"More than two decades after the November 4, 1979 seizure of the U.S. embassy in Tehran, and even before Iran's tacit cooperation with post-September 11 U.S. efforts to defeat Afghanistan's Taliban regime, signs of moderation in Iran had stimulated the United States to try to engage Iran in official talks. Iran, still split between conservatives and reformers loyal to President Mohammad Khatemi, who was elected in May 1997 and overwhelmingly reelected on June 8, 2001, has not accepted to date. However, recent reports of Iranian meddling in post-Taliban Afghanistan and Iran's intercepted January 2002 shipment of arms allegedly to the Palestinian Authority have reversed the warming trend. […] During the first term of the Clinton Administration, as part of a policy of 'dual containment' of Iran and Iraq, President Clinton imposed a ban on U.S. trade and investment in Iran in 1995, and a 1996 law imposed sanctions on foreign investment in Iran's energy sector (Iran-Libya Sanctions Act, ILSA). In keeping with a 1997 policy shift toward engagement, the Clinton Administration and Congress later eased sanctions to allow U.S. exports to Iran of food and medical supplies and importation from Iran of goods such as carpets and caviar. The United States has consistently worked with its allies to prevent arms and advanced technology sales to Iran and to limit Iran's influence over regional energy flows. U.S. purchases of Iranian crude oil and U.S. company investments in Iran remain barred. ILSA was renewed for another 5 years on August 3, 2001 (H.R. 1954, P.L. 107-24)."
CRS Issue Brief for Congress, IB93033