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President Obama, surrounded by the Congressional leadership, signed the Iran sanctions legislation into law.

Editorial: Implementation is Essential

President Obama last week signed into law the Comprehensive Iran Sanctions Accountability and Divestment Act (CISADA), the toughest sanctions on Iran ever passed by the United States Congress. If implemented, the new law holds the best chance to peacefully persuade Iran's leaders to abandon their pursuit of a nuclear weapons capability.

It is essential that the president takes advantage of all of the new authorities available to him and dramatically increase the pressure on Iran and companies that continue to do business with the terrorist state.

Many companies, when faced with the mere prospect of sanctions, stopped or reduced their business ties with Iran. At the end of June, French oil trader Total announced that it had suspended all sales of gasoline and refined petroleum products to Iran. Spain's Repsol also announced it had backed out of a contract to develop part of Iran’s South Pars natural gas field.

Imagine the pressure that Iran would feel if this new law is implemented in full.

Unfortunately, the track record on implementation of Iran sanctions is not good. As the Near East Report has previously highlighted, multiple administrations have failed to enforce the original Iran Sanctions Act of 1996. Though it is too early to tell, that may be changing.

The State Department recently announced it had completed an internal review of deals that may have violated the Iran Sanctions Act and found a number of cases where a company appeared to have violated the law.

Secretary of State Hillary Clinton is now considering what action to take in response to these findings–an important first step–but Congress must ensure that the Administration imposes real penalties on these companies and fully implements the recently-signed law. Failure to enact meaningful consequences for violating sanctions will only encourage companies to continue their negative behavior and potentially send a signal to companies that have already pulled out of Iran that they can go back in.

Implementation is key and CISADA imposes a number of requirements which will hopefully encourage better compliance. According to the law, the president “shall” initiate investigations of sanctionable activity and must make determinations if violations have occurred. Likewise, the president must also submit a report on companies investing in Iran’s energy sector within 90 days of the law's enactment. Moreover, companies seeking U.S. government contracts will, for the first time, be required to certify that neither they, nor their subsidiaries, conduct business in Iran’s energy sector in violation of U.S. law. Corporations, such as Honeywell, will thus be forced to choose between ending their subsidiary’s business in Iran or lose their government contracts.

Beyond targeting Iran’s energy sector, CISADA imposes new measures to ensure that no U.S. financial institution is unwittingly financing Iran’s illicit behavior. Within 90 days of the law's enactment, the Secretary of the Treasury must prescribe regulations to “prohibit or impose strict conditions on” the ability of foreign financial institutions to operate in the United States if they conduct business with Iran’s Islamic Revolutionary Guard Corps (IRGC), sanctioned Iranian banks or facilitating Iran’s illicit nuclear program or its support for terrorism.

If implemented, this provision will finally force international banks to choose between business with the United States or Iran, but not both. Virtually all international banks rely on access to our financial system for a substantial portion of their business and will presumably choose the U.S over Iran.

After the passage of CISADA, Secretary of State Clinton said “We are committed to fully implementing this legislation…” If the administrations does, there is a reasonable chance Iran will alter course. If not, we will soon be faced with two bad options, accepting a nuclear Iran or using military action to prevent it. Let’s hope the sanctions are implemented and no administration ever has to face such a stark choice.
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