US Sanctions against Iran
United States sanctions against various countries are featured in the news regularly. Especially relevant are its sanctions on Iran and its relations with that country as this has ramifications for India as well. This forms a vital part of the international relations syllabus for UPSC exam. In this article, you can read all about the various sanctions America has imposed on Iran and also those that it has lifted for the IAS exam.
The U.S. removed a wide range of sanctions against Iran after the International Atomic Energy Agency (IAEA) confirmed that Tehran had met its commitments to roll back its nuclear programme, under an agreement with China, France, Russia, the U.K., the U.S. and Germany on July 14 last year.
- The U.S. has only removed secondary sanctions that restrict the dealings of other countries with Iran.
- Primary sanctions that bar U.S. citizens and companies from business with Iran will remain.
Benefits for Iran
- The removal of restrictions on its oil, petrochemicals, banking, natural gas and port sectors will hugely benefit Iran and allow it to re-enter the global market.
- Iran will be able to access the huge amount of cash it has accumulated overseas from restricted oil sales during the sanctions. Most of this money is sitting in China, India, Japan, South Korea and Turkey.
Benefits for India
- The lifting of the sanctions on Iran will benefit India with lower oil prices and more opportunities for trade (India have been importing oil from them despite the sanctions through a rupee payment agreement).
- It should also bring the proposed India-Iran gas pipeline closer to reality.
- It will be much easier to export to Iran.
- India can also start taking up construction projects there.
- India will also benefit from the removal of restrictions on payments to Iranian companies that the sanctions had imposed.
- India can go ahead and sign commercial deals with Iran since payment is no longer an issue.
- India reportedly owes Iran $6.5 billion for crude oil purchases, the payment of which has so far been held up due to the sanctions.
- Israel remained pessimistic about the landmark Iranian nuclear deal with Prime Minister Benjamin Netanyahu accusing Tehran of still seeking nuclear military capabilities, destabilising the region and spreading terrorism globally.
- Israel will continue to monitor Iran’s negative activities and will take all necessary measures to maintain its security and defend itself.
- It warned that “Iran has not abandoned its aspirations to acquire nuclear weapons and continues to destabilise the Middle East and spread terrorism throughout the world.”
Explained: What is “Implementation Day”?
- For Iran, this is the day the economic benefits of the deal really start to kick in. When the landmark agreement was signed last July, the first stage was for Iran to dismantle significant parts of its nuclear programme.
- In late December it shipped 25,000 pounds of enriched uranium to Russia — almost all of its stockpile — and this week it deactivated the heavy-water reactor at Arak. On Saturday, the UN nuclear watchdog certified that Iran had fulfilled its initial commitments under the agreement. As a result, some of the sanctions on Iran have been lifted.
Most people predicted “Implementation Day” would take place sometime in the spring. So why now?
- At the time the deal was signed, experts forecast it would take Iran at least nine months to take the necessary steps. Privately, American officials say Iran has been in a rush to get the work done because of the upcoming elections in February. The moderates around President Hassan Rouhani want to be able to show that they engineered the lifting of international sanctions, even if the economic benefits will not yet be apparent.
What sort of sanctions are being lifted?
- Iran’s economy has been buckling under a broad range of international sanctions introduced by the UN, the EU and the US.
- The UN sanctions — which the Iranians particularly disliked — have been unwound, as has the EU embargo on oil imports. And some of the toughest US sanctions, such as the law that penalises international banks for doing business with Iran, have also been lifted.
- In theory, key sectors of the Iranian economy will be able to resume significant international business — oil and gas, banking, insurance and autos.
What sanctions will remain?
- Even once the American nuclear sanctions on Iran are lifted, a series of sanctions will remain relating to Iranian support of terrorism and human rights abuses.
- In practice, that means the Obama administration will lift many of the sanctions that can be applied on other countries doing business with Iran, but in most cases the restrictions on Americans will continue.
- The most important — and potentially controversial — elements of the remaining penalties are the sanctions on doing business with companies linked to the Iranian Revolutionary Guards, which will apply to other countries as well. That means that a European or Asian business wanting to do a deal in Iran will need to make sure its partners are not a front for the IRGC, which controls a considerable part of the Iranian economy. How these remaining sanctions are implemented could be a subject of considerable tension between the US and Europe.
What about the financial windfall that Iran will receive?
- One consequence of the sanctions was to freeze a large chunk of Iranian oil revenues in international banks, which in theory will now be released. Critics of the deal claim Iran will now receive a windfall of more than $100bn. The real figure is less clear. The US Treasury put it at about $50bn, while Iran’s central bank put the figure at $29bn. How much of the money will be injected into the Iranian economy is also uncertain.US officials suggest that Iran is likely to use much of the funds as foreign currency reserves to protect the value of its rial.
What is the reaction in the US?
- For the Obama administration, this is another crucial step in a deal it sees as one of its crowning achievements. Yet for the many critics of the deal in Washington, not all of whom are Republicans, this is another step in capitulation by the administration towards Iran.
- After Iran tested two ballistic missiles last year, opponents of the deal were already pushing for new sanctions to be introduced, which the White House says would violate the agreement. Mistrust of Iran on the right has been aggravated this week by the images of 10 American sailors being detained in the Persian Gulf by the IRGC Navy. Expect a lot of noise about the Iran deal as the Republican presidential primaries get into full swing.
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