The Iran Nuclear Agreement provides certain opportunities for U.S. firms, but these are not as significant as many U.S. business executives had hoped.  The following are highlights of the most important provisions of the Iran Nuclear Agreement and their impact on U.S. firms.

• The Joint Comprehensive Plan of Action signed on July 14, 2015 (the “Agreement”) sets forth the process for Iran to limit its nuclear program in exchange for “phased relief” from international trade and economic sanctions.
• Under the Agreement, Iran has committed to significantly curtail its nuclear program including reducing stockpiles of uranium, curbing uranium-enrichment activities, converting reactors and related actions.  The commitments extend over ten to fifteen year periods depending upon the specific action covered.
• For sanctions relief to commence, Iran must first meet a series of requirements regarding commencement of its obligations under the Agreement, to be verified by the International Atomic Energy Agency, which is expected to take at least six months.  In addition, Congress has the opportunity to review the Agreement - Congress has 60 days from the date the Agreement is submitted by the State Department to pass a resolution of disapproval to prevent final U.S. implementation.
• Under the proposed sanctions relief, certain of the myriad of layers of Iran sanctions will be lifted, but others will continue.  In analyzing the sanctions relief, it is important to recognize that multiple layers of Iran sanctions have been implemented over the years by the United Nations, the European Union and the United States.  Many of these will be lifted under the Agreement, but some will continue - many of the “primary” U.S. sanctions will continue in effect.
• If Iran meets its initial obligations during the initial implementation phase, it is expected that United Nations Security Council sanctions and European Union nuclear sanctions will be lifted.  In addition, “secondary” U.S. sanctions will also be lifted.  “Secondary” U.S. sanctions are generally those U.S. sanctions targeted against foreign parties rather than those that apply to U.S. persons.  As part of this process, $50-$100 billion of funds from payments for Iranian crude oil will be released from foreign banks and paid to Iran.
• Of most importance to U.S. companies, the “primary” U.S. sanctions against Iran will most likely not be lifted and are expected to continue for an indefinite period.  The primary U.S. sanctions are generally the current restrictions preventing “U.S. persons” from engaging in business transactions with Iran or Iranian parties, including exports, imports, investment and dealings in Iranian assets as set forth in OFAC’s Iran Transactions and Sanctions Regulations at 31 CFR Part 560.  These are generally the prohibitions that existed under U.S. law prior to 2010.  Thus U.S. firms will continue to be barred from engaging in most business transactions with Iran, with certain important exceptions discussed below.
• Notwithstanding the continuation of the direct U.S. sanctions, under Annex II Section 5 of the Agreement the U.S. has agreed to provide licenses that will permit the foreign subsidiaries of U.S. companies to engage in business in Iran and with Iranian parties.  Consequently while “U.S. persons” will not be permitted to engage in such activities directly, they will be able to own and control foreign-incorporated entities that will be, subject to licensing and other requirements by OFAC.  It is not yet clear if this will be pursuant to general licenses (i.e., an authorization that will apply automatically without specific application) or specific licenses (requiring an application and the issuance of a specific approval).  In addition, there may be other restrictions that OFAC imposes on such activities as well.  For example, individuals who are U.S. citizens will most likely not be permitted to be involved in activities of the foreign subsidiaries that are engaged in Iranian business activities.  We expect that OFAC will issue regulations addressing this requirement in the coming months.  Consequently, this provision may offer U.S. companies a significant opportunity to participate in Iranian business activities within a very short time period, albeit on an indirect basis through their foreign subsidiaries.  It should be noted, however, that the sanctions relief described above has not yet become effective, and companies are advised to carefully review any requirements promulgated by OFAC and the Bureau of Industry and Security prior to taking any actions.
• The Agreement also provides that U.S. persons will be permitted to engage in certain other business activities with Iran, including the sale of commercial passenger aircraft, spare parts, components and related services, and the import of Iranian-origin carpets and foodstuffs “including pistachios and caviar.”  In addition, under the current Iran sanctions program, U.S. persons are also presently permitted to engage in certain activities with Iran involving the commercial sale of agricultural commodities, medicines, medical supplies and medical devices, subject to licenses and certain other conditions, and it is expected that these provisions will continue.
   

As discussed, the changes to the sanctions programs described above have not yet become effective and may be subject to numerous conditions before entering into force – companies are cautioned not to proceed in engaging in activities until such activities have been authorized. 

We will continue to monitor these developments as they unfold over the next few months.