with Iran and Sudan in June 2007, while New Jersey's state legislature was considering similar action.

As of November, 2007, the following Iranian banks are prohibited from transferring money to or from United States banks::

For individuals and small businesses, these banking restrictions have created a large opportunity for the hawala market, which allows Iranians to transfer money to and from foreign countries using an underground unregulated exchange system.

The targeted banks, such as Bank Mellat, have also been able to replace banking relationships with a few large sanction-compliant banks with relationships with a larger number of smaller non-compliant banks.

Criticism of trade sanctions

The U.S. denies aircraft manufacturer Boeing the freedom to sell aircraft to Iranian aviation companies. The International Civil Aviation Organization warned that U.S. sanctions against Iran were placing civilian lives in danger by denying Iranian aviation necessary spare parts for aircraft repair.

The European Union has been critical of most of the U.S. trade sanctions against Iran. Some EU states have criticized ILSA as a “double standard” in U.S. foreign policy, in which the United States fiercely worked against the Arab League boycott of Israel while at the same time promoted a worldwide boycott of Iran. The EU countries threatened formal counter-action in the World Trade Organization.

Also see this article "Impacts of the US Trade and Financial Sanctions on Iran", by AKBAR E. TORBAT, The World Economy, Vol. 28, No. 3, pp. 407-434, March 2005. The following is the abstract of the article:

"This article presents a case study of the effectiveness of the US unilateral trade and financial sanctions on Iran. To assess the trade sanctions' effect, the US-Iran historical trade data are examined, and the economic cost of trade sanctions is measured by applying the concept of welfare loss. The financial sanctions' impacts are evaluated by assessing the extra charges Iran has paid on its foreign debt obligations and for financing its oil development projects. At the end, the efficacy of the US sanctions policy towards Iran is evaluated. It is found that the financial sanctions have had a more powerful impact than the trade sanctions. The analysis also shows that the unilateral import sanctions on the fungible crude oil have been ineffective. It is concluded that, overall, the sanctions' economic effect has been significant, while its political effect has been minimal. "


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