Sanctions to Remain Unchanged Until Nuclear Milestones Achieved
On April 2, 2015, Iran and the United States, along with Russia, China, France, the UK, and Germany (the P5+1 countries) announced that they have reached an agreement on the key parameters for a Joint Comprehensive Plan of Action (JCPOA) regarding the Iran nuclear program in exchange for the termination of certain sanctions. The agreed parameters form the foundation for the final text of the JCPOA, which will be written between now and June 30, 2015.
Speaking from the White House, President Barack Obama said, “[t]his relief will be phased as Iran takes steps to adhere to the deal. If Iran violates the deal, sanctions can be snapped back into place,” he said. “Meanwhile, other American sanctions on Iran for its support of terrorism, its human rights abuses, its ballistic missile program, will continue to be fully enforced.” In terms of the parameters of the sanction relief, the White House released the following:
- Iran has agreed to a series of detailed commitments to reduce its nuclear programs, including:
- Reducing its uranium enrichment capacity;
- Converting its facility at Fordow so that it is no longer used to enrich uranium;
- Enriching uranium at the Natanz facility, but with only 5,060 IR-1 first-generation centrifuges for 10 years;
- Providing the International Atomic Energy Agency (IAEA) with regular access to all of Iran’s nuclear facilities; and
- Redesigning and rebuilding a heavy water research reactor in Arak, based on a design which will not produce weapons grade plutonium, and which will support peaceful nuclear research and radioisotope production.
- Iran will receive sanctions relief, if it verifiably abides by its commitments;
- US and EU nuclear-related sanctions will be suspended after the IAEA has verified that Iran has taken all of its key nuclear-related steps. If at any time Iran fails to fulfill its commitments, these sanctions will snap back into place;
- The architecture of US nuclear-related sanctions on Iran will be retained for much of the duration of the deal and allow for snap-back of sanctions in the event of significant non-performance;
- All past UN Security Council resolutions on the Iran nuclear issue will be lifted simultaneous with the completion, by Iran, of nuclear-related actions addressing all key concerns (enrichment, Fordow, Arak, PMD, and transparency);
- However, core provisions in the UN Security Council resolutions — those that deal with transfers of sensitive technologies and activities — will be re-established by a new UN Security Council resolution that will endorse the JCPOA and urge its full implementation. It will also create the procurement channel mentioned above, which will serve as a key transparency measure. Important restrictions on conventional arms and ballistic missiles, as well as provisions that allow for related cargo inspections and asset freezes, will also be incorporated by this new resolution;
- A dispute resolution process will be specified, which enables any JCPOA participant, to seek to resolve disagreements about the performance of JCPOA commitments;
- If an issue of significant non-performance cannot be resolved through that process, then all previous UN sanctions could be re-imposed; and
- US sanctions on Iran for terrorism, human rights abuses, and ballistic missiles will remain in place under the deal.
In consistent statements, on Thursday April 2, 2015, the US Department of State issued a Media Note containing the same sanction implications.
On April 3, 2015, the US Department of Treasury’s Office of Foreign Assets Control (OFAC) issued Guidance Relating to the April 2, 2015 Announcement of Parameters for a Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran’s Nuclear Program. The Guidance provided:
- The parameters announced on April 2, 2015 for a JCPOA by the P5+1 and Iran do not immediately relieve, suspend, or terminate any sanctions on Iran. 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 parameters announced on April 2, 2015 provide a path for sanctions on Iran to be suspended and eventually terminated in exchange for IAEA-verified implementation by Iran of its key nuclear commitments;
- As of today, and until a 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 reached on November 24, 2013 remains in effect, as described in published Guidance and Frequently Asked Questions.
What does this mean for your current business?
The temporary sanction relief reached on November 24, 2013 as part of the Joint Plan of Action continues until June 30, 2015. Businesses should ensure that all aspects of any potentially sanctionable transaction are concluded on or before June 30, 2015, including payment. For more information on the temporary sanction relief, please see our prior alerts “Iran Deal Potentially to Suspend Secondary Administrative Sanctions” and “Six-Month Iran Sanction Relief Continues — So Do Other Sanctions Against Iran with New Sanctions on ‘Foreign Sanctions Evaders.’”
What might a final deal mean for US companies?
From current accounts, it appears relatively little may change for US companies either immediately, or even after Iran reaches the nuclear milestones set forth above. As President Obama and the State Department have made clear that “U.S. sanctions on Iran for terrorism, human rights abuses, and ballistic missiles will remain in place under the deal,” key primary sanctions on US companies could remain in place. For example, under anti-terrorism controls, a substantial number of products, software, and technology on the Commerce Control List require a license to Iran. Likewise, under other laws, the US Department of Commerce’s Bureau of Industry and Security (BIS) is required to deny licenses for items controlled to Iran for national security or foreign policy reasons. Thus, even if Iran meets all milestones and the announced framework’s sanction relief is fully implemented, it may be possible that only EAR99 items (not on the Commerce Control List) will be allowed to be exported from the US to Iran without a license. This would be a substantial relaxation of US economic sanctions but not the end of strict export controls on US exports to Iran.
Given the lack of detail provided by the sanctions relief prongs of the framework, it appears that we will have to await the written agreement to know the precise scope and timing of the economic sanctions reduction.
We remind the reader that important implementation details are still subject to negotiation, and as the mantra of these negotiates states, “nothing is agreed until everything is agreed.” Although the April 2, 2015 agreement reflects a major step towards a new era of trade and business with Iran, the US laws relating to economic sanctions and exports controls on trade with Iran remain unchanged until written agreements are reached and implemented under US law.