Japanese companies may face major questions about Iran after June 2015. At that time, significant new opportunities could open in one of the world’s largest undeveloped economies and energy reserves, or the door could remain shut and more severe sanctions policies could impact existing business. It is important to plan ahead to ensure any activities are undertaken in compliance with sanctions requirements. Here is what you need to know.

The P5 + 1 countries and Iran have a self-imposed deadline to reach a framework for a final nuclear agreement by the end of March 2015. The negotiating period for the current interim nuclear accord expires on June 30, 2015. This marks a crucial pivot point:

  • If the efforts succeed, a deal is expected to include phased removal of many U.S., EU and UN sanctions on Iran, opening significant new business opportunities, including for Japanese companies.
  • If the talks fail, the temporary measures currently in place to relieve some Iran sanctions during the negotiations will end and new sanctions may be imposed by the United States. This likely would include targeting non-U.S. companies and banks that do business with Iran or deal in Iranian oil, gas and petrochemicals.

Thus, companies wishing to do business with Iran will need to prepare for both outcomes. It is likely that we will not know the outcome of negotiations until June (assuming the parties do not walk away from the table). These next three months offer a critical window to assess:

  1. Which business opportunities with Iran may be desirable for your company and what sanctions would need to change in order to pursue those opportunities? If a framework agreement is reached in March 2015, what preparatory activities might your business wish to undertake between March and June 2015? And if a final agreement with Iran is reached, what would be the plan for the rest of 2015 and thereafter? In looking at all of these questions, it will be important to keep in mind that U.S., EU and UN sanctions still remain in place, are enforced, and would only be removed in stages. It will be important for legal and compliance officers to coordinate closely with business units to ensure any planning, travel or activities related to Iran are conducted lawfully.
  2. What business does your company currently do in Iran, with Iranian parties, or with Iranian origin energy products? What would be the company’s legal exposure if the interim sanctions revisions are removed or new sanctions are introduced by the United States? Currently, the United States has sanctions in place which allow sanction designations against non-U.S. companies for engaging in certain energy, transport and other transactions or services with Iran. Transactions in U.S. dollars or involving U.S.-origin goods and technology can be prohibited for non-U.S. companies and their non-U.S. affiliates. The United States declared that it would not enforce some existing sanctions against non-U.S. companies in certain energy, energy transport and insurance, banking, precious metal, auto and aviation transactions during the negotiations with Iran. These temporary changes expire on June 30, 2015. The U.S. Congress has threatened additional sanctions targeting non-U.S. companies doing business with Iran if the talks fail. It will be important for companies involved in business with Iran to start planning now for any activities which they may need to change or stop following an unsuccessful end of talks and in the case of aggressive U.S. sanctions moves for Iran.

U.S. sanctions and policy attorneys from our Washington, DC office will be in Tokyo to conduct workshops with Japanese companies on Iran-related sanctions compliance in May 2015. Further details will be forthcoming.