05-29-2025

Presidential Determination Pursuant to Section 1245(d)(4)(B) and (C) of the National Defense Authorization Act for Fiscal Year 2012

DeterminationView the Original .pdf
View the Original .pdf

The 1-Minute Brief

What: This Presidential Determination, issued on May 12, 2025, concludes that the global supply of oil is sufficient to allow countries to significantly reduce their purchases of petroleum and petroleum products from Iran. This finding is a legal prerequisite for the United States to impose sanctions on foreign financial institutions that engage in significant transactions with Iran's energy sector.

Money: There is no direct Congressional Budget Office (CBO) score or appropriation associated with this determination. Its financial impact is indirect, aimed at reducing Iran's revenue from oil sales, which have been a primary source of funding for the government. The effectiveness of these sanctions has historically led to the loss of billions of dollars in annual revenue for Iran.

Your Impact: For the average American, the most likely direct effect is on gasoline prices. By certifying that the global oil supply is adequate, the administration signals that restricting Iranian oil from the market should not cause a significant price spike for consumers. However, market volatility due to geopolitical tensions can still affect prices at the pump.

Status: This is a Presidential Determination, an executive action that is now in effect. It will be published in the Federal Register on May 29, 2025.

What's Actually in the Bill

This Presidential Determination is an executive action based on Section 1245 of the National Defense Authorization Act (NDAA) for Fiscal Year 2012. It doesn't create a new law but rather activates a provision within an existing one. The core function is to certify that the world's oil market can withstand a reduction in Iranian oil exports. This allows the U.S. to enforce sanctions against foreign banks that process payments for Iranian oil, effectively pressuring other countries to limit their purchases from Iran. The determination is based on reports from the Energy Information Administration (EIA) and other factors like global economic conditions and strategic reserves.

Core Provisions:

  • Presidential Finding: The President formally determines "that there is a sufficient supply of petroleum and petroleum products from countries other than Iran to permit a significant reduction in the volume of petroleum and petroleum products purchased from Iran."
  • Legal Prerequisite: This determination is required under Public Law 112-81 to apply sanctions targeting foreign financial institutions that deal with the Central Bank of Iran or other Iranian financial institutions for petroleum transactions.
  • Regular Review: The law mandates that the President must make this determination every 180 days to continue applying these specific sanctions.

Stated Purpose (from the Sponsors):

The stated purpose of the underlying law, Section 1245 of the NDAA for FY 2012, is to pressure Iran to change its behavior by restricting its main source of revenue. Supporters claim the goal is to prevent Iran from funding activities that destabilize the Middle East, developing its ballistic missile program, and supporting terrorist organizations. The ultimate stated goal of the sanctions is to bring about a positive change in Iran's policies.

Key Facts:

Affected Sectors: Energy, Banking, and International Shipping.
Timeline: The determination was signed on May 12, 2025, and is scheduled for publication in the Federal Register on May 29, 2025. The sanctions framework it supports is ongoing.
Scope: The determination has a global scope, affecting any country and financial institution that engages in the purchase of Iranian oil.

The Backstory: How We Got Here

Timeline of Events:

The Long Standoff (1979-2012):

  • 1979: Following the Iranian Revolution and the hostage crisis at the U.S. Embassy in Tehran, the United States imposed its first sanctions on Iran.
  • 1995-1996: President Clinton issued executive orders prohibiting U.S. trade and investment with Iran. The Iran-Libya Sanctions Act was passed, penalizing foreign companies investing in Iran's energy sector.
  • 2006: The UN Security Council began passing resolutions demanding Iran halt its uranium enrichment program, leading to broader international sanctions.
  • December 31, 2011: Amid growing concerns about Iran's nuclear program, President Obama signed the National Defense Authorization Act for Fiscal Year 2012. Section 1245 of this law created a powerful new tool: sanctions on foreign banks that conduct transactions with Iran's Central Bank for oil purchases. This required the President to periodically assess the global oil market to ensure the sanctions wouldn't harm allies or the global economy.

