On April 2, 2015, the P5+1 (China, France, Germany, Russia, the UK and the US) and Iran announced that they have reached an agreement on the framework for an envisaged Joint Comprehensive Plan of Action (JCPOA Framework) in relation to Iran’s nuclear programme.
Andrews Kurth Middle East has been closely monitoring and analysing the existing sanctions regime targeting Iran and the ongoing negotiations that resulted in the JCPOA Framework. This article summarises the key highlights of the JCPOA Framework and our commentary in relation to the same.
Iran’s key obligations, as proposed under the JCPOA Framework, can be grouped into the following five categories: first, a reduction in Iran’s enrichment facilities, infrastructure and stockpile; second, halting and conversion of the activities at Fordow; third, limited use of the centrifuges at Natanz; fourth, obligation of transparency and the International Atomic Energy Agency's (IAEA) ability to inspect Iran’s nuclear facilities and programme; and lastly, destruction and removal of Iran’s core reactor and redesign and rebuilding of a research reactor, all within a 10 to 15 year period.
In exchange for compliance with the aforementioned obligations, Iran would benefit from a phased relief of the existing sanctions regime. However, it appears that the US sanctions on Iran for terrorism, human rights abuses and ballistic missiles will remain in place. Furthermore, the JCPOA Framework contemplates a mechanism whereby sanctions may be reinstated on Iran in the event of non-performance.
Following the April 2 announcement, the US Treasury Department published a guidance relating to the JCPOA Framework. As set out therein, the following points are worth noting:
- the JCPOA Framework does not immediately relieve, suspend or terminate the existing sanctions regime targeting Iran. Rather, the only sanctions relief in force is the relief provided pursuant to the Joint Plan of Action (JPOA) reached on November 24, 2013 and extended through June 30, 2015;
- the JCPOA Framework provides a path for sanctions relief on Iran, provided Iran complies with its key nuclear commitments (as verified by the IAEA);
- as of today and until the contemplated Joint Comprehensive Plan of Action (JCPOA) is concluded, other than the sanctions relief provided under the JPOA, all US sanctions remain in place and will continue to be vigorously enforced; and
- the sanctions relief provided for under the JPOA remains in effect.
The 2015 JCPOA Framework is yet another step, following the 2013 JPOA, in what is shaping up to be a long journey towards a final and comprehensive relief of the existing Iranian sanctions regime. Conclusion of the anticipated JCPOA and the lifting or suspension of existing Iranian sanctions would undoubtedly have a significant impact on the risk analysis in relation to doing business in Iran. It is also likely that global oil prices would be affected as Iranian oil comes to market.
That said, as noted above, the JCPOA Framework does not immediately relieve, suspend or terminate the existing Iranian sanctions regime. Rather, existing scepticism (at least for certain stakeholders) on Iran’s full and ongoing compliance with its envisaged obligations, political opposition to the JCPOA Framework (most notably in the US) and ongoing regional conflicts involving Iran (whether real or perceived) creates a climate of uncertainty on a final and comprehensive relief of the existing Iranian sanctions regime. As such, for market participants looking to enter (or re-enter) the Iranian market, a “wait and see” approach continues to be the best advice for now.