This report outlines the background and original passage of the ILSA (Iran-Libya Sanctions Act), its key provisions which excluded Libya from the act, its implementation and effectiveness and the proposed modifications and extensions to the ILSA.

This report discusses the debate over U.S. policy toward Iran, much of which has centered on the nature of the current regime. Some experts believe that Iran, a country of almost 70 million people, is a threat to U.S. interests because hardliners in Iran’s regime dominate and set a policy direction intended to challenge U.S. influence and allies in the region. President Bush, in his January 29, 2002, State of the Union message, labeled Iran part of an “axis of evil” along with Iraq and North Korea.

According to an Administration national security strategy document released on March 16, 2006, the United States "may face no greater challenge from a single country than Iran." The Bush Administration announced May 31, 2006, that it would negotiate with Iran in concert with U.S. allies. If diplomacy and sanctions do not succeed, some advocate military action against Iran's nuclear infrastructure rather than acquiescence to a nuclear-armed Iran. U.S. concerns regarding Iran include Iran's nuclear program, Iran's influence on Iraq by way of providing arms and other material assistance to Shiite Islamist militias, and Iran's human rights practices, which include strict limits on free expression and repression of ethnic and religious minorities.

Iran's influence over the post-Saddam government in Iraq is substantial because the predominant parties in that government have long enjoyed Tehran's sponsorship. An emerging concern is that Iran's influence has extended to support for militant groups in Iraq. U.S. officials say that sophisticated explosive devices are entering Iraq from Iran, suggesting that Iran, or factions within Iran, are backing Iraqi factions that use violence to oppose the U.S. presence in Iraq.