Earlier this year, the International Atomic Energy Agency confirmed that Iran had met its initial obligations under the Joint Plan of Action (Joint Plan) with the “P5+1” (the United States, the United Kingdom, France, Russia, China and Germany). Iran’s suspension of sensitive nuclear activities triggered temporary relaxation of certain sanctions, but most restrictions and an aggressive enforcement climate remain in place. The US government has cautioned that the sanctions relief is “limited, temporary, targeted, and reversible.”
Limited Impact on Direct US Sanctions Against Iran
Comprehensive US trade and economic sanctions have prohibited US persons and US companies from engaging in or supporting virtually all forms of business involving Iran. These sanctions generally remain in place.
Limited Exceptions to the Rule
Targeted Impact on Secondary US Sanctions Against Iran
The US Congress and the Obama Administration have added various extraterritorial sanctions measures that target trade and financial activities between non-US parties and Iran, even if the non-US parties have little or no connection to the US. While the Joint Plan eases certain of these “secondary” sanctions, the relief is subject to significant limitations, both in terms of timing and substance.
Time Limitations – Activities pre-dating January 20, 2014 and activities not completed between January 20, 2014 and July 20, 2014
Substantive Limitations – Exports of Iran’s petrochemical products and associated services, purchase from and sale to Iran of gold and other precious metals and associated services and the sale, supply or transfer to Iran of goods and services used in connection with the automotive sector and associated services
First Installment of US$4.2 billion in Oil Funds Received
The White House estimates that the limited easing of the secondary sanctions identified above may result in approximately US$1.5 billion in revenue for Iran.
Impact on EU Regulations
The temporary suspension of certain US secondary sanctions benefits parties located in the EU and elsewhere that are not US persons or US companies, or that are not owned or controlled by US persons or US companies. In addition and in accord with the Joint Plan, the EU, by enacting Council Regulation (EU) No 2014/42 (the Regulation) on January 20, 2014, has amended its main regulation prohibiting activities related to Iran, Council Regulation (EU) No 267/2012, to authorize for the Joint Plan Period the following activities:
Transport of crude oil and petroleum products originating in or exported from Iran
Import, purchase, and transport of Iranian petrochemical products, and the related provision of insurance, reinsurance and financial assistance
Sale, supply, transfer or export of gold, silver, and specified base metals to, or purchase, import or transport of gold, silver, and such metals from, the Government of Iran or any person acting on its behalf
Provision of vessels for the transport or storage of Iranian oil and petrochemical products
Relaxed restrictions on the transfer of funds to or from Iran
While the implementation of the Joint Plan reflects continued progress in negotiations between the P5+1 and Iran, the sanctions relief afforded to date is limited and temporary, and does not meaningfully affect most US persons, US companies and their foreign affiliates, or multinational corporations. Indeed, the core of US and EU sanctions on Iran remain in full force, and they continue to create significant legal, reputational, and practical risks for any persons or entities seeking to do any form of business with Iran.