How Should U.S. Companies React To The Iran Nuclear Deal And Which Sanctions Are Suspended?

Perkins Coie

The United States agreed to suspend certain sanctions against Iran over the weekend as part of an agreement to curb the Iranian nuclear program.  The agreement, which provides for a six-month first step towards a comprehensive solution for Iran’s nuclear program and related sanctions, is between Iran and the United States, the United Kingdom, Germany, France, Russia, and China, collectively referred to as “P5+1.” 

The limited sanctions relief will be sector-specific and reversible.  Additionally, for transactions within the authorized sectors, current U.S. law includes other U.S. sanctions against Iran that may remain unaffected and prevent most U.S. companies from dealing with Iran despite such relief.  Thus, U.S. companies will generally continue to require specific authorization from the U.S. government, i.e., the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) before engaging in transactions with Iran.

Which Iran Sanctions Were Suspended/Reduced?

Under this initial agreement with Iran, the U.S. and the other P5+1 countries committed to reduce temporarily certain sanctions against Iran in exchange for Iran taking specific measures to scale back, and allow monitoring of, its nuclear program.  Specifically, the U.S. agreed it will:

  • Pause increasingly restrictive U.S. sanctions on the sale of Iranian crude oil and authorize payment to Iran of certain oil revenue currently held abroad;
  • Suspend certain U.S. sanctions on Iran’s petrochemical exports, gold and precious metals industry, and auto sector;
  • Permit the supply and installation in Iran of safety-related spare parts for civil aviation;
  • Allow Iran to pay for food and agricultural products, medicine, medical devices and medical expenses using Iranian oil revenue frozen outside of Iran; and
  • Allow governmental tuition assistance to be transferred from restricted Iranian funds directly to recognized educational institutions in third countries to assist with tuition costs of Iranian students.

Services associated with the above sectors will also be permitted, such as provision of insurance or transportation.  The Obama administration will need to issue executive orders, general licenses and other measures to implement these changes under U.S. law.

What is the Impact of Sanctions Relief on U.S. Companies?

A number of factors will prevent the Iran sanctions relief from significantly changing the legal obligations of U.S. companies.  First, the Obama administration has stressed that the sanctions relief is only temporary and could be reversed during the next six months based on Iran’s actions in implementing its obligations under the deal.  If Iran does not meet its obligations in that period, the sanctions will be reinstated.

An additional complication is that Congress could resist these changes.  Some members of Congress have suggested that Congress should further tighten U.S. sanctions against Iran, despite the U.S. commitment in the deal to refrain from new nuclear-related sanctions.      

Further, the Obama administration has emphasized that existing “sanctions architecture” will remain in effect.  This means that most of the comprehensive Iran sanctions preventing U.S. companies from dealing with Iranian persons will remain in effect and continue to be “vigorously” enforced.  For example, the U.S. government has identified many persons on OFAC’s “Specially Designated Nationals List” (SDN List) with whom U.S. companies are not permitted to transact business.  Also, sanctions against major Iranian banks such as the Central Bank of Iran, among others, will remain in place, as well as sanctions on a broad range of financial services.

Finally, even within sectors where U.S. sanctions were reduced or suspended (e.g., civil aircraft spare parts, auto sector, etc.), U.S. companies may be restricted from engaging in certain transactions with Iran.  For example, the measures taken by the Obama administration to implement the agreement might require specific OFAC authorization to move forward with the export to Iran of safety-related spare parts for commercial aircraft.  Similarly, an otherwise authorized transaction might involve a company owned by an SDN, in which case the U.S. company would, in most cases, have to forego the opportunity in order to comply with U.S. law.  Thus, the scope of the sector-specific sanctions relief remains to be seen.

How Should U.S. Companies React to this Deal?

In general, U.S. companies should not engage in transactions with Iran, the government of Iran or individuals in Iran (or on the SDN List) unless specifically authorized by the U.S. government.  The sanctions relief outlined by the Obama administration over the weekend will not change this course of dealing.  In short, companies should consider a “wait-and-see” approach before changing current corporate compliance programs.  A clearer picture of the direction of sanctions relief is likely to emerge following the initial six-month phase of the agreement.

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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