The Sanctions Divide: The White House Pushes to Ease Trade Restrictions on Iran While Congress Contemplates a New Round of Sanctions Legislation

by King & Spalding

On November 24, 2013 in Geneva, the five members of the UN Security Council – United States, United Kingdom, France, China, and Russia, plus Germany ("P5+1"), agreed on a Joint Plan of Action ("JPA") to lift some of the existing sanctions against Iran. This is to be done in exchange for confidence-building measures from Tehran to limit certain aspects of its nuclear activities.

On that same day, President Obama declared that the JPA would serve as an interim first step to "halt the progress of the Iranian nuclear program" and "roll back . . . key parts of the program" and affirmed that the United States would "continue to enforce [sanctions] vigorously" against Iran until a comprehensive solution is negotiated. This latter sentiment was echoed by David Cohen, the current Undersecretary for Terrorism and Financial Intelligence at the U.S. Department of Treasury, who emphasized that sanctions against Iran will remain in place and that "we will communicate a blunt message to every foreign official, businessperson and banker who thinks now might be a good time to test the waters: [w]e are watching, and we are poised to act against anyone, anywhere, who violates our sanctions."

While the P5+1 and Iran have yet to agree on the JPA start date, on November 29 the Secretary of State John Kerry announced that the White House was waiving certain oil sanctions pertaining to Iran, and that it "will pause for six months [United States'] efforts to further reduce Iran's crude oil sales." Tehran confirmed that the Obama Administration already released $8 billion of Iran's blocked funds as a good will gesture and is expected to release additional $15 billion under the terms of the JPA.

The Geneva Bargain

At the core of the multilateral agreement, the Islamic Republic of Iran reaffirmed that "under no circumstances will Iran ever seek or develop any nuclear weapons." The White House stated that the "comprehensive solution" reached in Geneva last month would build on Iran's promise that its nuclear program will be exclusively peaceful and the agreement would result Iran's ability to "fully enjoy its right to nuclear energy for peaceful purposes under the relevant articles of the NPT in conformity with its obligations therein."

The comprehensive solution envisions the creation of a Joint Commission of the P5+1 and Iran to "monitor the implementation of the near-term measures and address issues that may arise, with the IAEA responsible for verification of nuclear-related measures." The text of the JPA states that the bargain is "the comprehensive lifting of all UN Security Council sanctions, as well as multilateral and national sanctions related to Iran's nuclear programme" in exchange for Iran's documented efforts to cease all nuclear weapons-related activities and allow for transparency by the IAEA. Specifically, in exchange for Iran's actions, voluntary measures to be taken by the P5+1 may include the following:

• Suspension of U.S. and EU sanctions on: (1) Iran's petrochemical exports, as well as sanctions on associated services and (2) gold and precious metals, as well as sanctions on associated services;

• Suspension of U.S. sanctions on Iran's auto industry, as well as sanctions on associated services;

• Licensing of the supply and installation in Iran of spare parts for safety of flight for Iranian civil aviation and associated services. License safety related inspections and repairs in Iran as well as associated services;

• No new nuclear-related UN Security Council sanctions;

• No new EU or US nuclear-related sanctions;

• Establishment of a financial channel to facilitate humanitarian trade for Iran's domestic needs using Iranian oil revenues held abroad; and

• Increasing the EU authorization thresholds for transactions for non-sanctioned trade to an agreed amount.

New Pending US Sanctions Legislation In Defiance Of The Obama Administration

Against the backdrop of international easing of sanctions, lawmakers on Capitol Hill are seeking to adopt new measures against Iran. In a bipartisan effort a quarter of the Senate introduced a measure on December 19 that will go into effect should Iran violate the JPA. This measure includes additional sanctions against Iran's special economic zones and entities in Iran's strategic sectors as well as a global boycott of Iran's oil exports. The White House responded that the President will veto any new sanctions against Iran.

Jane Y. Cohen

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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