Introduction

With concern in the West mounting over Iran's nuclear ambitions, some lawmakers and policy advocates see sanctions as the best option to halt Tehran's uranium-enrichment program. Since 2010, the United States--along with international partners--has increasingly issued new sanctions as new reports surfaced of the country's progress on potential nuclear weapons capability. In the latest instance, an International Atomic Energy Agency report released in November 2011 issued the agency's strongest judgment to date that Iran is seeking a nuclear weapon. In response, the United States imposed new sanctions tightening the screws on Iran's petrochemical and oil and gas sectors. For the first time, the United States also designated Iran's entire financial sector--including the Central Bank of Iran--as a "primary money laundering concern" under the Patriot Act. Critics say opposition from China and Russia have led to watered-down international sanctions (VOA) in the past. Both nations, which maintain strong economic ties to Iran, have also opposed unilateral measures by Washington, claiming they will hurt diplomatic attempts to engage Iran by circumventing UN authority.

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Washington's Approach

The long list of U.S. economic and political sanctions against Iran has its root in the 1979 Tehran hostage crisis. On November 14, 1979, President Jimmy Carter declared an emergency and ordered a freeze on all Iranian assets "which are or become subject to the jurisdiction of the United States." Additional sanctions were imposed when, in January 1984, Iran was implicated in the bombing of the U.S. Marine base in Beirut, Lebanon. The United States added Iran to its list of countries that support terrorism (in this case, the Lebanon-based militant group Hezbollah), banning U.S. foreign aid to Tehran and imposing export controls on dual-use items. Over the next decade, deteriorating relations prompted the United States to ban exports to Iran on a host of products, from airplane and helicopter parts to scuba gear.

Concern over Iran's nuclear program surfaced later, and today is the driving factor behind efforts to tighten the economic noose. The following areas are targeted by significant U.S. sanctions:

• Weapons development. The Iran-Iraq Arms Nonproliferation Act (October 23, 1992), calls for the sanctioning of any person or entity that assists Tehran in weapons development or acquisition of "chemical, biological, nuclear, or destabilizing numbers and types of advanced conventional weapons." Subsequent nonproliferation orders include the Iran-Syria-North Korea Non-Proliferation Act, and Executive Order 13382 (PDF), signed by President Bush in June 2005.
• Trade and investment. On April 30, 1995, President Bill Clinton announced a comprehensive ban on U.S. trade and investment in Iran, a move codified by Executive Order 12959 (PDF). The move drew protest from France, Britain, and Germany; it has since been relaxed to allow for trade in luxury items and humanitarian aid goods. In March 2010, U.S. President Barack Obama, like George W. Bush renewed Clinton's executive order banning U.S. trade and investment with Iran.
• Nuclear materials. The Iran and Libya Sanctions Act of 1996 (ISA) was aimed at denying Iran access to materials to further its nuclear program by sanctioning non-U.S. business investment in Iran's energy sector. While the act has been seen as a blueprint for possible actions aimed at foreign support of Iranian weapons development, in practice the measure has proven largely symbolic. Kenneth Katzman, an Iran analyst at the Congressional Research Service, writes (PDF) that "no projects have actually been sanctioned under ISA, and numerous investment agreements with Iran since its enactment have helped Iran slow deterioration of its energy export sector."
• Financial dealings. The U.S. Treasury Department administers a vast array of financial sanctions against Iran, everything from bans on the importation of gifts over $100 to laws barring financial dealings with Iranian entities. Efforts to ban Iranian banks from accessing the U.S. financial system--spearheaded by Stuart Levey, undersecretary for terrorism and financial intelligence since 2004--have also increased (NYT) in recent years. In November 2011, the United States designated the entire Iranian banking regime as one that might be aiding and abetting terrorist activities but the measure fell short of sanctioning the country's central bank.
• Assets. Following the terrorist attacks in New York and Washington, President Bush authored Executive Order 13224 (PDF), freezing the assets of entities determined to be supporting international terrorism. This list includes dozens of individuals, organizations, and financial institutions in Iran. Over the years, Washington has sanctioned dozens more individuals and Iranian institutions, including banks, defense contractors, and the Revolutionary Guard Corps. In October 2011, the Treasury Department added five Iranians, including four senior officers of the IRGC's elite paramilitary Quds Force, to this list for plotting the assassination of the Saudi ambassador to the United States. It also added Iranian commercial airline Mahan Air for providing financial, material, and technological support to the IRGC and Quds Force. IRGC-Quds Force was also listed in Executive Order 13572 of April 2011 aimed at blocking properties of individuals and entities for supporting the Syrian regime's human rights abuses and suppression of anti-government protests.
• Refined gasoline. In July 2010, President Obama signed into law a measure aimed at penalizing domestic and foreign companies for selling refined gasoline to Iran, or for supplying equipment in Iran's bid to increase its refining capacity. In signing the measure, Obama declared the act, H.R. 2194, "a powerful tool against Iran's development of nuclear weapons and support of terrorism. China (WSJ) and Russia (CSMonitor) quickly opposed the unilateral U.S. measure on grounds that the move--aimed at closing loopholes in the UN sanctions regime--could hurt their business interests while undermining diplomatic overtures to Tehran.

