Memo: The Iranian Revolutionary Guards Corps Economic Exclusion Act (H.R. 5132)

If passed in its current form, H.R. 5132 – the Iranian Revolutionary Guards Corps Economic Exclusion Act – threatens to violate the JCPOA, undermine current long-term restrictions on Iran’s nuclear program, and splinter the United States from its European allies and other international partners. This bill threatens the JCPOA and ordinary Iranians, not the IRGC.

Key provisions of the bill appear targeted not at the heavily-sanctioned IRGC, but at deterring companies from doing business with Iran’s private sector in violation of U.S. commitments under the JCPOA. The Iran nuclear deal not only maintains the already extensive sanctions in place on the IRGC, it implicitly opens opportunities for economic competitors to the IRGC in Iran’s private sectors by enabling them to receive the benefit of sanctions relief. Contrary to this approach, H.R. 5132 would accrue to the benefit of the IRGC and undercut ongoing trends that are diminishing their economic influence, including the Iranian Supreme Leader’s direction – under popular pressure – that the IRGC must divest many of its holdings.

This legislation also comes amid Trump’s reckless threats to unilaterally terminate the JCPOA, an outcome which Europe and many in Congress are seeking to prevent. This is the wrong bill at the wrong time; Members of Congress should be restraining this President from killing this key nonproliferation agreement and moving toward war, not coaxing him forward.

Turning Iran into a “No Fly Zone”?

Section 5 of the bill would trigger a process to designate Iran Airports Company – which reportedly owns and controls all of Iran’s civilian airports – as a Specially Designated Global Terrorist under E.O. 13224 as a result of its reported facilitation of Mahan Air flights. If so designated, all of Iran’s civilian airports would likewise be constructively blocked under the U.S.’s Global Terrorism Sanctions Regulations (GTSR)s, placing all international flights to Iran at the risk of future designation. The U.S. already bans Iranians from visiting their families in the U.S. under Trump’s Muslim ban, this bill now threatens to ban all civilian flights into Iran. Moreover, such a designation would also jeopardize U.S. commitments under the JCPOA to license the sale of civilian aircraft to Iran.

Reimposing Sanctions Lifted Under JCPOA

Section 4 of H.R. 5132 threatens to re-impose sanctions on Iranian financial institutions that were delisted under the JCPOA, which would be a clear violation of U.S. sanctions-lifting obligations under the nuclear agreement. By requiring the President to identify any Iranian financial institutions that have facilitated transactions even tangentially linked to the IRGC, the bill could subject Iran’s central bank and other major financial institutions to secondary sanctions.  The lifting of these sanctions was central to the relief promised Iran under the JCPOA; the reimposition of such sanctions would effectively nullify any benefit to Iran from agreeing to long-term restrictions on its nuclear program.

Additionally, the bill defines Iranian financial institutions to include all financial institutions located in Iran. Under this definition, branches or representative offices of non-Iranian, foreign financial institutions that are located in Iran would be reported as “Iranian financial institutions.” Even if such institutions have not engaged in transactions with the IRGC, the inclusion of their name on mandated U.S. government reports – which may be publicized – would act as an effective deterrent to opening or maintaining branches or representative offices in Iran. This is anathema to the U.S.’s JCPOA commitment to agree on steps to facilitate Iran’s access to finance.

Moreover, in mandating the administration to report on all foreign entities on the Tehran stock exchange and all foreign persons operating major businesses in Iran, the bill may undermine its own goals of increasing sanctions pressure. The Obama administration set a precedent by threatening to veto the Iranian Leadership Asset Transparency Act (H.R. 1638), indicating that similar reporting requirements under that bill would:

“incentivize those involved to make their financial dealings less transparent and create a disincentive for Iran’s banking sector to demonstrate transparency. These onerous reporting requirements also would take critical resources away from the U.S. Department of the Treasury’s important work to identify Iranian entities engaged in sanctionable conduct.”

The Obama administration also indicated in its veto threat that JCPOA participants would view the public reporting requirement as hedging on U.S. JCPOA commitments. Given the breadth of reporting requirements the bill would impose on the Treasury Department, H.R. 5132 would almost certainly raise similar concerns.

Coaxing Trump to Violate JCPOA

Section 6 of the bill declares that it shall be U.S. policy to prevent Iran’s accession to the World Trade Organization and similar international bodies, which is contrary to U.S. obligations under the JCPOA to facilitate Iran’s access to trade and finance. This risks undermining efforts by international bodies to facilitate changes to Iran’s economic and financial character in ways that advance U.S. foreign policy objectives.

Broad Sectoral Sanctions Stifle Communication and Violate the JCPOA

Section 2 of the bill requires the President to determine whether major Iranian entities, including those in Iran’s telecommunications, construction, engineering, and mining sectors, should be sanctioned as under the effective ownership or control of the IRGC. In doing so, this bill seeks to sanction broad sectors of the Iranian economy in ways that are even more aspirational than those sanctions pre-dating the nuclear agreement. Doing so would be not only anathema to U.S. obligations under the JCPOA to facilitate Iran’s access to trade and finance, but would effectively nullify any benefit to Iran from agreeing to long-term restrictions on its nuclear program.

Moreover, by targeting Iran’s telecommunications sector, the bill could prevent outside telecommunication vendors from working in Iran. Such vendors are crucial for the cell phone, Internet, and other communication infrastructure that the Iranian people rely on to communicate freely, both internally and with the outside world.

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