Iran Speech Shifts Pressure to Congress, But Changes Little for U.S. Businesses

by Baker Donelson
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President Trump’s October 13 speech denounced Iran’s “fanatical regime” as a “menace,” and threatened to terminate the 2015 Iran nuclear deal negotiated by Barack Obama and formally known as the Joint Comprehensive Plan of Action (JCPOA). He accused the “rogue” Iranian government of financing terror organizations, imprisoning Americans and fomenting vicious civil wars.

While President Trump made his disapproval of both the nuclear deal and the Iranian government abundantly clear, he took no action to substantively alter the broad Iran sanctions currently in force or to re-impose the narrow subcategory of “secondary sanctions” temporary suspended under the JCPOA. In short, President Trump passed the buck to Congress while maintaining the status quo with respect to sanctions. For U.S. businesses, this means that not much has changed, and that participation in most activities and transactions involving Iran or Iranian entities is still prohibited. 

Under the Iranian Transactions and Sanctions Regulations (ITSR), which remained in full force with respect to U.S. businesses under the JCPOA and continue to apply today, U.S. companies (and U.S. individuals) are prohibited from doing business in or with Iran, Iranian entities, or entities listed on the Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals and Blocked Persons (SDN) List. The JCPOA only conditionally suspended a narrow category of nuclear-related “secondary sanctions” that apply to non-U.S. entities in Europe and elsewhere. (For more background on the JCPOA’s effect on U.S. sanctions regulations, see our earlier column here.) 

The President’s announcement that he would not recertify Iran’s continued compliance with the JCPOA, triggers a 60-day window for Congress to reimpose these “secondary sanctions.” A decision by Congress to reimpose the “secondary sanctions” while Iran is still complying with its JCPOA obligations would be a clear violation of the agreement, resulting in the U.S. effectively exiting the JCPOA.

While reimposition of the “secondary sanctions” would not directly affect the sanctions that currently apply to U.S. businesses and already prohibit most transactions involving Iran, the move is relevant to U.S. industry in that it would signal that the President and Congress are united in their disapproval of the 2015 deal and uninterested in pursuing the JCPOA as a means to resolve the Iranian nuclear crisis. While the other JCPOA participants may still decide to continue operating in accordance with the agreement, reimposition of the “secondary sanctions” will undoubtedly undo any diplomatic progress achieved under the JCPOA and render any easing of U.S. sanctions against Iran in the near future highly improbably.

The President also did add nine entities to OFAC’s SDN List. U.S. companies are prohibited from doing businesses with parties on the SDN List or parties owned or controlled by SDNs, and entities are added to and removed from the SDN List on a rolling basis. Therefore, the latest additions do not represent a departure from the Iran sanctions regime that already applies to U.S. businesses.

As the administration continues to update its sanctions policy to address threats from around the world, it is important to stay up to date on U.S.-Iranian relations moving forward.  Particularly, businesses should continue to screen existing and future potential business partners to ensure that they are not violating existing sanctions by unknowingly doing business with an SDN.  Given that some Members of Congress have already voiced opposition to the President’s rhetoric, Congressional action to reinstitute the “secondary sanctions” suspended in accordance with the JCPOA is no sure bet.

What Congress does will help us determine if we should expect more substantial changes in the future, so stay tuned.

 

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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