Authorizing the Imposition of Certain Sanctions With Respect to the Provision of Goods, Services, Technology, or Support for Iran's Energy and Petrochemical Sectors

Background

Before its revocation, Barack Obama's executive order impacted U.S. foreign policy by intensifying the global economic pressure on Iran. This order authorized significant sanctions targeting Iran's energy and petrochemical sectors. It imposed restrictions on individuals and entities providing goods, services, technology, or support with a substantial market value that could aid Iran in enhancing its petroleum and petrochemical sectors. The execution of these sanctions involved coordination among agencies like the Department of State and the Department of the Treasury, which diligently monitored international transactions and business activities to enforce compliance. The purpose was to leverage economic tools as part of a broader strategy to hinder Iran's ability to fund its nuclear program.

The sanctions authorized under this directive covered a range of financial restrictions designed to isolate Iran economically. For instance, the order prohibited U.S. financial institutions from offering substantial loans or credits to targeted Iranian entities, unless aimed at alleviating human suffering. Furthermore, it restricted financial transactions involving blocked individuals’ interests and prohibited the export of goods and technology under certain conditions. These sanctions, therefore, effectively restricted access to international markets for Iran's primary revenue-generating sectors, putting them under severe economic duress.

Operational adjustments within federal agencies were necessary to ensure the stringent application of these sanctions. The Departments of State and Treasury were tasked with identifying individuals and entities subject to the sanctions, while the Export-Import Bank and Commerce Department ensured compliance with export restrictions. Additionally, regulatory components included directives for U.S. entities to report any potential infractions, reinforcing the administration's broader aim to curtail Iran's controversial nuclear activities. These measures served as exemplars of how executive power can directly affect the foreign policy landscape through economic constraints.

Reason for Revocation

The revocation of this directive in January 2016 was integrally linked to the multilateral nuclear agreement known as the Joint Comprehensive Plan of Action (JCPOA). Under President Obama, there was a notable policy shift towards diplomatic engagement with Iran, aimed at curbing the nuclear threat through negotiation rather than isolation. This order's revocation was part of fulfilling the U.S. commitment under the JCPOA to ease economic sanctions in exchange for verifiable limitations on Iran's nuclear program.

The JCPOA represented a significant pivot in U.S. foreign policy, prioritizing diplomatic engagement over unilateral coercive measures. By agreeing to revoke sanctions, including those in the executive order, the Obama administration acknowledged Iran's compliance with nuclear agreements, thereby promoting international cooperation and signaling a readiness to rebuild diplomatic relationships. This ideological shift was seen as a move towards a more integrated global approach to conflict resolution, reflecting a belief in the efficacy of multi-party negotiations to achieve security goals.

This revocation also reflected a strategic calculus that reintegrating Iran into the global economic system would foster moderating influences within the country. The administration posited that increasing Iran’s economic ties with Western nations would create internal pressure for political reforms. Moreover, lifting sanctions was designed to provide the Iranian public tangible benefits to buttress the nuclear agreement's domestic legitimacy in Iran.

Winners

The energy sector, particularly companies involved in oil and gas exploration and petrochemicals, stood to gain significantly from the easing of sanctions. European and Asian firms, such as Total of France and Royal Dutch Shell, were poised to re-enter or expand their footprint in Iran's large energy market. The possibility of lucrative contracts involving Iran's vast oil reserves provided these companies with substantial investment opportunities.

Financial institutions in Europe and Asia also likely benefited, as they were positioned to resume or expand financial transactions and services with Iranian counterparts. The revocation of sanctions facilitated the re-establishment of banking relationships that had been severed, allowing for normalized trading and financial operations. This translated into profitable avenues for service provision and financial inflows associated with investments in Iran's energy sector.

Additionally, Iranian businesses and the broader economy were anticipated winners due to improved access to international markets and foreign investments. With sanction removal, Iran was expected to see an inflow of foreign direct investment, which would bolster its economy, create jobs, and provide the government with resources to address domestic economic issues. This economic stimulus also aimed to enhance Iran's integration into the global economy, fostering potential socio-political shifts.

Losers

For some U.S. companies, notably those in sectors still restricted by non-nuclear sanctions, the revocation was less beneficial. U.S. businesses were limited in their engagement with Iran due to enduring sanctions related to terrorism and ballistic missile activities, which meant missed economic opportunities compared to their international counterparts. These restrictions hindered their ability to compete in the Iranian market against European or Asian companies unfettered by such barriers.

Additionally, industries in countries that had previously filled the void left by Iranian sanctions, such as alternative oil suppliers like Saudi Arabia and Russia, could have faced increased competition. As Iranian oil re-entered the market, global oil prices saw dynamics shifted, potentially impacting these nations' export revenue.

Critics of the JCPOA, including segments within the U.S. political landscape and allied nations like Israel, perceived security risks associated with the easing of sanctions as endangering regional stability. Concerns were raised that financial benefits reaped by Iran could bolster non-nuclear destabilizing activities and increase the support for contentious programs, diminishing perceived gains from the JCPOA.