Third, Treasury or State can impose financial sanctions,  including a freeze on assets and a prohibition on access to U.S. financial  institutions, against parties who engage in proliferation or terrorism- related activities with any party, including Iran. In  2007, Syrian parties were sanctioned in 8 cases. Second, financial sanctions  deny parties involved in Iran’s proliferation and terrorism activities access  to the U.S. financial system and complicate their support for such  activities. However,  other evidence raises questions about the extent of reported economic  impacts. In addition, sanctioned Iranian banks may be able to turn to  other financial sources or fund their activities in currencies other than the  U.S. dollar. U.S. Officials State that Iran Sanctions Act Has Contributed to Delays in Foreign Investment in Iran’s Petroleum Sector

U.S. officials and experts have stated that U.S. sanctions have played a role  in slowing Iran’s progress in developing its oil and gas resources. We also found that since 2003 the Iranian government has signed contracts  reported at approximately $20 billion with foreign firms to develop Iran’s  energy resources. U.S. Officials Report that Financial Sanctions Deny Entities Involved in Proliferation and Terrorism Access to U.S. Financial System

State and Treasury officials have testified that financial sanctions deny  designated individuals and entities access to the funds needed to sustain  Iran’s proliferation. Although Iran halted its nuclear weapons program, it  continues to enrich uranium, acquire advanced weapons, and support  terrorism. Sanction Influence on Iran’s Behavior; UN Sanctions Have Recently Been Imposed

Iran’s global trade ties and leading role in energy production make it  difficult for the United States to isolate Iran and deter its acquisition of  advanced weapons technology and support for terrorism. First, Iran’s  trade with the world—both imports and exports—has grown since the  U.S. trade ban began in 1987. Although trade has fluctuated from year to  year, most of the growth has occurred since 2002, coinciding with the rise  in oil prices. This trade includes imports of weapons and nuclear  technology. Iran’s Trade with the United States Decreased Substantially Following the Imposition of the Trade Ban

U.S. trade with Iran declined sharply immediately following the adoption  of both the 1987 U.S. ban on imports from Iran and the 1995 ban on U.S.  exports to and investment in Iran. This assessment should collect information, to the extent  feasible, from various U.S. agencies and consider factors such as, but not  limited to, the following:  the number of goods seized, penalties imposed, and convictions obtained  under the trade ban (Homeland Security, Treasury, Commerce, Justice);    sensitive items diverted to Iran through transshipment points (Commerce  and the intelligence community); the extent to which repeat foreign violators of Iran-specific sanctions laws  have ended their sales of sensitive items to Iran (State and intelligence  community); the amount of assets frozen resulting from financial sanctions (Treasury  and the intelligence community); and the extent of delays in foreign investment in Iran’s energy sector (State,  Energy, and the intelligence community). This  comment reinforces our finding that the overall impact of sanctions is  unclear. This report  addresses (1) U.S. sanctions targeting Iran and their implementation, (2)  the reported impact of the sanctions, and (3) factors that limit the ability  of U.S. sanctions to reduce Iran’s proliferation and terrorism-related  activities. Finally, we reviewed the November 2007  unclassified National Intelligence Estimate on Iran.
Why GAO Did This Study

The 2006 U.S. National Security Strategy stated that the United States faces challenges from Iran, including Iran's proliferation efforts and involvement in international terrorism. To address these concerns, the United States employs a range of tools, including diplomatic pressure, a military presence in the Gulf, and sanctions. A U.S. sanction is a unilateral restriction or condition on economic activity imposed by the United States for reasons of foreign policy or national security. We were asked to review (1) U.S. sanctions targeting Iran and their implementation, (2) reported sanction impacts, and (3) factors limiting sanctions. To conduct the review, we assessed trade and sanction data, information on Iran's economy and energy sector, and U.S. and international reports on Iran, and discussed sanctions with U.S. officials and Iran experts.

What GAO Found

Since 1987, U.S. agencies have implemented numerous sanctions against Iran. First, Treasury oversees a ban on U.S. trade and investment with Iran and filed over 94 civil penalty cases between 2003 and 2007 against companies violating the prohibition. This ban may be circumvented by shipping U.S. goods to Iran through other countries. Second, State administers laws that sanction foreign parties engaging in proliferation or terrorism-related activities with Iran. Under one law, State has imposed sanctions in 111 instances against Chinese, North Korean, Syrian, and Russian entities. Third, Treasury or State can use financial sanctions to freeze the assets of targeted parties and reduce their access to the U.S. financial system. U.S. officials report that U.S. sanctions have slowed foreign investment in Iran's petroleum sector, denied parties involved in Iran's proliferation and terrorism activities access to the U.S. financial system, and provided a clear statement of U.S. concerns to the rest of the world. However, other evidence raises questions about the extent of reported impacts. Since 2003, the Iranian government has signed contracts reported at about $20 billion with foreign firms to develop its energy resources. Further, sanctioned Iranian banks may fund their activities in currencies other than the dollar. Moreover, while Iran halted its nuclear weapons program in 2003, according to the November 2007 National Intelligence Estimate, it continues to enrich uranium, acquire advanced weapons technology, and support terrorism. Finally, U.S. agencies do not systematically collect or analyze data demonstrating the overall impact and results of their sanctioning and enforcement actions. Iran's global trade ties and leading role in energy production make it difficult for the United States to isolate Iran and pressure it to reduce proliferation and support for terrorism. For example, Iran's overall trade with the world has grown since the U.S. imposed sanctions, although this trade has fluctuated. Imports rose sharply following the Iran-Iraq war in 1988 and then declined until 1995; most export growth followed the rise in oil prices beginning in 2002. This trade included imports of weapons and nuclear technology. However, multilateral UN sanctions began in December 2006.