U.S. law allows the export of certain agricultural goods, medicine, and  medical devices to Iran under certain conditions. From 2010 through 2012, the United States Established Additional Financial Sanctions Targeting Iran

Recent congressional legislation and a number of executive orders  enacted since 2010 have established additional U.S. financial sanctions  targeting Iran. According to an Under Secretary of the Treasury, “CISADA set a new  precedent” because “… t gave the Secretary of the Treasury the  authority for the first time to require U.S. banks to terminate  correspondent banking relationships with foreign banks that knowingly  engaged in significant transactions with designated Iranian banks.”  Among other actions, section 104(c) of CISADA required the Secretary of  the Treasury to prescribe regulations to prohibit or impose strict  conditions on the opening or maintaining in the United States of a  correspondent account or a payable-through account by a foreign  financial institution found to have knowingly engaged in certain activities  or facilitating a significant transaction by entities such as Iran’s Islamic  Revolutionary Guard Corps (IRGC). Agencies Administer and Enforce U.S. Financial Sanctions Targeting Iran

U.S. government agencies and regulators administer and enforce U.S.  financial sanctions targeting Iran with banks’ assistance. State  administers some investment and trade sanctions, principally energy  sanctions, targeting Iran. The federal and state  banking regulators ensure effective compliance with these sanctions  programs by the banks that they regulate. Specifically, since 2005, Treasury and Justice, in coordination with State  and federal regulators, have taken actions against banks, assessing large  financial settlements for systematic and willful violations of sanctions  laws, including violations of Iran financial sanctions regulations. Treasury has primary responsibility for administering the finance-related  provisions of recent U.S. sanctions authorities by developing regulations,  conducting outreach to domestic and foreign financial regulators and  financial institutions, and identifying apparent sanctions violations. Treasury also assesses the effects of financial sanctions on the Iranian  economy. Identification of violations. Similarly, in December 2012, both HSBC Holdings, PLC and HSBC Bank  USA N.A. U.S. and International Sanctions Have Adversely Affected the Iranian Economy, and Iran Is Attempting to Adapt to Them

The combination of the various U.S. and international trade, investment,  and financial sanctions has adversely affected the Iranian economy and  its future outlook. Our analysis indicates that the Iranian economy has  consistently underperformed comparable peer countries across key  economic indicators since the enactment of U.S. and international  sanctions between 2010 and 2012. Following the enactment of sanctions beginning in 2010, Iran’s oil  production, oil export revenue, and gross domestic product (GDP) have  declined relative to comparable countries, and inflation has increased. Some experts stated that the deterioration in Iran’s  recent economic performance resulted from a combination of sanctions— including U.S. and international sanctions—and economic  mismanagement by the government of Iran. Several aspects of the  sanctions have reduced Iran’s ability to produce oil. Since 2010, Iranian oil export revenue has  declined while peers’ revenue has increased. Three forecasters—IHS Global Insight, IMF, and the Economist  Intelligence Unit—have downgraded their forecasts of the Iranian  economy to reflect a deterioration in Iran’s expected economic  performance after the enactment of recent U.S. and international  sanctions. EU and U.S. Exports of Humanitarian Goods to Iran Increased During 2012

Our analysis indicates that EU and U.S. exports of humanitarian goods to  Iran increased by about 35 percent in the first 10 months of 2012, from  $1.671 billion in the first 10 months of 2011 to $2.258 billion in the first 10  months of 2012 (see table 3). Iran Is Trying to Adapt to Sanctions by Seeking New Payment Mechanisms and Changing Trading Partners

			Iran Is Reportedly Using Barter Agreements for Some Oil Exports

According to open sources, the government of Iran has made efforts to  adapt to U.S. and international sanctions in a number of ways, including  using alternative payment mechanisms such as barter agreements and  changing its trading partners. However, these recent agreements have thus far  not fully offset the reduced exports to the EU and others. GAO staff who made key contributions to this report  are listed in appendix V.

