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1 1 (February 26, 2019)

handle is hein.crs/govybo0001 and id is 1 raw text is: Congressional Researh Service INFS Updated February 26, 2019 Iran: Efforts to Preserve Economic Benefits of the Nuclear Deal Overview On May 8, 2018, President Trump announced that the United States would cease implementing U.S. commitments under the 2015 multilateral Joint Comprehensive Plan of Action (JCPOA) with Iran. On November 5, 2018, at the end of a wind down period, all pre-JCPOA U.S. sanctions on foreign firms that conduct transactions in all of Iran's core economic sectors, including energy, banking, shipping, and manufacturing, went back into effect. These include sanctions on petroleum-related transactions and transactions by foreign banks with Iran's Central Bank. In addition, foreign firms that transact business with entities designated by the United States for sanctions could face virtual exclusion from the U.S. economy. The non-U.S. parties to the JCPOA-the United Kingdom (UK), France, Germany, Russia, China, the European Union (EU) and Iran-opposed the U.S. move and have sought to preserve the accord. The outcome of their efforts may depend on the degree to which Iran perceives that it continues to receive economic benefits of the agreement. To date, Iran has continued to comply with the JCPOA, while pressing the EU and other parties to provide assurances of continued economic engagement with Iran. Iran Trade and Investment Post-JCPOA Iranian leaders might abrogate the JCPOA if the economy suffers the effects of multilateral sanctions as during 2011- 2015. During that time, Iran's crude oil exports dropped by more than half, and its total trade by value fell nearly 50%, according to International Monetary Fund (IMF) data. In April 2015, then-Treasury Secretary Jacob Lew said Iran's economy was about 20% smaller than it would have been had sanctions not been imposed. Iranian officials have stated that avoiding a repeat of such economic damage depends, in particular, on maintaining the ability to export oil and receive payments in hard currency. Oil and petroleum products account for 80% of Iran's exports, and the proceeds are expected to fund half the 2018-19 budget. In October 2018, the IMF reduced its economic growth outlook for Iran, estimating a contraction of -3.6% in 2019, due primarily to the impact of U.S. sanctions. Following adoption of the JCPOA, Iran's crude exports had more than doubled, reaching a monthly peak of 2.5 million barrels per day (bpd) in early 2018, according to Bloomberg tanker tracking data. According to Bloomberg data, observed shipments fell below 1 million bpd as of January 2019; however, other estimates suggest Iranian trade remains higher. Reports of the Iranian oil tanker fleet switching off its transponders have made accurately tracking Iranian trade flows difficult. Asia, Iran's largest market, purchased more than 65% of Iran's crude exports (Figure 1) in 2018; China was the largest importer, accounting for more than one-third, followed by India. During the escalation of sanctions in 2011-2015, Asian trading partners cut Iranian oil imports (to earn a U.S. sanctions exception for significantly reducing oil purchases), but did not follow the EU in imposing an embargo. Figure I. Iran's Crude Oil Exports by Region thousand barrels per day 2,500 2,000 1,500 1,000 500 0 O . - O 4 O - O E Other I Asia NEurope Figure 2. Iran's Crude Oil Exports to Europe thousand barrels per day 700 600 500 400 300 200 0o o to D 1`1 1` 1` 1` W- W0 00 0 t 75 - - 7 -Q -n 0 -9 c 0 9 * Italy * France H C (U 0 Spain * Greece * Netherlands 0 Eastern Europe Source: Bloomberg tanker tracking. Iran's continued adherence to the JCPOA might hinge on whether it can generate enough oil revenue to avoid a severe recession. Since 2016, Europe accounted for more than a fifth of Iran's crude exports. From 2016 to 2017, exports to Europe grew nearly 50%; within the EU, Italy, Spain, and Greece have been the largest importers (Figure 2). However, after U.S. sanctions were reimposed, EU imports fell to zero; other buyers, such as Japan and South Korea also cut purchases. Exceptions from U.S. sanctions allow certain countries to maintain limited trade, however (see below), and some purchases resumed in early 2019. Since 2016, oil shipments to Europe had not surpassed pre- sanctions levels, unlike in China and India. By mid-2018, https:/crsreports.congress.go,

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