Iran Sanctions:

Impact in Furthering U.S. Objectives Is Unclear and Should Be Reviewed

GAO-08-58: Published: Dec 18, 2007. Publicly Released: Jan 16, 2008.

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The 2006 U.S. National Security Strategy stated that the United States faces challenges from Iran, including Iran's proliferation efforts and involvement in international terrorism. To address these concerns, the United States employs a range of tools, including diplomatic pressure, a military presence in the Gulf, and sanctions. A U.S. sanction is a unilateral restriction or condition on economic activity imposed by the United States for reasons of foreign policy or national security. We were asked to review (1) U.S. sanctions targeting Iran and their implementation, (2) reported sanction impacts, and (3) factors limiting sanctions. To conduct the review, we assessed trade and sanction data, information on Iran's economy and energy sector, and U.S. and international reports on Iran, and discussed sanctions with U.S. officials and Iran experts.

Since 1987, U.S. agencies have implemented numerous sanctions against Iran. First, Treasury oversees a ban on U.S. trade and investment with Iran and filed over 94 civil penalty cases between 2003 and 2007 against companies violating the prohibition. This ban may be circumvented by shipping U.S. goods to Iran through other countries. Second, State administers laws that sanction foreign parties engaging in proliferation or terrorism-related activities with Iran. Under one law, State has imposed sanctions in 111 instances against Chinese, North Korean, Syrian, and Russian entities. Third, Treasury or State can use financial sanctions to freeze the assets of targeted parties and reduce their access to the U.S. financial system. U.S. officials report that U.S. sanctions have slowed foreign investment in Iran's petroleum sector, denied parties involved in Iran's proliferation and terrorism activities access to the U.S. financial system, and provided a clear statement of U.S. concerns to the rest of the world. However, other evidence raises questions about the extent of reported impacts. Since 2003, the Iranian government has signed contracts reported at about $20 billion with foreign firms to develop its energy resources. Further, sanctioned Iranian banks may fund their activities in currencies other than the dollar. Moreover, while Iran halted its nuclear weapons program in 2003, according to the November 2007 National Intelligence Estimate, it continues to enrich uranium, acquire advanced weapons technology, and support terrorism. Finally, U.S. agencies do not systematically collect or analyze data demonstrating the overall impact and results of their sanctioning and enforcement actions. Iran's global trade ties and leading role in energy production make it difficult for the United States to isolate Iran and pressure it to reduce proliferation and support for terrorism. For example, Iran's overall trade with the world has grown since the U.S. imposed sanctions, although this trade has fluctuated. Imports rose sharply following the Iran-Iraq war in 1988 and then declined until 1995; most export growth followed the rise in oil prices beginning in 2002. This trade included imports of weapons and nuclear technology. However, multilateral UN sanctions began in December 2006.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Congress has addressed our Matter by passing legislation that places reporting requirements on the Director on National Intelligence.On July 1, 2010, the President signed into law the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010. The Conference Report for the bill cited the GAO as asserting that Iran continued to circumvent sanctions and receive sensitive equipment, including some of U.S. origin. In response, Title III: Prevention of Diversion of Certain Goods, Services, and Technologies to Iran of the Act required the Director of National Intelligence to report to the President and Congress, about governments believed to allow the re-export, transshipment, transfer, retransfer, or diversion to Iranians of key goods, services or technologies that could be used for weapons of mass destruction, proliferation or acts of terrorism. The President, upon receipt of the report may designate a country, a Destination of Diversion Concern.

    Matter: Congress and the Administration need a better understanding of the impact of U.S. sanctions against Iran and the extent to which sanctions are achieving U.S. foreign policy objectives. The Administration needs to take a series of actions to first improve the disparate data collected on Iran sanctions and then establish baseline information for the continuous monitoring and periodic reporting on what U.S. sanctions have achieved. Accordingly, Congress may wish to consider requiring the National Security Council (NSC), in collaboration with the Departments of State, the Treasury, Energy, and Commerce; the intelligence community; and U.S. enforcement agencies to collect, analyze, and improve data on U.S. agencies' actions to enforce sanctions against Iran and complete an overall baseline assessment of the impact and use of U.S. sanctions, including factors that impair or strengthen them. This assessment should collect information, to the extent feasible, from various U.S. agencies and consider factors such as, but not limited to, the following: (1) the number of goods seized, penalties imposed, and convictions obtained under the trade ban (Homeland Security, Treasury, Commerce, Justice); (2) sensitive items diverted to Iran through transshipment points (Commerce and the intelligence community); (3) the extent to which repeat foreign violators of Iran-specific sanctions laws have ended their sales of sensitive items to Iran (State and intelligence community); (4) the amount of assets frozen resulting from financial sanctions (Treasury and the intelligence community); and (5) the extent of delays in foreign investment in Iran's energy sector (State, Energy, and the intelligence community).

  2. Status: Closed - Implemented

    Comments: The Department of Treasury continuously collects data and information from all sources, including classified, to identify changes in the Iranian economy by monitoring several essential financial and economic sectors. Treasury assesses the impact of sanctions on Iran and shares its findings with relevant agency and intelligence officials prior to disseminating the information to agency management and policy makers in the form of a quarterly classified report.

    Matter: Congress and the Administration need a better understanding of the impact of U.S. sanctions against Iran and the extent to which sanctions are achieving U.S. foreign policy objectives. The Administration needs to take a series of actions to first improve the disparate data collected on Iran sanctions and then establish baseline information for the continuous monitoring and periodic reporting on what U.S. sanctions have achieved. Accordingly, Congress may wish to consider requiring the NSC, in collaboration with the Departments of State, the Treasury, Energy, and Commerce; the intelligence community; and U.S. enforcement agencies to develop a framework for assessing the ongoing impact of U.S. sanctions, taking into account any data gaps that were identified as part of the baseline assessment , and the contribution of multilateral sanctions.

  3. Status: Closed - Implemented

    Comments: The Department of Treasury continuously collects data and information from all sources, including classified, to identify changes in the Iranian economy by monitoring several essential financial and economic sectors. Treasury assesses the impact of sanctions on Iran and shares its findings with relevant agency and intelligence officials prior to disseminating the information to agency management and policy makers in the form of a quarterly classified report.

    Matter: Congress and the Administration need a better understanding of the impact of U.S. sanctions against Iran and the extent to which sanctions are achieving U.S. foreign policy objectives. The Administration needs to take a series of actions to first improve the disparate data collected on Iran sanctions and then establish baseline information for the continuous monitoring and periodic reporting on what U.S. sanctions have achieved. Accordingly, Congress may wish to consider requiring the NSC, in collaboration with the Departments of State, the Treasury, Energy, and Commerce; the intelligence community; and U.S. enforcement agencies to report periodically to the Congress on the impact of sanctions against Iran in achieving U.S. foreign policy objectives.

 

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