Appendix I: Scope and Methodology

To describe recent laws and executive orders that have added to the  Department of Treasury’s (Treasury) authority to implement financial  sanctions targeting Iran, we reviewed the public laws and executive  orders that define these sanctions, as well as the regulations developed  to administer them. To review the impact of sanctions targeting Iran on the availability of  humanitarian goods to Iran, we reviewed official UN and open source  reports about the access of such goods in Iran.
Why GAO Did This Study

Since 1987, the United States has implemented a broad range of sanctions targeting Iran to deter it from developing its nuclear program, supporting terrorism, and continuing its human rights abuses. Beginning in 2010, Congress has enacted additional financial sanctions which generally restrict Iranian access to the U.S. financial system. In addition, the United Nations and the European Union have adopted several sanctions to compel Iran to suspend its nuclear program. However, concerns have been raised in Congress and by the United Nations about the impact of these sanctions, including the effect of recent financial sanctions on exports of humanitarian goods to Iran. The export of certain humanitarian goods to Iran is allowed by U.S. law, under certain conditions.
In this report, GAO (1) describes recent laws and executive orders that have added to Treasury's authority to implement financial sanctions targeting Iran, (2) describes U.S. efforts to administer and enforce the financial sanctions, and (3) analyzes evidence of the effect that recent U.S. and international sanctions have had on the Iranian economy. GAO reviewed U.S. public laws, executive orders, and agency guidance; met with U.S. agency officials; and analyzed trade and economic data from the International Monetary Fund, European Union, and others, as well as forecasts of Iran's future economic performance.

What GAO Found

Since 2010, congressional legislation, such as the Comprehensive Iran Accountability, Sanctions, and Divestment Act of 2010 (CISADA), as well as a number of executive orders, have established additional U.S. financial sanctions targeting Iran. For example, CISADA authorized the imposition of sanctions on foreign financial institutions that facilitated certain activities or financial transactions by entities including Iran's Islamic Revolutionary Guard Corps. According to an Under Secretary of the Treasury, CISADA "set a new precedent," because "[i]t gave the Secretary of the Treasury the authority for the first time to require U.S. banks to terminate correspondent banking relationships with foreign banks that knowingly engaged in significant transactions with designated Iranian banks."
The Department of the Treasury (Treasury)-along with other U.S government agencies-administers and enforces U.S. financial sanctions targeting Iran. Treasury administers the sanctions by developing regulations, conducting outreach to domestic financial regulators and foreign banks, identifying apparent sanctions violations, and assessing the effects of the sanctions. State administers some investment and trade sanctions, principally energy sanctions, targeting Iran. U.S agencies and federal and state banking regulators have taken a range of actions to ensure compliance with financial sanctions. Specifically, in recent years, Treasury and the Department of Justice (Justice) have taken actions against banks for systematic and willful violations of sanctions laws, including violations of U.S. financial sanctions regulations targeting Iran. For example, in 2012, Justice announced that both HSBC Holdings, PLC and HSBC Bank USA NA had agreed to forfeit $1.256 billion to the United States in connection with violations of sanctions targeting Iran, among other countries.
The combination of U.S. and international sanctions has adversely affected the Iranian economy and its future outlook. According to GAO's analysis, the Iranian economy has consistently underperformed the economies of comparable peer countries across a number of key economic indicators since 2010, when recent sanctions were enacted. In contrast to its peers, Iran's oil production, oil export revenues, and economic growth estimates have fallen, and its inflation has increased. For example, Iran's oil export revenues fell by 18 percent from 2010 to 2012, while its peers' oil export revenues increased by 50 percent. In addition, professional and International Monetary Fund forecasts of the Iranian economy were downgraded to reflect deterioration in Iran's expected economic performance after the implementation of recent sanctions. Some experts have stated that Iran's recent economic deterioration has resulted from a combination of sanctions and Iranian economic mismanagement. GAO's analysis of European Union and U.S. exports to Iran of humanitarian goods indicates that exports of these goods, such as agricultural goods and medicines, increased in the first 10 months of 2012 compared with 2011. UN reports have raised concerns about the availability of such goods in Iran. According to open sources, the government of Iran has tried to adapt to the sanctions through various means, including using alternative payment mechanisms such as barter agreements and changing its trading partners. However, these recent agreements have thus far not fully offset the reduced exports of oil to the European Union and others.