Iran Sanctions Contained in the Iran Threat Reduction and Syria Human Rights Act (ITRSHRA)

Summary:

On August 10, 2012, President Obama signed into law the Iran Threat Reduction and Syria Human Rights Act of 2012 (ITRSHRA). The Iran-related provisions in the law provide for sanctions on activities related to Iran’s energy and financial sectors, proliferation of weapons of mass destruction, support for terrorism, and human rights abuses. ITRSHRA also amends portions of the Iran Sanctions Act of 1996 (ISA), the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA), and section 1245 of the FY 2012 National Defense Authorization Act (NDAA). These new authorities greatly increase the pressure on Iran to comply with its full range of international nuclear obligations and engage in constructive negotiations with the international community. The legislation also contains provisions providing for sanctions on activities related to Syria’s human rights abuses, which will be covered in a separate fact sheet.

Commercial Sanctions under ITRSHRA

Summary of Previous Sanctions:

Previously, ISA, as amended by CISADA, provided for sanctions on: 1) Making an investment above certain monetary thresholds that directly and significantly contributes to Iran’s ability to develop its petroleum resources; 2) Providing goods, services, technology, information, or support above certain monetary thresholds that could directly and significantly facilitate the maintenance or expansion of Iran’s domestic production of refined petroleum products; 3) Providing Iran refined petroleum products above certain monetary thresholds; and 4) Providing goods, services, technology, information, or support that could directly and significantly contribute to Iran’s ability to import refined petroleum products. Furthermore, Executive Order (E.O.) 13590 provides for sanctions on the provision of goods, services, technology, or support above certain monetary thresholds that could directly and significantly contribute to the maintenance or enhancement of Iran’s ability to develop its petroleum resources or to the maintenance or expansion of Iran’s domestic production of petrochemical products.

New Sanctionable Commercial Activities Under ITRSHRA:

ITRSHRA amends ISA/CISADA and also adds new categories of sanctionable commercial activities with Iran, including knowingly:

• Participating in a joint venture established on or after January 1, 2002 with respect to the development of petroleum resources outside of Iran if the Government of Iran is a substantial partner or investor in the joint venture, or if Iran could receive technological knowledge or equipment not previously available to it which could directly and significantly contribute to the enhancement of Iran’s ability to develop its petroleum resources.[1]
• Owning, operating, controlling, or insuring a vessel that on or after 90 days from the Act’s enactment was used to transport crude oil from Iran to another country (this does not apply to vessels used to transport crude oil from Iran to a country given a “significant reduction” exception under section 1245 of the NDAA).
• Owning, operating, or controlling a vessel that on or after 90 days from the Act’s enactment is used in a manner that conceals the Iranian origin of crude oil or refined petroleum products transported on the vessel, including by permitting the vessel’s operator to suspend the operation of the vessel’s satellite tracking device or obscuring the ownership, operation, or control of the vessel.
• Providing underwriting services, insurance, or reinsurance on or after the enactment of the Act for the National Iranian Oil Company (NIOC), the National Iranian Tanker Company (NITC), or a successor entity to either such company.[2]
• Purchasing, subscribing to, or facilitating the issuance of sovereign debt of the Government of Iran or debt of any entity owned or controlled by the Government of Iran, including bonds, issued on or after the Act’s enactment.

Sanctions Provisions on Commercial Activities with Iran:

Previously, ISA required that the Secretary of State impose at least 3 out of 9 available sanctions once the Secretary of State had made a determination that sanctionable activity had occurred. ITRSHRA amends these provisions to now require the imposition of at least 5 sanctions and expands the list of available sanctions to 12.

The available sanctions include prohibitions on:

1. Export assistance from the Export-Import Bank of the United States;[3]

2. Licenses for export of U.S. military, “dual use,”[4] or nuclear-related goods or technology;

3. Private U.S. bank loans exceeding $10 million in any 12-month period;

4. If the sanctioned person is a financial institution, designation as a primary dealer in USG debt instruments or service as a repository of USG funds;

