The Enhanced Iran Sanctions Act (S. 556), introduced by Sen. Dan Sullivan (R-AK) in the Senate, would impose new sanctions on actors with minimal connection to trade related to Iranian oil. Critically, the bill would offer minimal discretion to the President on sanctions policy, and would require an act of Congress to halt after 2029, making it significantly more difficult for a successor administration to use existing leverage to conduct diplomacy or sustain any agreement struck in the coming years.
While Iranian oil is already heavily sanctioned with multiple layers of overlapping U.S. and international sanctions, the Enhanced Iran Sanctions Act would mandate controversial “tertiary” sanctions on actors far removed from Iranian oil sales, potentially threatening to upend the global economy in the name of unilateral sanctions enforcement. This would be very unwise.
Tertiary Sanctions
Less than a year ago, the 118th Congress passed the Stop Harboring Iranian Petroleum (SHIP) Act (S. 1829/H.R. 3774) as part of the National Security Supplemental (Public Law No: 118-50). Notably, while the original versions of the SHIP Act included the tertiary sanctions proposal, lawmakers wisely removed it prior to passage of the supplemental.
Yet the Enhanced Iran Sanctions Act once again aims to make the tertiary sanctions U.S. law, amending the National Security Supplemental to mandate sanctions on any person or entity that “directly or indirectly conducts a significant transaction with, for, or on behalf of a foreign person” designated under the following SHIP Act authorities:
– Owners and operators of foreign ports that happen to conduct tangential or significant business related to Iranian oil shipments;
– Owners and operators of tankers that have conducted business related to Iranian oil; and
– Owners and operators of refineries that have conducted business related to Iranian oil.
This goes beyond “primary” sanctions – aimed at blocking trade between the issuing country and the sanctioned country – or “secondary” sanctions – aimed at blocking trade between foreign nations and the sanctioned country. It would instead beact like an unprecedented “tertiary” sanction to sever trade with any foreign entity that is at least two steps removed from Iran’s oil industry.
Playing this scenario out, it is not an exaggeration to say that the bill risks triggering a global recession with profound harms to the U.S. economy if implemented to the hilt. After passage of the bill, any shipping company with ships passing through a port that has been designated for servicing a lone Iranian tanker would be slated for designation under the bill. Or, any oil company that continues to utilize refineries that had processed Iranian petroleum products would need to be designated. Given the intertwined nature of both the global shipping and energy industries, this could be a truly massive expansion of existing sanctions in a way that could harm the U.S. economy and the Trump administration’s diplomatic efforts as a whole.
As Rep. Joaquin Castro (D-TX) warned in the 118th Congress, the full SHIP Act sanctions including tertiary sanctions would “have devastating effects on the global economy, and on oil prices.” He warned that it would “disrupt global trade, supply chains and damage our relations with important allies and partners,” ultimately raising consumer prices in the United States. Likewise, the Ranking Member of the House Foreign Affairs Committee, Rep. Gregory Meeks (D-NY) also warned that full implementation of the sanctions would have ripple effects on the global economy that harm American consumers. He stated “the scope of these proposed sanctions is massive…gas prices in our own country would certainly rise and middle class families would be immediately impacted. Shipping from Asia to the United States could be stalled, denying America goods they require.”
Sunsetting the Waiver, not the Bill Itself
Traditionally, mindful of shifting geopolitical dynamics, sanctions legislation authorizes new sanctions for a set period of time, after which they are either renewed by Congress or allowed to “sunset.” Sanctions legislation also typically provides the Administration with the discretion to pause – or “waive” – the sanctions as necessary to advance foreign policy goals. This legislation, however, turns this norm on its head — only temporarily granting the President waiver authority and permanently imposing the sanctions. Notably, the waiver authority would terminate on February 1, 2029 – which is just a few days after the inauguration of the next U.S. president. It is essentially unprecedented for lawmakers to sunset waiver authorities themselves, rather than the underlying sanctions legislation.
One can intuit the reasoning behind the inclusion of this waiver sunset: the authors want to create a crisis for any successor to the Trump administration, potentially blocking them from sustaining any deal struck by the Trump administration or eliminating their ability to negotiate a new one. But whatever the reason, it is a bad idea.
What’s the strategy?
Since the collapse of the JCPOA in President Trump’s first term, Iran has had no reason to doubt U.S. economic strength. But unfortunately, the U.S. has provided ample reason for Iran to doubt that, if it rolled back its nuclear program or agreed to other U.S. demands, it would receive any benefit from sanctions lifting. In the coming weeks, the Trump administration could soon initiate negotiations with Iran on its nuclear program, which would test America’s ability to credibly offer sanctions relief to forestall the twin threats of war and Iranian proliferation. Any move on the sanctions front should be measured on whether it is supportive or harmful to America’s diplomatic strategy. Particularly given the sunset of the waiver authority included in that bill, the Enhanced Iran Sanctions Act fails that test.
The authors of this bill appear intent to pass measures that are extremely unlikely to add serious leverage against Iran, while making it harder for this and future administrations to secure U.S. interests by securing favorable agreements that reduce threats from Iran. For these reasons, lawmakers should withhold support and prevent this bill from becoming law.