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Wednesday
Jan112017

Iran Sanctions Deal: What happened so far, and what's ahead?

It’s been about a year since the Iran deal, more formally known as the Joint Comprehensive Plan of Action or JCPOA, came into effect. What has that year looked like? And what might be coming for the Iran deal?

Under the JCPOA, the United States eased up on its nuclear-related sanctions against Iran, which included an extremely limited segment of its “primary sanctions” (those applicable to U.S. entities) as well as most of its “secondary sanctions” (those applicable to non-U.S. entities). 

So far, with regard to the primary sanctions, a few foreign subsidiaries of U.S. companies started to do business in Iran under the Treasury Department’s Office of Foreign Assets Control (OFAC) General License H.  For the most part, though, companies have been hesitant or just not well-positioned to qualify to use this narrow authorization for foreign subsidiaries of U.S. companies.

Boeing and Airbus had licenses granted by OFAC to contract with Iran for the sale of commercial passenger aircraft.

The greatest challenge to those actually willing to take advantage of the lifting of sanctions, both primary and secondary, has been financing. Many global banks -- even if they don’t have any U.S. affiliations and even if the payment is denominated in something other than U.S. dollars -- have refused to finance Iran-related transactions.

Finally, Donald Trump during his campaign vowed to dismantle the Iran deal, renegotiate a better one, or enforce it so aggressively that “they don’t have a chance.”

Since the election, President Elect Trump has been largely quiet on this issue. But his picks for national security adviser, retired Army Gen. Mike Flynn, and CIA head, Rep. Mike Pompeo, have voiced opposition to the Iran deal. 

It’s difficult to predict to what extent President Trump will act on what he said on the campaign trail. The new administration might not take any concrete action at all with regard to the JCPOA. It could even further ease certain sanctions in order to allow U.S. businesses more opportunities to compete with the rest of the world in the Iranian market. Part of the President Elect's criticism of the deal was that U.S. businesses are missing out while “all of these countries… [are] going to make lots of money and lots of other things with Iran…”

If the president decides to withdraw from the Iran deal, there won’t be much in his way, at least not legally. The JCPOA is not a treaty and it’s not even an executive agreement; it’s merely a political commitment. That means the new administration could simply reinstate the U.S. sanctions that were in place before January 2016.  

Alternatively, if the president chooses to honor the political commitment to any extent, he could trigger the deal’s provisions for “snapback” by reporting a breach by Iran to the UN Security Council. Like the other possible scenarios, snapback would also be a unilateral action. The U.S. does not require any sort of approval from the other P5+1 countries or the Security Council to reinstate its own sanctions against Iran.

While OFAC has been relatively quiet since the easing of sanctions in January 2016, it did offer some guidance last month on what it would look like in the event the sanctions snap back.  

We knew that the “grandfathering” of contracts signed prior to snapback would not be permitted. But it wasn't clear whether companies would have an opportunity to wind down their operations involving Iran before being subject to enforcement. 

In its updated Frequently Asked Questions, OFAC said companies will have a 180-day window to wind down business involving Iran, if the company was properly acting under a JCPOA-related authorization and the business was undertaken pursuant to a written agreement entered into prior to the snapback date.  Companies will also be allowed to receive payment after snapback if the goods or services have been fully provided or delivered by the snapback date and the payment is made consistent with the terms of a written agreement entered into prior to snapback.

Although the trade community generally relies on OFAC’s FAQ guidance, the FAQs aren't binding on the new administration. The Trump Administration is likely to honor the reasonable wind-down period, partly to give some degree of certainty to companies doing business in Iran, and partly to help maintain a level of confidence in the U.S. economic sanctions regime as a whole.

____

Nina Mohseni is an associate attorney at Sandler, Travis & Rosenberg in Chicago where she practices customs and international trade law. She is on the board of the Chicago chapter of the Organization of Women in International Trade (OWIT Chicago) and the junior board of the British American Business Council of Chicago (BABCC). She is also a founding member and former chair of the Chicago Bar Association’s International Corporate and Trade Law Committee.

Reader Comments (1)

Buck up and do what needs to be done Mr. President. We don't need their money. Some things money can't buy. The U.S. is not for sale!! Intestinal fortitude please.
January 11, 2017 | Unregistered CommenterTjones
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