JCPOA Era and U.S. Withdrawal (2015-2018):

  • 2015: The Joint Comprehensive Plan of Action (JCPOA), or the Iran nuclear deal, was signed between Iran and the P5+1 (China, France, Russia, United Kingdom, United States—plus Germany). In exchange for verifiable curbs on its nuclear program, Iran received relief from many international and U.S. secondary sanctions, allowing it to increase oil exports.
  • May 8, 2018: President Trump announced the withdrawal of the United States from the JCPOA, calling it a "one-sided deal." This led to the immediate reimposition of all U.S. sanctions that had been lifted or waived.

"Maximum Pressure" and Continued Tensions (2018-Present):

  • November 2018: U.S. sanctions fully snapped back into place. The Trump administration granted temporary waivers, known as Significant Reduction Exceptions (SREs), to eight countries, allowing them to continue importing some Iranian oil.
  • May 2019: The SREs were not renewed, with the administration stating its goal was to drive Iran's oil exports to zero.
  • 2019-2025: The "maximum pressure" campaign continued, with the U.S. imposing hundreds of sanctions on Iranian individuals, entities, and vessels involved in the energy sector. Despite these measures, Iran has continued to export oil, often through a "shadow fleet" of tankers using deceptive practices. This Presidential Determination continues the policy of maintaining pressure on Iran by keeping the legal framework for sanctions in place.

Why Now? The Political Calculus:

  • Sustaining Pressure: This determination is a routine but necessary step to legally maintain the sanctions regime against Iran's oil sector. It signals a continuation of the existing U.S. policy to economically isolate Iran.
  • Geopolitical Signaling: Following a reported escalation in regional conflict, including alleged strikes on Iranian nuclear infrastructure, and with nuclear diplomacy stalled, this action reinforces economic pressure as a primary tool of U.S. policy.
  • Market Stability: With reports from the Energy Information Administration suggesting a stable global oil market, the administration can make this determination without significant fear of causing an immediate energy price crisis for consumers and allies.

Your Real-World Impact

The Direct Answer: This action primarily affects the global oil industry and U.S. foreign policy, but its most tangible impact on Americans is its potential influence on gas prices.

What Could Change for You:

Potential Benefits:

  • Stable Gas Prices: By affirming that global oil supplies are sufficient, the determination aims to prevent price shocks that could result from taking Iranian oil off the market. If the assessment is correct, you are less likely to see a sudden spike in prices at the pump due to this specific policy.
  • National Security: Proponents argue that by limiting Iran's oil revenue, this policy reduces funding for activities that threaten U.S. interests and allies, contributing to long-term national security.

Possible Disruptions or Costs:

Short-term (1-6 months):

  • Market Volatility: While the EIA report suggests supply is sufficient, geopolitical events are unpredictable. Sanctions enforcement can lead to instability in the Middle East, which often causes short-term jitters in the oil market and can temporarily increase gas prices.

Long-term:

  • Sustained Higher Energy Costs: Critics of this policy argue that consistently keeping a major producer like Iran out of the formal market constricts global supply and may contribute to a higher baseline for oil prices over the long term.

Who's Most Affected:

Primary Groups: International energy companies, global financial institutions, and shipping companies that might otherwise do business with Iran.
Secondary Groups: U.S. consumers (through gasoline prices), U.S. military personnel stationed in the Middle East, and Iranian civilians affected by the economic impact of sanctions.
Regional Impact: The policy has a significant impact on countries that have historically been major importers of Iranian oil, such as China and India.

Bottom Line: This executive action is designed to keep economic pressure on Iran without causing a spike in your gas prices, though the risk of market volatility remains.

Where the Parties Stand

Republican Position: "Maximum Pressure"

Core Stance: Generally supports maintaining and strengthening sanctions on Iran to compel it to change its foreign policy and abandon its nuclear ambitions.

Their Arguments:

  • ✓ Sanctions are a critical tool for cutting off funding to the Iranian regime, which they argue supports terrorism and destabilizes the region.
  • ✓ A strong stance against Iran is necessary to protect U.S. national security interests and those of allies like Israel.
  • ⚠️ Some may express concern that the policy doesn't go far enough and that enforcement against sanctions-evading networks, particularly those involving China, needs to be more aggressive.
  • ✗ Oppose any return to the JCPOA or lifting of sanctions without significant concessions from Iran that go beyond its nuclear program to include ballistic missiles and regional activities.

