Historical Background of US Sanctions on Iran
Economic restrictions against Iran began in 1979 when then-President Jimmy Carter signed Executive Order No. 12170. This order responded to perceived threats to U.S. national security, economic interests, and foreign policy, resulting in the freezing of all Iranian government assets within U.S. jurisdiction. The order was grounded in the International Emergency Economic Powers Act (IEEPA) and the National Emergencies Act (NEA), reflecting the gravity of the situation. Since that time, the sanctions framework has expanded considerably and now encompasses multiple regulations, including 31 CFR Parts 535, 560, 561, and 562. Non-compliance with these regulations, overseen by the Office of Foreign Assets Control (OFAC), can lead to severe penalties.
Evolution and Expansion of US Sanctions
Originally aimed at cutting off Iran’s access to international financial resources, U.S. sanctions have broadened over the years to cover numerous sectors such as military technology, scientific research, and space activities. Notably, in late 2019, additional sanctions were imposed targeting Iranian entities involved in space exploration, including the Iranian Space Agency and associated research centers.
Enforcement and Impact on US Businesses
OFAC plays a critical role in enforcing sanctions aimed at changing Iranian government policies. Consequently, American companies face tight restrictions on dealings with Iran. For example, Boeing is completely banned from operating in Iran, while tech giants like Microsoft and Apple maintain limited access only under strict controls. OFAC may issue special licenses to allow certain transactions under specific circumstances.
In 2024, following Iran’s military actions against Israel, the U.S. announced a new set of sanctions focused on curbing Iran’s oil exports. Due to the extraterritorial nature of U.S. sanctions, foreign companies and individuals violating these restrictions can also be subject to secondary sanctions.
The JCPOA and Its Influence on Sanctions
The Joint Comprehensive Plan of Action (JCPOA), commonly known as the Iran nuclear deal, was an agreement between Iran and the P5+1 countries designed to limit Iran’s nuclear program in exchange for sanction relief. Negotiations began in 2005 and culminated in inspections and phased sanction lifting. However, in 2017, the U.S. began withdrawing from the deal under President Trump, citing violations by Iran. By 2018, the U.S. had fully reinstated all previously lifted sanctions.
Legal Framework Governing Sanctions on Iran
The sanctions regime against Iran is built upon a robust legal foundation comprising U.S. federal regulations and international obligations. Key U.S. regulations include:
- 31 CFR Part 535 (Iranian Assets Control Regulations)
- 31 CFR Part 560 (Iranian Transactions and Sanctions Regulations)
- 31 CFR Part 561 (Iranian Financial Sanctions Regulations)
- 31 CFR Part 562 (Iranian Human Rights Abuses Sanctions Regulations)
These are supported by statutes like the Antiterrorism and Effective Death Penalty Act (AEDPA), Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA), and others. Executive powers derive from IEEPA and NEA, allowing broad presidential authority in national emergencies. International mandates, including UN Security Council Resolution 2231, further influence the framework, even though U.S. sanctions continue despite international agreements.
Restrictions on Trade and Commerce with Iran
Trading with Iran is highly restricted under OFAC rules. Exporting goods, technology, or services from the U.S. to Iran is generally prohibited, including indirect exports via third countries. This ban also extends to services such as transportation, insurance, and logistics. Imports from Iran are mostly banned except for licensed humanitarian goods. Energy sector transactions are especially scrutinized, with stringent prohibitions on exports related to oil and gas extraction.
Financial Transactions and Banking Limitations
Financial dealings involving Iran are tightly controlled. Transferring funds for Iranian transactions through U.S. financial systems or dollar-denominated accounts is prohibited. Attempts to bypass sanctions using intermediaries or shell companies are closely monitored and penalized. OFAC requires licenses for humanitarian or other narrowly permitted transactions.
Extraterritorial Reach of Sanctions on Foreign Parties
U.S. sanctions extend beyond domestic borders, targeting foreign nationals and companies involved in transactions linked to Iran. This includes dealings with U.S.-controlled assets or indirect involvement with the U.S. financial system. Supporting Iranian entities in circumventing sanctions is strictly forbidden, regardless of the foreign party’s nationality.
Re-export bans cover goods and technology containing U.S. components, preventing foreign companies from routing prohibited items to Iran. Attempts to use complex schemes to evade sanctions are met with severe legal consequences.
Prohibited Investments and Financial Activities
Investments by U.S. persons or entities in Iranian assets—especially those controlled by the Iranian government—are expressly forbidden. This includes bank deposits and financial dealings with Iranian institutions, as these are considered support for the Iranian regime. Violating these prohibitions can result in heavy penalties, including fines and reputational harm.
Consequences and the Role of Legal Counsel
The prolonged sanctions regime has severely impacted Iran’s economy, fostering a “resistance economy” model. Inflation and diminished oil revenues have had significant social and economic effects. European attempts to bypass U.S. sanctions, such as the creation of INSTEX, have faced political and operational challenges.
Navigating this intricate sanctions environment requires expert legal guidance. Experienced OFAC sanctions attorneys assist clients with:
- Asset freezing and unfreezing issues
- Petitions for removal from sanctions lists
- Obtaining OFAC licenses for authorized transactions
- Representation during enforcement proceedings
A tailored approach is essential to manage the complexities and risks involved in dealing with Iran.