FPI Bulletin: Breathing Life into the Iran Sanctions Act

December 13, 2016

On the surface, the recent extension of the Iran Sanctions Act (ISA) offers a rare glimmer of bipartisanship following 17 months of bitter debate over the Joint Comprehensive Plan of Action (JCPOA). Yet this development is less significant than meets the eye. The ISA extension preserves the statutory framework for U.S. laws sanctioning Iran, but it comes in the context of the Obama administration’s repeated failure, over the past year, to apply those laws in a way that would deter Iran’s multiple violations of the JCPOA and ongoing regional aggression. The legislation will thus retain only modest value unless the executive branch enforces it as part of a broader campaign to increase pressure on Tehran.

The Iran Sanctions Act

Technically, even in the absence of country-specific legislation such as ISA, the executive branch maintains broad statutory authority to sanction U.S. adversaries and foreign companies that invest in them. Under the 1977 International Emergency Economic Powers Act (IEEPA; P.L. 95-223), the president, upon declaring a “national emergency” with respect to “an unusual and extraordinary threat,” may unilaterally impose a vast range of economic penalties deemed necessary to protect the United States.

Still, for more than two decades, Congress has played a key role in developing U.S. sanctions laws aimed explicitly at Iran. ISA — first passed in 1996 as the Iran and Libya Sanctions Act (P.L. 104-172) but renamed in 2006 following the termination of sanctions against the Qaddafi regime — represented a congressional effort both to deter foreign investment in Iran and to pressure a reluctant Clinton administration to take stronger action against the country. The legislation, which explicitly cites IEEPA as the statutory authority for the sanctions it seeks, authorized the president to sanction companies that invest more than $20 million in one year in Iran’s energy sector, the lifeblood of the nation’s economy. Crucially, however, the law did not compel the president to impose sanctions.

ISA constituted the first major bill that sought to penalize non-U.S. companies conducting business with Iran, thereby dramatically increasing pressure on European and Asian firms to terminate their economic ties with the regime. But while the legislation’s mere passage did deter some firms from investing in Iran’s energy sector, others still proceeded to conduct business in Iran without consequence. In the first 14 years following the bill’s enactment, the Clinton, Bush, and Obama administrations, fearful of alienating America’s European and Asian allies, failed to impose ISA sanctions on any foreign investors in Iran.

Still, ISA represented only the beginning of major congressional efforts to sanction Iran, and laid the statutory groundwork for future, more powerful legislation. Between 2010 and 2013, Congress — animated in part by Iran’s Green Revolution and the discovery of the regime’s covert enrichment facility at Fordow — passed a series of new laws that strengthened ISA’s provisions and further tightened other economic restrictions on Iran. These measures, which included the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (P.L. 111-195) and the Iran Threat Reduction and Syria Human Rights Act of 2012 (P.L. 112-158), among others, spurred President Obama to apply his executive authority, including long-unused ISA penalties, to catalyze Iran’s increasing isolation from the international economy.

In 2013, the cumulatively devastating impact of these steps, as well as new U.N. Security Council resolutions targeting Iran, prompted the regime to return to the negotiating table. In July 2015, Tehran and world powers finalized the JCPOA. In January 2016, the Obama administration waived the enactment of ISA’s key provisions, as well as many other sanctions bills, as part of the JCPOA’s implementation.

Does ISA Strengthen U.S. Deterrence?

In this context, many proponents of ISA’s renewal have exaggerated its significance by falsely claiming that its expiration would prevent the White House from reimposing sanctions in the event of an Iranian violation of the accord. At the same time, the Obama administration — anxious that ISA’s extension would lead Tehran to abandon the JCPOA — attempted to minimize the law’s importance by contending that, absent renewal, it could snap back sanctions on Iran using existing authority.

Both arguments misrepresent the actual significance of ISA. For most of its history, the law’s inherent statutory influence has remained fairly minimal; ISA began to exert meaningful economic pressure only in the context of the Obama administration’s larger sanctions campaign that began in 2010. In the absence of such a campaign, ISA’s importance stems primarily from its strategic value. First, a failure to extend the bill would have weakened U.S. deterrence, and thereby encouraged further Iranian noncompliance, by signaling to Tehran that Washington lacks the resolve to hold the regime accountable for its misbehavior.

Second, the law’s expiration would have sent a message to foreign companies hesitant to resume business with Iran that America is unlikely to penalize them for their investments, thus encouraging them to reestablish economic ties with the country. Third, it would have denied the president a tactical opportunity, in future talks with Tehran, to induce compromise by citing the credible prospect of further sanctions laws passed unilaterally by Congress. And fourth, an exclusive reliance on executive orders to impose sanctions would have weakened their political legitimacy and hence their long-term viability.

In itself, though, the ISA extension does not meaningfully strengthen America’s strategic position vis-à-vis Iran; it merely prevents its further atrophy. In this sense, the resounding bipartisan renewal of ISA — it passed the House by a vote of 419-1 and the Senate by a vote of 99-0 — obscures an ironic, and far more significant, congressional and executive branch failure.

Over the past year, Tehran has repeatedly violated the nuclear accord. Yet the Obama administration, despite its pledge to snap back sanctions on Iran in response to any JCPOA violation, has failed to reimpose economic penalties pursuant to ISA or any other sanctions bill. Nevertheless, members of Congress have hailed the legislation as necessary for ensuring the future viability of a snapback mechanism — even as the administration has ignored Iranian infringements that should already have triggered that very mechanism. In so doing, they have missed a key lesson of ISA’s history: In the absence of a broader legal architecture and a president determined to exercise it, such legislation will possess relatively limited value.

Conclusion

The renewal of ISA has allowed Congress to congratulate itself — even as President Obama and his supporters continue to block numerous bills that would actually strengthen sanctions against Iran. If passed, these measures would advance objectives that once received near-unanimous support: increasing transparency, preventing new concessions that go unreciprocated, and punishing Iran for its regional aggression, human rights abuses, and illicit ballistic missile tests. The administration’s inaction, however, has stymied all of these worthwhile goals.

In the coming months, President-elect Trump should exploit ISA’s deterrent ability by using its authority to begin penalizing Iran for its JCPOA violations to date. Then, in accordance with another promise of President Obama that also has gone unmet, he should work with Congress to apply further sanctions on Iran for its regional aggression, human rights abuses, and ballistic missile tests. These steps will give the new administration leverage to seek a broader renegotiation of the deal that corrects its many deficiencies. In so doing, President-elect Trump can advance the longstanding objective that lay at the heart of ISA and the larger U.S. sanctions architecture: preventing Iran from acquiring a nuclear weapon.

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The Foreign Policy Initiative seeks to promote an active U.S. foreign policy committed to robust support for democratic allies, human rights, a strong American military equipped to meet the challenges of the 21st century, and strengthening America’s global economic competitiveness.
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