Guest Post: The White House’s Sanctions Relief Toolbox

When Iran’s Foreign Minister Javad Zarif visited New York two weeks ago for the Non-Proliferation Treaty Review Conference, he was asked at an NYU forum whether Iran feared that Congress would force the President to abrogate US commitments under a nuclear deal. Zarif answered clearly, stating, “The responsibility of bringing [the US] into line falls on the shoulders of the President of the United States. … He will have to stop implementing all the sanctions — economic and financial sanctions — that have been imposed on Iran.” Zarif emphasized, “However he does it, that’s his problem, as it will be my problem to implement certain [nuclear-related] measures.”

With the Senate’s passage of the Corker-Cardin bill last week — which would provide Congress with the chance to review any nuclear deal with Iran and sets up a procedure for a resolution of approval or disapproval — a question has arisen as to how the President would meet the US’s obligation to “cease the application of all nuclear-related secondary economic and financial sanctions [on Iran].” At a time when Congress is unlikely to take any affirmative action in support of a nuclear deal (and has attached no additional authorities for the President to meet US commitments to a Joint Resolution of Approval), some have expressed doubt as to whether the President can provide Iran credible sanctions relief on the basis of his own existing authorities.

Those doubts, however, should be put to rest. Under current law, and absent congressional action limiting such powers, the President has substantial authorities to provide Iran significant sanctions relief under any nuclear deal. These authorities need to be understood in order to appreciate how the President can and will relieve sanctions on Iran without either congressional support or exceeding the bounds of his constitutional powers.

The President can do each of the following three things:

  • Suspend the operation of sanctions via his waiver authorities
  • License otherwise prohibited transactions via his statutory authorities
  • De-designate Iranian persons and entities from the Treasury Department’s Office of Foreign Assets Control (OFAC) Specially Designated Nationals and Blocked Persons (SDN) List

Think of this as the President’s toolbox: By virtue of these authorities, the President can provide Iran sanctions relief under a nuclear deal without sign off from Congress.  

Waiver Authorities

The President’s waiver authorities are well known. Under existing sanctions legislation, the President is authorized to waive the application (or imposition) of sanctions for renewable time-limited periods measuring between 120–180 days. He has done so, for instance, pursuant to the Joint Plan of Action, in which Iran receives limited sanctions relief in return for a halt to its nuclear program while negotiations are ongoing. He will likewise do so extensively should a nuclear deal be reached in the weeks ahead.

Some in Congress have expressed wariness over the President’s utilization of these authorities to provide sanctions relief to Iran without first coming to Congress, seeing this as an abuse of the President’s authority. The claim is the President is re-purposing waiver authorities for reasons not originally contemplated. However, this ignores how waiver provisions have historically been used (e.g., the Iran Sanctions Act went unenforced for its first decade), as well as the relevant legislative history, where waiver provisions were included for the purpose of providing the flexibility to the President to reach a settlement with Iran on its nuclear program.

Beyond its legal merits, too, waiving the application of sanctions is sound policy. As the President of the Council on Foreign Relations, Richard N. Haass, wrote back in 1998, waiver provisions are “needed … if the executive is to have the flexibility needed to explore whether the introduction of limited incentives can bring about a desired policy goal.” Moreover, by waiving the application of sanctions, the President retains the statutory authorities to re-impose sanctions in case Iran is found to have engaged in “significant non-performance” under a nuclear deal. 

Licensing Authorities

Waivers are time-limited and thus in need of constant renewal. As such, they pose an appreciable risk for those interested in doing business in or with Iran. This is where the President’s licensing authorities play a role, as they provide a source of confidence that sanctions relief is on more permanent footing than simple presidential waiver.

By licensing transactions — an implied or express power depending on the source of the statutory prohibition — the President authorizes that which is otherwise prohibited. Such license authorizations are, for all intents and purposes, effective carve-outs. They permit US and foreign parties to undertake certain activities in relation to a target that would be otherwise impermissible. For instance, as part of his new opening to Cuba, President Obama utilized licensing authorities to relax the sanctions and permit activities that had been prohibited.

The President could use this same roadmap to authorize transactions that would otherwise prohibited under the Iranian Financial Sanctions Regulations and the Iranian Transactions and Sanctions Regulations. Such a licensing scheme could permit foreign financial institutions to engage in significant financial transactions with Iranian banks that are designated for facilitating Iran’s nuclear program. In doing so, the President would “carve out” certain activities from broad sanctions prohibitions, thereby providing Iran significant sanctions relief all the while retaining the architecture of the sanctions. 

Designation Authorities

OFAC’s SDN List identifies specific persons and entities designated for sanctions. These sanctions include an asset freeze and a prohibition on US persons engaging in any transactions with the designated party. Most US and foreign banks and companies have incorporated OFAC’s SDN List into their compliance programs to ensure that they are not triggering the application of US sanctions prohibitions and subjecting themselves to sanctions as a result.

In the case of Iran, however, the sanctions prohibitions are far more extensive. For instance, Section 104(c) of the Comprehensive Iran Sanctions Accountability and Divestment Act bars foreign financial institutions from conducting or facilitating significant transactions with certain designated Iranian parties. Such parties include most of Iran’s major banks. This has largely hampered Iran’s ability to conduct even the most basic cross-border transactions.

One of the most potent forms of relief the President can provide, then, is removing Iranian persons and entities from OFAC’s SDN List. In doing so, the President would lift the prohibition attached to the designation as it applied to the now-de-designated person. For instance, the de-designation of a designated Iranian bank would remove the application of Section 104(c)’s sanctions prohibition with respect to that bank. In other words, the sanctions prohibition continues to exist, but no longer applies to the de-designated party.

Because OFAC’s SDN List has become so integrated in most major banks and companies’ compliance programs, there is a perceived risk in dealing with designated parties, even if such dealings have been licensed. Removing the names of Iranian parties from the SDN List would assuage lingering concerns over the interpretation and application of sanctions prohibitions. 

Conclusion

The President should make creative use of the above authorities to provide Iran sanctions relief as part of a nuclear deal — none of which require affirmative action on the part of Congress. How the President utilizes these authorities to provide sanctions relief will determine the credibility of that relief and whether it translates into practical value for Iran. Undoing the most complex sanctions program the US has ever imposed on a target will prove a difficult task with few easy-fix solutions and will require innovation in the deployment of the President’s authorities. 

About the Author(s)

Tyler Cullis

Legal Fellow at the National Iranian American Council His writings have appeared in the New York Times, CNN, Foreign Policy, and BBC Persian, amongst others, and he is a frequent guest contributor in print, including to the Washington Post, the Associated Press, and Al Jazeera America.