On November 5, 2018, the United States fully reimposed sanctions against Iran as part of its decision to withdraw from the Iran nuclear deal, also known as the Joint Comprehensive Plan of Action (“JCPOA”).  President Trump announced the decision to withdraw on May 8, 2018, thus beginning the “wind-down” period for businesses to withdraw from Iran. 

The first phase of this “wind-down” process occurred on June 27, 2018 when the Treasury Department’s Office of Foreign Assets Control (OFAC) took the following actions:

• Revoked General License H, which had previously authorized foreign subsidiaries of U.S. parent companies to engage in certain transactions with Iran;
• Revoked General License I, which had previously authorized U.S. persons to negotiate contingent contracts for exports of commercial passenger aircraft and related parts and services to Iran that were previously eligible for OFAC licensing under a Statement of Licensing Policy that the Trump Administration had revoked on May 8, 2018; and
• Issued temporary licenses which allowed limited activities until November 5, 2018 in order to “wind down” any transactions that were previously authorized under General Licenses H and I.

Then, on August 6, 2018, 90 days after the JCPOA withdrawal announcement, the first tranche of sanctions were reinstated.  The reinstated sanctions included (but were not limited to):

• Secondary sanctions applicable to persons who support the Government of Iran in acquiring U.S. dollar banknotes and precious metals;
• Secondary sanctions applicable to persons who engage in significant transactions with Iran’s automotive sector and foreign financial institutions who conduct or facilitate such transactions; and
• Secondary sanctions applicable to foreign financial institutions who conduct certain transactions involving the Iranian rial.

Effective today, November 5, 2018, the second and final tranche of sanctions were reinstated in order to fully reinstate the entirety of Iran sanctions that were lifted by the Obama Administration in January 2106.  The sanctions reinstated in this second tranche are among the most powerful because they reinstate secondary sanctions against non-U.S. persons and non-U.S. financial institutions.  The second tranche of reinstated sanctions mainly target persons designated to OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN) list in connection with Iran and Iran’s oil, gas and banking sectors.

Specifically, the sanctions reinstated on November 5^th include:

• Reimposition of sanctions against approximately 700 persons including those that were removed from the SDN list and/or other lists maintained by the U.S. Government on January 16, 2016 plus approximately 300 additional persons. Although U.S. persons were generally prohibited from transacting with these persons at all times while the JCPOA was in effect and during the JCPOA “wind down” period, these SDN relistings have a significant effect on non-U.S. persons because the relistings will extend secondary sanctions to transactions between non-U.S. persons and the relisted persons.  Many of these relisted Iranian companies have extensive operations both inside and outside of Iran, such as National Iranian Oil Company (NIOC), Naftiran Intertrade Company (NICO) and their 50%-or-greater owned subsidiaries;
• Secondary sanctions applicable to non-U.S. persons who transact with port operators in Iran and the Iranian energy, shipping and shipbuilding sectors;
• Secondary sanctions applicable to non-U.S. persons related to significant transactions for the purchase, acquisition, sale, transport or marketing of petroleum, petroleum products or petrochemical products from Iran;
• Secondary sanctions applicable to non-U.S. financial institutions and insurance companies who facilitate transactions in support of, insure or provide insurance services in support of persons designated as SDNs in connection with Iran or other transactions with certain sanctioned sectors of Iran’s economy;
• Revocation of the June 27, 2018 “wind down” licenses for activities that were previously authorized under General Licenses H and I. This generally means that, beginning November 5, 2018, U.S.-owned or –controlled foreign entities will revert back to being completely prohibited from transacting with Iran (even for transactions that were entered into during the JCPOA and prior to June 27, 2018).

In light of the reimposition of these Iran sanctions, nearly every Iranian bank (including the Central Bank of Iran) have been placed on the SDN List, which will make any transactions with Iran quite difficult even for authorized trade.

We anticipate that the Administration and OFAC will issue additional designations and sanctions against Iran in the coming days and weeks in an effort to stem Iran’s opportunities for external trade and to bring Iran back to the negotiating table to replace the JCPOA with a new agreement.  In a press briefing held late last week, Secretary of Treasury Steven Mnuchin stated in addition to restoring the sanctions against the previously listed SDNs, the Treasury Department plans to add “more than 300 new designations . . . substantially more than we ever have previously done.”

In addition, it has been reported that the Administration plans to grant temporary six-month waivers to eight to-be named countries to avoid penalties under the U.S. sanctions while those countries wind down their oil business with Iran.  The list of countries is reported to include: China, India, South Korea, Turkey, Italy, Greece, Japan, and Taiwan.