Unwinding Iran Sanctions: Why Legal and Political Hurdles Could Delay Economic Relief
Tehran could gain tens of billions of dollars if U.S. sanctions are permanently lifted, but legal and political hurdles may delay economic relief for years. While a new U.S. Treasury license allows oil sales through August 21, Congress must still amend laws regarding groups like Hezbollah and Hamas.
Why will the removal of Iran sanctions take years?
The process of dismantling four decades of trade restrictions involves a “tangled nest” of legal mechanisms. According to Juan Zarate, a former deputy national security adviser for combating terrorism, the sanctions regime consists of both executive orders and congressional mandates.
While a president can rescind executive orders, many sanctions are baked into U.S. law. Specifically, sanctions targeting groups like Hamas and Hezbollah require Congressional action to remove or amend. This legislative requirement creates a significant bottleneck for any interim deal.
Even if the political will exists, the administrative workload is massive. Jeremy Paner, a partner at law firm Hughes Hubbard & Reed and former U.S. sanctions official, stated that delisting the thousands of entities currently designated by the Treasury’s Office of Foreign Assets Control (OFAC) would take at least one year.
“Any attempt to comprehensively remove layer upon layer of sanctions will be like peeling back an onion — exposing the administration – not just to legal complexities but political risks,” said Matt Zweig, managing director of policy at FDD Action.
U.S. sanctions against Iran began in 1979 following the seizure of the U.S. embassy in Tehran by revolutionary students.
How much money could Iran gain from a permanent deal?
The immediate financial impact of the current 60-day reprieve is significant. Some estimates suggest the temporary license issued by the U.S. Treasury could be worth up to $3 billion for Iran over a two-month period.
If these measures become permanent, the economic windfall increases drastically. Edward Fishman, a senior fellow at the Council on Foreign Relations, told Reuters the value could swell to “at least tens of billions of dollars.”
A permanent lifting of sanctions would likely transform the global energy market by:
- Erasing the current discount on Iranian oil.
- Allowing Tehran to sell to buyers beyond China.
- Increasing overall Iranian export volumes.
Currently, China remains the dominant player in the Iranian energy sector, purchasing approximately 90% of the country’s oil despite existing restrictions.
Comparison: March License vs. Current License
The new license issued on Monday represents a strategic expansion of permitted activities compared to previous measures. While the March license focused primarily on petroleum, the current version includes a broader scope to facilitate faster revenue access.
| Feature | March License | Current License (Monday) |
|---|---|---|
| Crude Oil & Petrochemicals | Included | Included |
| Banking & Insurance | Limited | Explicitly Included |
| Transportation Services | Limited | Explicitly Included |
What risks do banks and oil firms face?
Even with legal licenses in place, the private sector remains hesitant. Banks, insurers, and oil companies face high exposure to sanctions-evasion risks, particularly regarding links to China, North Korea, and Russia.
Stephanie Connor, a partner with Holland & Knight and former OFAC official, raised concerns about the potential for funds to reach the Islamic Revolutionary Guard Corps (IRGC), which the U.S. designates as a foreign terrorist organization.
Beyond regulatory shifts, companies face direct litigation risks. The 2016 Justice Against Sponsors of Terrorism Act (JASTA) allows victims of attacks to sue investors and companies that allegedly aided designated terrorist groups. Because aides believe JASTA is unlikely to be repealed, the legal shadow remains long.
Pro Tip: For multinational corporations, “compliance” extends beyond current U.S. law. Companies must also monitor separate sanctions imposed by the U.N., the European Union, and the United Kingdom to avoid massive fines.
Brett Erickson, principal with Obsidian Risk Advisors, noted that massive multi-billion dollar commitments are unlikely until the political landscape becomes more stable. “There’s just a long way to go,” Erickson said.
Frequently Asked Questions
Can the President lift all Iranian sanctions alone?
No. While the President can rescind executive orders, several sanctions are mandated by law and require Congress to act to remove or amend them.
What is the deadline for the current U.S. oil license?
The temporary general license for the sale of Iranian crude oil and petrochemical products is valid through August 21.
Why is China so important to Iran’s economy?
China currently buys about 90% of Iranian oil, making it the primary market for Iranian energy despite international sanctions.
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