Initiatives to Intensify US Sanctions against Iran Could Restrict Global Business Operations

Article by Carol J. Bilzi , Timothy J. Keeler and Simeon M. Kriesberg

Originally published April 1, 2010

Keywords: US sanctions, Iran, global business, unilateral sanctions, Iran Sanctions Act

Legislation Pending in US Congress

Legislation designed to strengthen US unilateral sanctions against, and deter companies from doing business in, Iran could affect a variety of global business operations, including some with no direct connection to Iran. The legislation, which passed the House (on December 15, 2009, by a vote of 412-12) and the Senate (first on January 28, 2010, by voice vote, and then again for technical reasons, on March 11, 2010, by unanimous consent), now awaits further action by a House-Senate conference committee to reconcile the two versions.

Many members of Congress, together with constituencies that seek to increase pressure on Iran over its nuclear program, are pressing to finalize the legislation quickly. The Obama Administration has publicly asked for more time to allow diplomatic efforts to progress. The Administration has also raised concerns about the level of Executive Branch discretion in the legislation. Passage of the legislation could occur swiftly if negotiations with UN Security Council members regarding multilateral sanctions break down, or the Administration and Congress are able to resolve the Administration's concerns and agree on timing. The next potential action-forcing event on the Congressional schedule is the Memorial Day recess at the end of May.

Both bills amend the Iran Sanctions Act of 1996 (ISA) (originally enacted as the Iran-Libya Sanctions Act). ISA authorized the President to impose sanctions on non-US companies that make significant investments in Iran's petroleum industry. The failure of the Executive Branch to exercise its authority to impose sanctions under ISA is a source of frustration in Congress and another motivation for the legislation. This also raises the possibility of increased enforcement by the Administration of existing law.

The pending legislation would expand the prohibitions against doing business with Iran, create harsher sanctions, and limit the discretion of the President to waive such sanctions. Both bills seek to limit Iran's ability to produce refined petroleum products and import such products. Insurers, reinsurers, and insurance brokers are specifically targeted.

The legislation would not only impose sanctions on non-US companies (including foreign subsidiaries of US...