5. Procurement contracts with the United States Government;

6. Foreign exchange transactions subject to U.S. jurisdiction;

7. Financial transactions subject to U.S. jurisdiction;

8. Transactions with respect to property and interests in property subject to U.S. jurisdiction;

9. Imports to the United States from the sanctioned person;

10. Ban on investment in equity or debt of the sanctioned person;

11. Exclusion (visa ban) of corporate officers of sanctioned entities;

12. Or sanctions (any of the above) on principal executive officers of sanctioned entities.

Sanctions on Financial Institutions under ITRSHRA

Summary of Previous Sanctions:

CISADA provides for sanctions on foreign financial institutions that knowingly facilitate: Iranian Weapons of Mass Destruction (WMD) transactions; transactions related to Iran’s support for terrorism; the activities of persons sanctioned under Iran-related UN Security Council Resolutions (UNSCRs); significant transactions for the Islamic Revolutionary Guard Corps (IRGC) or its U.S.-designated agents or affiliates; or significant transactions with Iranian-linked financial institutions designated by the United States. The NDAA provides for sanctions on certain significant financial transactions with the Central Bank of Iran (CBI).

New Sanctionable Activities for Financial Institutions under ITRSHRA:

ITRSHRA amends CISADA by adding new activities that could result in correspondent account sanctions for foreign financial institutions that knowingly:

• Facilitate a significant transaction for a person who is designated by the United States in connection with Iran’s proliferation activities or support for terrorism.
• Facilitate the activities of persons working on behalf of, at the direction of, or owned or controlled by an entity subject to financial sanctions under an Iran-related United Nations Security Council Resolution.

ITRSHRA also provides for the blocking of property or interests in property subject to U.S. jurisdiction of entities:

• Providing, enabling, or facilitating access to specialized financial messaging services for the Central Bank of Iran or a U.S.-designated Iranian-linked financial institution.

ITRSHRA Changes to Section 1245 of the Fiscal Year 2012 National Defense Authorization Act (NDAA)

• Expands sanctionable activities under the NDAA to include, from 180 days after the enactment of the Act, non-petroleum transactions by state-owned/controlled foreign financial institutions that are not central banks.
• Narrows the NDAA exception for “significant reduction” to only include, from 180 days after the enactment of the Act, financial transactions: (i) for trade in goods or services between the country with primary jurisdiction over the foreign financial institution and Iran; and (ii) where any funds owed to Iran as a result of such trade are credited to an account located in the country with primary jurisdiction over the foreign financial institution.
• Expands eligibility for the NDAA exception to include countries that were purchasing crude oil from Iran, previously received an exception, and subsequently ceased all such purchases.

Terrorism or Proliferation-Related Provisions of ITRSHRA

Summary of Previous Sanctions:

E.O. 13382, E.O. 13224, E.O. 12938, and the Iran, North Korea, and Syria Nonproliferation Act (INKSNA) provide for sanctions on a range of activities related to Iran’s proliferation of weapons of mass destruction or support for terrorism.

New Terrorism or Proliferation-Related Sanctionable Activities under ITRSHRA:

IRGC and UNSC-Designated Entities

ITRSHRA contains several provisions for knowingly engaging in actions with respect to the IRGC or Iranian entities subject to UNSCRs. These include:

• Requires within 90 days of the enactment of the Act identification and blocking of all property and interests in property subject to U.S. jurisdiction, as well as visa denial, for officials, agents, or affiliates of the IRGC.
• Requires 5 out of 12 sanctions (the same as the sanctions on commercial-related activities above) on persons that, on or after the enactment of the Act, materially assist, sponsor, or provide financial, material, or technological support for, or goods or services in support of, or engage in significant transactions with, the IRGC or its officials, agents, or affiliates; and allows additional sanctions pursuant to the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) (“IEEPA”).
• Requires 5 out of 12 sanctions (the same as the sanctions on commercial-related activities above) on persons that, on or after the enactment of the Act, engage in significant transactions with a person subject to, or a person acting on behalf of or at the direction of a person subject to, financial sanctions pursuant to an Iran-related UNSCR; and allows additional sanctions pursuant to IEEPA.
• Authorizes measures against agencies of foreign (non-Iranian) governmental entities that materially assist, sponsor, or provide financial, material, or technological support for, or goods and services in support of, or materially engage in a significant transaction with, designated IRGC officials, agents, or affiliates, or a person designated by Iran-related UNSCRs, or a person acting on behalf of, or at the direction of said persons.
  • Authorized measures include restrictions on foreign assistance, sales of defense articles, and licenses for United States Munitions List items, as well as U.S. opposition to international financial institution (IFI) loans or assistance.

