In what may be a harbinger of things to come, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has issued new guidance regarding what may occur if the United States re-implements economic sanctions against Iran that were scaled back following the July 2015 nuclear deal (the Joint Comprehensive Plan of Action or JCPOA). That guidance, in the form of two amended Frequently Asked Questions (M.4 and M.5, available here), makes clear that:

• the United States will not retroactively impose sanctions for legitimate activity undertaken prior to any sanctions snapback;
• continuation of previously legitimate activities following snapback could be penalized; and
• the U.S. government intends to provide a 180-day period to wind down Iran business that was consistent with the lifting of U.S. sanctions under the JCPOA.

This guidance is notable for a number of reasons. First, it seems to commit OFAC to a wind-down period, even though the Trump administration might never honor that commitment.

Second, OFAC seemingly is giving credence to the possibility that the JCPOA could fail, and the United States could re-impose sanctions against Iran that were lifted as a result of that agreement. As we indicated last month, Donald Trump has threatened to abolish the JCPOA, and there are various paths by which he could do so. OFAC’s guidance appears to contemplate that reality.

The guidance also may constitute a reaction to the recent announcement, by Iranian President Rouhani, that Iran will build a nuclear-powered marine propeller that could be used for nuclear submarines. That announcement was itself reportedly a response to the United States’ extension of the Iran Sanctions Act this week. (President Obama declined to sign the bill, but allowed it to become law anyway.)

Given these developments, and more drama that is sure to come, the U.S.-Iran relationship bears close watching. Businesses that have capitalized on or are contemplating opportunities in Iran may want to sit tight for the time being.

In this charged political climate, it is difficult to predict what sanctions restrictions will be in place in the weeks and months ahead. Such unpredictability means it is nearly impossible to make the calculated business decisions that are essential to long-term success in a market like Iran. It is a strange day when a U.S. regulator cannot say with confidence what is forthcoming, and issues guidance that could be ignored or rescinded within weeks of its issuance.