On November 24, 2014, Iran and the “P5+1” countries (consisting of the United States, the United Kingdom, France, China, Russia, and Germany) extended by mutual consent the Joint Plan of Action (JPOA) agreement reached on November 24, 2013.  This marks the second time the JPOA has been extended, with the first extension taking place on July 19, 2014.  Pursuant to the most recent extension, the limited economic sanctions relief provided under the JPOA will remain in effect through June 30, 2015.

Extension of US Sanctions Relief

As we have previously advised, pursuant to the JPOA, the United States relaxed certain economic sanctions against Iran related to Iran’s export of petrochemical products; Iran’s auto industry; Iran’s purchase and sale of gold and other precious metals; the supply to Iran of spare parts in support of the safe operation of Iran’s civil aircraft; Iran’s export of crude oil to certain countries; and import of humanitarian goods into Iran as well as payment of medical expenses incurred by Iranians abroad.  The United States also authorized “associated services,” including any insurance, transportation, or financial services typically incident to the underlying activity that was authorized.  The relief was limited to these activities, and, with the exception of aviation safety provisions, did not apply to US persons or US-owned or -controlled companies located abroad.  The relief only applied to activities that were “initiated and completed entirely” within the six-month period from January 20, 2014 through July 20, 2014; this period later was extended to run through November 24, 2014, as we have previously advised.

In order to continue the negotiations regarding Iran’s nuclear program, the P5+1 countries and Iran again have agreed to extend the JPOA, and therefore the US government has extended the temporary sanctions relief through June 30, 2015.  The US Department of Treasury, Office of Foreign Assets Control (OFAC) has implemented this extension through the publication of of guidanceFrequently Asked Questions (FAQ), and a Second Amended Statement of Licensing Policy regarding safety-related activities in support of Iran’s civil aviation industry.  The temporary suspension of sanctions now applies to activities (including payments) that are “initiated and completed entirely” between January 20, 2014 and June 30, 2015 (the JPOA Period), but not to activities undertaken before or after the JPOA Period.  The terms of the suspension remain unchanged from those set out in OFAC’s guidance and FAQ of July 21, 2014.

The OFAC guidance makes clear that insurance payments for claims arising from incidents that occur during the JPOA Period can be made after June 30, 2015, provided that the underlying transactions and activities are authorized under the JPOA and occur during the JPOA Period.  This is in accord with the guidance that OFAC issued in July 2014.

Extension of EU Sanctions Relief

As we have previously advised, on January 20, 2014 the European Union, pursuant to the JPOA, suspended the prohibitions of: (i) the provision of insurance, reinsurance, and transport of Iranian crude oil; (ii) the import, purchase, or transport of Iranian petrochemical products and the provision of related services; and (iii) the trade in gold and precious metals.  The European Union also increased the authorization thresholds in relation to the transfers of funds to and from Iran.  The suspension initially was for a period of six months from January 20, 2014 through July 20, 2014, “during which the contracts would have to be executed,” which meant that any activity would need to be initiated and completed during the six-month period.  This period later was extended to run through November 24, 2014, as we have previously advised.

On November 25, 2014, the European Union extended the suspension of prohibitions through June 30, 2015 by adopting Council Decision 2014/829/CFSP.  The European Union extended the suspension of prohibitions without any change so that the same activities or transactions would continue to be authorized as long as they are “executed” (i.e., initiated and completed) between January 20, 2014 and June 30, 2015.

Conclusion

The relaxation of sanctions pursuant to the JPOA is likely to remain in effect through June 30, 2015, although the United States maintains that such relief can be reversed if Iran does not abide by the terms of the JPOA.

It is not clear whether the P5+ 1 countries and Iran will reach a final agreement by June 30, 2015, and the terms of such a final agreement similarly remain unclear.  Despite earlier indications that the parties were close to agreement as the November 24, 2014 deadline approached, the P5+1 countries and Iran ultimately acknowledged that large gaps in the negotiations remained.  Neither the United States nor the European Union has provided any firm indication as to the extent of sanctions relief that would be provided in a final agreement.  Overall, the situation remains difficult to predict. 

Finally, it is important to note that the United States and European Union will continue to enforce existing restrictions not affected by the JPOA.  The United States in particular has emphasized this point.