Proliferation:

ITRSHRA provides for sanctions for knowingly engaging in activities related to Iran’s proliferation of WMD, including:

• Requires 5 out of 12 sanctions (the same as those for the commercial-related sanctions above) on a person for exporting, transferring, permitting, or otherwise facilitating, on or after the date of enactment of the Act, the transshipment of any goods, services, technology, or other items to any other person while the person knew or should have known that the export, transfer, or transshipment would likely result in another person exporting, transferring, transshipping or otherwise providing the goods, services, technology, or other items to Iran and that the items would contribute materially to the ability of Iran to acquire or develop chemical, biological, or nuclear weapons or related technologies or destabilizing numbers and types of advanced conventional weapons.
• Requires 5 out of 12 sanctions (the same as those for the commercial-related sanctions above) for participating, on or after the Act’s enactment, in a joint venture established on or after February 2, 2012, with the Government of Iran, an entity incorporated in Iran or subject to the jurisdiction of the Government of Iran, or a person acting on behalf of or at the direction of the Government or Iran or such an entity that involves any activity relating to the mining, production, or transportation of uranium. For a joint venture established before February 2, 2012, the joint venture must also be one through which (1) uranium is transferred directly or indirectly to Iran, (2) the Government of Iran receives significant revenue, or (3) Iran could receive technological knowledge or equipment not previously available to it that could contribute materially to the ability of Iran to develop nuclear weapons or related technologies.
• Requires an asset freeze and prohibition on transactions in property and interests of entities that sell, lease, or provide a vessel or insurance, reinsurance, or other shipping services for the transportation to or from Iran of goods that could materially contribute to the activities of Iran with respect to the proliferation of weapons of mass destruction or support for acts of international terrorism.

Human Rights-Related Provisions of ITRSHRA:

ITRSHRA amends CISADA to include two new sections 105A and 105B that require the U.S. Government to deny a visa and block the U.S. property and interests in property of persons engaged in activities related to human rights abuses and censorship with regards to Iran, including:

• On or after the date of enactment of ITRSHRA, knowingly transferring or facilitating the transfer of, or providing services for, goods or technologies to Iran, entities subject to the jurisdiction of the Government of Iran, entities organized under the laws of Iran, or Iranian nationals that the President determines are likely to be used by the Government of Iran to commit serious human rights abuses against the people of Iran.
  • This provision includes, but is not limited to, firearms or ammunition[5], rubber bullets, police batons, pepper or chemical sprays, stun grenades, electroshock weapons, tear gas, water cannons, and surveillance technology.
  • It also includes “sensitive technology”, which is defined by section 106 of CISADA as hardware, software, telecommunications equipment or any other technology the President determines is to be used specifically 1) to restrict the free flow of unbiased information in Iran; or 2) to disrupt, monitor or otherwise restrict speech of the people of Iran.
• Engaging in censorship or other activities, on or after June 12, 2009, with respect to Iran that prohibit, limit or penalize the exercise of freedom of expression or assembly by citizens of Iran, or limit access to print or broadcast media, including the facilitation or support of efforts by the Iranian government to jam international satellite signals.

Expanded Liability for U.S. Companies

• No later than 60 days after the enactment of the Act, ITRSHRA prohibits any entity owned or controlled by a U.S. person which is established or maintained outside of the United States from knowingly engaging in any transaction directly or indirectly with the Government of Iran or persons subject to the jurisdiction of the Government of Iran that would be prohibited in the United States or for U.S. persons, and provides for civil penalties on the U.S. parent company if the entity owned or controlled by it and established or maintained outside of the United States violates, attempts or conspires to violate, or causes a violation of this provision.[6] U.S. persons (including U.S. organized entities) will be subject to penalties if non-U.S. entities that they own or control engage in transactions with the Government of Iran or persons subject to the jurisdiction of Iran prohibited by regulations and orders pursuant to IEEPA.

Waivers:

• ITRSHRA does provide for certain waivers of sanctions for the commercial, financial, or proliferation/terrorism-related activities with Iran. These waivers may be applied on a case-by-case basis with respect to a sanctionable person depending on the facts and U.S. interests in each case.