Legislative Strategy: Pushing for the full enforcement of existing sanctions and introducing new legislation to expand sanctions to other sectors of the Iranian economy.

Democratic Position: "Diplomacy First, with Sanctions as Leverage"

Core Stance: The party has a more divided view. While many support sanctions as a tool, the progressive wing often advocates for a return to diplomacy, mirroring the approach of the Obama administration.

Their Arguments:

  • ✓ Acknowledges that sanctions can be a useful form of leverage in negotiations.
  • ⚠️ Concerns that "maximum pressure" without a diplomatic path has failed to change Iran's behavior and has instead led Iran to accelerate its nuclear program. Many are critical of the U.S. withdrawal from the JCPOA.
  • ✗ Oppose a policy of sanctions-only, arguing that it isolates the U.S. from its allies and risks escalating conflict. They are also often more attentive to the humanitarian impact of sanctions on ordinary Iranians.

Legislative Strategy: Generally supportive of executive actions that maintain flexibility. The party's leadership would likely prefer to use the sanctions framework as a bargaining chip to entice Iran back to the negotiating table for a new or revised nuclear deal.

Constitutional Check

The Verdict: ✓ Constitutional

Basis of Authority:

The President's action is based on authority granted by Congress under Section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 112-81). This law delegates specific foreign policy and economic powers to the executive branch. This authority is rooted in Congress's power to regulate commerce with foreign nations.

Article I, Section 8, Clause 3 of the U.S. Constitution (Commerce Clause): "[The Congress shall have Power] To regulate Commerce with foreign Nations..."

Constitutional Implications:

Delegation of Powers: This is a clear instance where Congress has delegated authority to the President to make determinations and impose sanctions based on specific findings. This delegation is a common feature of U.S. foreign policy legislation.
Precedent: The Supreme Court has historically granted the executive branch significant leeway in the realm of foreign affairs and national security. The use of sanctions authorized by Congress and implemented by the President is a well-established practice.
Federalism: This action deals exclusively with foreign policy and international commerce, areas where the federal government has clear authority, so it does not overstep into powers reserved for the states.

Potential Legal Challenges:

Legal challenges are unlikely to succeed. The challenges to this sanctions regime typically come not from within the U.S. on constitutional grounds, but from foreign entities and governments that are subject to the sanctions. These challenges play out in the diplomatic and economic arenas rather than in U.S. courts. The law itself is clear in granting the President this specific authority, making a domestic legal challenge to the determination itself highly improbable.

Your Action Options

TO SUPPORT THIS BILL

5-Minute Actions:

  • Call Your Rep/Senators: Capitol Switchboard: (202) 224-3121. "I'm a constituent from [Your City/Town] and I support the President's determination under the NDAA to maintain sanctions on Iranian oil. I urge [Rep./Sen. Name] to support strong enforcement."

30-Minute Deep Dive:

  • Write a Detailed Email: Contact members of the Senate Committee on Banking, Housing, and Urban Affairs and the House Committee on Financial Services, as they have oversight of these sanctions. Express your support for holding Iran accountable through economic pressure.
  • Join an Organization: Look into advocacy groups that focus on national security and a strong U.S. foreign policy in the Middle East.

TO OPPOSE THIS BILL

5-Minute Actions:

  • Call Your Rep/Senators: Capitol Switchboard: (202) 224-3121. "I'm a constituent from [Your City/Town] and I am concerned that the current sanctions-only policy on Iran is not working. I urge [Rep./Sen. Name] to support a new diplomatic strategy."

30-Minute Deep Dive:

  • Write a Letter to the Editor: Submit a letter to your local newspaper arguing that the "maximum pressure" campaign has failed and that the U.S. should prioritize diplomacy to resolve the nuclear issue and prevent a wider conflict.
  • Join an Organization: Join advocacy groups that promote diplomacy over military and economic confrontation and that raise awareness about the humanitarian consequences of broad-based sanctions.