President Trump signed a new Executive Order on August 6, 2018, titled “Reimposing Certain Sanctions with Respect to Iran”. The Executive Order was timed to coincide with the last day of the 90-day wind-down period established for activities associated with certain sanctions relief authorized by the Joint Comprehensive Plan of Action (“JCPOA”). As a result, the first round of sanctions against Iran will become effective at 12:01 a.m. on August 7, 2018.
On May 8, 2018, President Trump announced the U.S. withdrawal from the JCPOA and gave companies doing business in Iran two “wind-down” periods to cease activities in Iran that were previously authorized under the JCPOA. Beginning on August 7, 2018, the U.S. has announced its intention to begin enforcement of the first tranche of reinstated sanctions which include (but are not limited to):
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Secondary sanctions applicable to non-U.S. persons who support the Government of Iran in acquiring U.S. dollar banknotes and precious metals;
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Secondary sanctions applicable to non-U.S. persons who transact with Iran’s automotive sector; and
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Foreign financial institutions who conduct certain transactions involving the Iranian rial.
Effective August 7, the U.S. government will also fully revoke licenses previously issued under the JCPOA related to commercial aircraft export transactions. The Department of Treasury’s Office of Foreign Assets Control (“OFAC”) has issued new FAQ guidance related to this new Executive Order and has also updated its previous JCPOA-related FAQ guidance.
Although this first round of U.S. sanctions is expected to have an impact on the Iranian economy, the more significant wind-down period is set to expire on November 4, 2018. Sanctions that will be put back into place effective November 5, 2018 will target Iran’s (i) port operators, (ii) energy, shipping, and ship-building sectors, (iii) petroleum-related transactions, and (iv) certain transactions by foreign financial institutions. In addition, effective November 5, 2018, the U.S. will: (1) revoke any authorization for U.S.-owned or –controlled foreign entities to wind down certain activities with the Government of Iran and persons subject to the jurisdiction of the Government of Iran that were previously authorized under General License H; and (2) reimpose sanctions against those persons that were removed from the List of Specially Designated Nationals and Blocked Persons (SDN) list and/or other lists maintained by the U.S. Government on January 16, 2016. The new Executive Order provides initial guidance on activities that will become subject to sanction on November 5, 2018, but OFAC indicated that it will be issuing additional guidance no later than November 4, 2018.
In response to the re-imposition of U.S. sanctions, the European Union announced the updated EU Blocking Statute will enter into force on August 7, 2018 (tomorrow). The “Blocking Statute” is intended to protect European businesses from the economic effects of the sanctions. However, many doubt the effectiveness of such a measure and a senior State Department official told the press today that the U.S. is “not particularly concerned” by the EU’s enactment of the Blocking Statute.
