This report provides a general overview of Iran's economy, addresses related U.S. policy concerns, and discusses policy options for Congress. The purpose of this report is two-fold. First, it provides insight into important macroeconomic trends, policy reforms and objectives, key economic sectors, international trade patterns, and sources of foreign exchange. Second, in the context of U.S. economic sanctions imposed for national security and foreign policy reasons, it evaluates Iran's economic structure, strengths, and vulnerabilities and discusses U.S. policy concerns.

The Kurdish-inhabited region of northern Iraq is relatively peaceful and prospering economically, but the Iraqi Kurds' political autonomy and political strength in post- Saddam Iraq is causing friction with Arab leaders in Iraq, Turkey, and Iran. However, an overall reduction in violence in Iraq, coupled with continued U.S. political influence over the Kurds, is likely to prevent a destabilizing escalation of the Iraqi Kurd-Arab disputes. Also see CRS Report RL31339, Iraq: Post-Saddam Governance and Security, by Kenneth Katzman.

A 1996 amendment to the Foreign Sovereign Immunities Act (FSIA) enables American victims of international terrorist acts supported by certain States designated by the State Department as supporters of terrorism - Cuba, Iran, North Korea, Sudan, Syria, and previously Iraq and Libya - to bring suit in U.S. courts to seek monetary damages. This report, which will be updated, provides an overview of these issues and relevant legislation (H.R. 5167).

Iran is materially assisting and influencing major Shiite Muslim factions in Iraq, most of which have ideological, political, and religious ties to Tehran. Among these factions is that of hardline anti-U.S. cleric Moqtada Al Sadr, whose Mahdi Army militia, according to some observers, serves as a proxy force for Tehran against the United States.