[author:  Jane Y. Cohen]

The sanctions stranglehold on Iran is loosening as the Obama Administration continues to chip away at restrictions on the commercial passenger aircraft industry. Pursuant to the phased enactment of the Joint Comprehensive Plan of Action (JCPOA), last month the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) issued General License I (GL I), which authorizes U.S. persons to enter into, and to engage in transactions that are ordinarily incident to the negotiation of and the entry into, contingent contracts for activities eligible for authorization under the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services (SLP) issued by OFAC on JCPOA’s Implementation Day (January 16, 2016).

This means that, while a specific license from OFAC is still required to export, re-export, sell, lease, or transfer commercial passenger aircraft and related parts and services to Iran under the SLP, the issuance of GL I will allow for a more efficient processing of specific license applications and will likely provide a boost to the commercial passenger aircraft industry. GL I defines “contingent contracts” to include executory contracts, executory pro forma invoices, agreements in principle, executory offers capable of acceptance such as bids or proposals in response to public tenders, binding memoranda of understanding, or other similar agreements. The performance of such contracts must be made “expressly contingent” upon OFAC issuing a specific license to authorize the underlying activities to be performed.

Meanwhile, U.S. officials have expressed concern over Iran’s recent ballistic missile tests. Though not expressly prohibited under the terms of the JCPOA, the launching of missiles capable of delivering a nuclear payload by Iran last month was reported as “inconsistent with” and “in defiance of” of a United Nations Security Council Resolution (UNSCR) 2231, adopted in July 2015. In reaction to the actions taken by Tehran, on April 1 at the Nuclear Security Summit in Washington, D.C., President Obama acknowledged that “Iran so far has followed the letter of the agreement,” but not its “spirit.” Whether Iran’s violations of UNSCR 2231 will have any impact on the continued implementation of the JCPOA remains to be seen. The focus of the Administration remains opening Iran for business, and the President explained that Iran needs to signal to “the world community and businesses that [Iran] is not going to be engaging in a range of provocative actions that are going to scare businesses off.”

Importantly, opening the Iranian economy to the world community and businesses does not also include the use of the U.S. financial system. Following Iran’s ballistic missile tests, the Associated Press reported that OFAC was working to publish a general license that would authorize non-U.S. financial institutions to conduct foreign currency trades in U.S. dollars “in support of legitimate business with Iran.” However, at the Nuclear Security Summit, President Obama seemed to deny that such reports are true. Also, on April 5, while testifying before the Senate Foreign Relations Committee, Under Secretary of State for Political Affairs Thomas Shannon denied such “rumors and news” as untrue. In response, lawmakers in Congress introduced S. 2752 and H.R. 4898 to prevent the Administration from issuing licenses to permit offshore dollar clearing outside of the United States financial system for transactions involving or benefitting Iran.