Although American entities involved with trade of IT technology should do their due diligence on their partners, especially international partners, for compliance with the U.S. and the E.U. sanctions against Iran, they should closely follow recent developments that may change the situation.

Since the beginning of the year, President has signed several Executive Orders that impose further sanctions against companies who directly or indirectly do business with Iran, especially companies involved with IT technology. However, the Administration itself is engaged in negotiations with Iran. Russia has taken the initiative to broker a deal between the U.S. and Iran whereby in exchange for concessions on its nuclear program, U.S. will lift some of the sanctions and even contemplate normalizing the relationship between the two countries. It is reported that Wendy Sherman, the third ranking official and senior career diplomat at the Department of State, heads the U.S. delegation. The first meeting took place in March in Istanbul, and the second meeting took place on May 23in Bagdad. They are scheduled to meet again.

In Bagdad, Iran indicated its willingness to make certain concessions but the U.S. delegate did not offer simultaneous steps of equal value. The President is cautious about reaching a solution too fast lest he is deemed weak in the eyes of the voters. Further, he needs time to convince the Israeli lobby to support his policy of reaching an acceptable agreement with Iran.

In an election year, it is not surprising that the President is attempting to reach Iran. He wants to stabilize the region to prevent further increases in oil prices, to reduce the Administration’s expenditures in the region and to reduce regional and global tensions. Sarkozy’s loss was a good indicator that global financial markets cannot sustain endless wars in a rich and lucrative region that controls the world’s largest and best quality oil resources and has a substantial buying power. Sarkozy was a hawkish supporter of military solutions against Iran.

Now the question is why the negotiations have not reached a climax at this point. The U.S. is adapting a multiphase negotiation tactic with Iran, which means they want to give the sanctions enough time hoping they could subdue Iran's economy even harder, so that Iran will be willing to make more concessions in successive steps.

Despite a lack of obvious progress partly due to Israeli security concerns, the U.S. and Iran are converging and eventually will principally agree on the following:

  • Iran will be allowed to enrich uranium up to certain level (5%);
  • Fordow enrichment facility will not be dismantled;
  • The already stockpile of 20% enriched uranium will be exchanged;
  • Additional Protocol will be ratified by Iran;
  • The oil price will be reduced and stabilized; and
  • Some or maybe all of the sanctions will be lifted.

Currently, Japanese and 10 EU countries, including, England, France, German, Belgium, and the Netherlands, who buy oil from Iran have obtained an exempt status from these sanctions arguing that they face extraordinary challenges and high cost of modifying their refineries to deal with a lesser quality oil than Iran’s. The exemptions legally enable entities from these countries to carry out their trade with Iran. Last week, the Bank of Tokyo Mitsubishi released $2.6 billion which it had frozen in 1983.