As negotiations with Iran enter the home stretch this week in Vienna, the ability of the U.S. government to relieve economic sanctions on Iran is likely to emerge as a major factor in determining whether Tehran will accept significant restrictions on its nuclear program.
According to a new paper by Kenneth Katzman, an Iran expert
at the Congressional Research Service, President Barack Obama has ample authority to satisfy Iran’s demands through the use of waivers and the expiration in 2016 of the only piece of US sanctions legislation that has a “sunset” clause, the Iran Sanctions Act (ISA).
Katzman, speaking Monday at the Atlantic Council, said that US administrations “have a tremendous amount of discretion” when it comes to applying sanctions because of the primacy given to the executive branch in the U.S. Constitution for conducting foreign policy.
Thus Obama can waive the sanctions which are of greatest concern to Iran – so-called secondary sanctions that threaten foreign companies that do business with Iran with exclusion from the U.S. market.
Congress, Katzman notes, does not get an “up or down” vote on presidential waivers.
While Iran has been subjected to U.S. sanctions since the 1979 hostage crisis, the really crippling multinational penalties came only under the Obama administration, after Iran restarted and accelerated a program to enrich uranium.
Sanctions run deep
The most biting sanctions were imposed following passage of United Nations Security Council resolution 1929 in June, 2010. Congress passed laws such as the Comprehensive Iran Sanctions,
Accountability and Divestment Act (CISADA), which threatened foreign banks that did transactions with sanctioned Iranian banks with losing their U.S. business.
That action – coupled with later expulsion of Iran from SWIFT, the Europe-based organization that regulates electronic financial messaging – effectively isolated Iran from the international banking system.
However, the U.S. president can waive those sanctions by instructing the secretary of the Treasury to write a report to Congressional committees asserting that the action is in U.S. national interests.
Similarly, the White House can stop applying the Fiscal 2012 National Defense Defense Authorization Act – which obliged foreign buyers of Iranian oil to significantly reduce their purchases of crude – for unlimited increments of 120 days by asserting that the waivers are “in the national security interest of the United States.”
Katzman, writing and speaking in his personal capacity and not on behalf of the U.S. government, envisions a process
by which the Obama administration waives these key sanctions – assuming a nuclear deal is reached – for the next two years until the ISA sunsets.
That bill – first passed in 1996 and repeatedly renewed – is the only piece of sanctions legislation that has a scheduled expiration date, according to Katzman. It is due to expire on Dec. 31, 2016 – a month before Obama leaves office and sufficient time following a possible nuclear agreement to test Iranian compliance.
The end of ISA would reopen Iran to foreign investment in its oil and gas sector, enabling the Islamic Republic to boost production and exports, which have been reduced substantially in recent years.
Congress, of course, could try to extend the law but face a presidential veto that would be difficult to overcome.
Other sanctions on Iran – related to its human rights record and support for groups on the U.S. State Department’s terrorist list – would remain in place. Congress has shown an inclination
to try to pile on more sanctions even while negotiations are proceeding.
So far, however, the Obama administration has managed to hold Congress at bay.
As to concerns expressed by Iranians that U.S. policy toward Iran – which now includes new tentative talks
on dealing with the Iraq crisis – will be radically changed by a new administration, Katzman notes that agreements reached in one administration are generally binding on another.
Examples include the strategic framework agreement signed with Iraq under the Bush administration in 2008.
Sanctions that prohibit U.S. companies from doing business with Iran – except for food, medicine and other humanitarian items – are likely to remain in place for some time.
But foreign subsidiaries of big U.S. multinationals could re-enter the Iranian market under the scenario envisioned by Katzman.
Cornelius Adebahr, a Europe expert at the Carnegie Endowment for International Peace, says he believes European firms will readily return to Iran if a long-term nuclear agreement is reached and they no longer face the threat of U.S. sanctions.
Trade delegations from France, Austria and a number of other European countries have visited Iran since the conclusion last fall of an interim nuclear deal but no big contracts have been signed.
Iran is also looking for the release of some $100 billion in oil revenues currently locked up in foreign accounts as well as fresh investment and exports. For Europe to lift its own extensive web of sanctions, however, action must be synchronized with the United States.
“There is hardly any European company that would invest in or trade with Iran that does not at the same time have an interest in the U.S. market
,” Adebahr wrote in companion paper to Katzman's analysis.
“That is why European firms would not do business with Iran as long as the specter of liability looms over their activities in the United States,” Adebahr wrote.