Some experts are skeptical of sanctions on gasoline, saying they often inadvertently target the wrong entities. "They are sanctions against our allies, and the people that we need to get on board with us, to help us deal with Iran," says Kimberly Ann Elliott, a senior fellow at the Center for Global Development who has studied sanctions policy. Iran imports gasoline from a number of important U.S. allies (PDF), including India, France, the Netherlands, and a host of Gulf States. "Putting sanctions on their companies is not very likely to encourage them to be cooperative" on other issues of regional importance, Elliott says.

Additionally, nations that rely on Iranian gas imports--notably Turkey--are unlikely to support a gasoline import ban, experts say. Iran and international energy giants appear equally intent on skirting looming petroleum-related sanctions. Energy giants like Royal Dutch Shell PLC and Total SA are already masking their business dealings with Iran (WSJ), while Iranian shippers operate a series of shell companies (NYT) to avoid international economic pressure.

International Efforts

The UN Security Council has wrestled with imposing sanctions on Iran since 2006 due to Iran's failures to comply with International Atomic Energy Agency requirements and its continuing uranium-enrichment activities. In December of that year, the council approved the first of now four multilateral resolutions authorizing bans on exports of nuclear, missile, and dual-use technologies; limiting travel by dozens of Iranian officials; and freezing the assets of forty individuals and entities, including Bank Sepah and various front companies. The measures also call on states to refrain from business with Iran, and authorizes the inspection of cargo carried by Iranian shippers. In June of 2010, the Security Council issued a fourth round of sanctions under Resolution 1929--putting the squeeze on Iran's Revolutionary Guards-owned businesses, its shipping industry, and the country's commercial and financial service sector. Efforts to push through a fourth round of economic noose-tightening at the UN, while successful, were nonetheless complicated by resistance from Russia and China, which are linked to Iran by important economic and political interests.

Yet despite opposition from the two permanent Security Council members, international efforts to squeeze Iran economically are solidifying. In July 2010, Canada banned new investment (AP) in Iran's oil and gas industries. European allies have also implemented their own sanctions, and although historically these states have had less of an appetite for punitive measures, recent actions have been tougher. For much of the 1990s, while Washington imposed unilateral sanctions, EU countries maintained a policy of "critical dialogue" with Iran. But as Iran grew increasingly defiant on the nuclear front, European partners turned up the heat (PDF), Katzman of the Congressional Research Service notes. In June 2008, the EU froze the assets of nearly forty individuals and entities doing business with Bank Melli, Iran's largest bank; Western officials have accused Bank Melli of supporting Iran's nuclear and missile programs. Japan and the EU have also placed restrictions on international lending to Iran, which, Katzman writes, "represents a narrowing of past differences between the United States and its allies on this issue."

In June 2010, the European Union went further, enacting measures similar to those approved by the U.S. Congress that ban investment and assistance (BBC) to Iran's energy sector. In July 2010, a series of prohibitions were placed on European firms doing business in the country. The EU also added to its list (PDF) of designated individuals, companies, banks, and organizations targeted for asset freezes. Many analysts believe the moves, taken together, will place increased strain on the Iranian economy, given the EU's position as Iran's largest trading partner. In 2008, Iran exported $16.9 billion worth of goods to EU countries. In response to the IAEA report in November 2011, the UK and Canada also imposed new sanctions similar to the United States restricting the activities of Iran's central bank.

Navigating the Road Ahead

Experts are divided on the effectiveness of sanctions as a tool to force rogue states to abandon their weapons programs. In the cases of Libya and Iraq, many analysts note the role economic sanctions had in inhibiting the development of weapons programs (though in the case of Iraq, the full extent of their effectiveness was not known until after the U.S.-led invasion of 2003). And in Iran, there is some evidence that sanctions are hindering economic growth. Washington hopes that squeezing Iran's economy will pressure the country's leadership to alter course on its nuclear program. But others say Iran's economy remains relatively healthy, and any setback has had less to do with international pressure than poor economic policies. Elliott, of the Center for Global Development, says the best approach would be for the United States to better coordinate its efforts with the EU. Yet Elliott says sanctions should only be seen as one tool in a broader diplomatic arsenal: "It has to be coupled with this attempt to negotiate and really bargain with Iran, and to put some carrots on the table as well as sticks," she says. "I don't think the sticks alone are going to do it."