On July 14, 2015, Iran, the United States, the United Kingdom, China, France, Russia, and Germany finalized a Joint Comprehensive Plan of Action (JCPOA) intended to restrict Iran’s nuclear activities in exchange for easing international sanctions against the country. While the text of the JCPOA provides a relatively detailed framework for the implementation of the agreement, several questions remain with respect to existing U.S. sanctions against Iran. Recent unofficial remarks from U.S. government officials provide some insight.
First, the JCPOA targets only nuclear-related sanctions. While the JCPOA will phase out nuclear-related sanctions, other sanctions will remain in full force. These include the arms embargo, sanctions targeting Iran’s nuclear and ballistic missile programs, and sanctions related to terrorism and human rights abuses.
Second, all current sanctions will remain in effect until “Implementation Day” — the day the International Atomic Energy Agency verifies that Iran has implemented certain nuclear-related obligations detailed in the JCPOA. Implementation Day is expected to occur in the first quarter of 2016.
Third, as of Implementation Day, the United States will lift the bulk of its secondary sanctions against Iran, i.e., sanctions directed toward non-U.S. persons. Once that occurs, non-U.S. persons will generally be allowed to conduct business with Iranian entities without being penalized by the U.S. government. Importantly, sanctions restricting the activities of U.S. persons, as well as entities owned or controlled by U.S. persons, will remain in effect.
In particular, the U.S. government has agreed to authorize foreign subsidiaries of U.S. companies to engage in business with Iranian entities. Sources have indicated that the authorization will take the form of a general license issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). However, information regarding the precise scope of such authorization has not yet been released.
Fourth, while most current restrictions on U.S. persons’ ability to do business with Iran will remain in place, the United States has undertaken to ease restrictions relating to certain transactions involving civil aircraft and parts, as well as imports into the United States of Iran-origin foodstuffs and carpets.
Finally, should Iran fail to meet its commitments under the JCPOA, the nuclear-related sanctions can “snap back” into force. In other words, sanctions lifted on or after Implementation Day could immediately be brought back into force, forcing U.S. and non-U.S. entities to cease relevant conduct. Sources have also indicated that contracts entered into during the period of eased sanctions will not be grandfathered, so that parties will likely be expected to wind down such contracts within a specified period.