On 24 November 2014, the P5+1 countries (China, France, Germany, the Russian Federation, the United Kingdom, and the United States) agreed with Iran to continue negotiations regarding Iran’s nuclear-related activities and to extend the Joint Plan of Action (JPOA) that suspended a limited number of economic sanctions against Iran. The JPOA originally went into effect for a six-month period beginning 20 January 2014, and was initially scheduled to expire 20 July 2014. The JPOA commitments were extended until 24 November 2014, but the parties have not yet reached a final agreement. The parties have agreed to extend the negotiations until 1 July 2015, with the expectation that a consensus on terms should be reached by 1 March 2015. The parties expect to reconvene discussions in December 2014.
As with prior JPOA measures, there is no material advantage to U.S. companies and any non-U.S. entities owned or controlled by them (including non-U.S. subsidiaries and 50/50 joint ventures) because they remain subject to the full scope of primary U.S. sanctions that prohibit virtually all dealings with Iran and those sanctions remain fully in force (they have not been suspended).
With respect to how the limited sanctions relief under the JPOA for some non-U.S. companies related to certain sectors (e.g., certain automotive and precious metals transactions) will continue in effect under the new extended time frame, the U.S. government has not yet formally provided/updated guidance on these points. U.S. Secretary of State John Kerry’s comments regarding the extension of the JPOA are available here. The European Union has released a formal statement regarding the extension, available here.
Meanwhile, the manner in which the U.S. Congress responds to this new extension will be critical. Many members of Congress, both Republican and Democratic, have threatened to enact new economic sanctions against Iran, even as the negotiations proceeded. To this point, Sen. Harry Reid (D-NV), the Democratic Majority Leader of the Senate, has prevented those bills from getting a vote in the Senate, effectively blocking the legislation. In January 2015, the newly elected Republican majority in the Senate will take office, weakening the ability of Reid and other Democrats supportive of President Obama’s efforts to block new legislation. The Congress beginning in January will be controlled by Republicans in both the Senate and House, and will likely be far more willing to move legislation. Legislative action during the current “lame duck” session of Congress (ending in December) is possible, but less likely, as the Democrats still control the Senate majority during this transition period.
The shape and fate of new sanctions legislation is not yet clear, but there is a real threat that legislation could be enacted. Two leading opponents of the president’s policies, Sen. Mark Kirk (R-IL) and Sen. Robert Menendez (D-NJ), had introduced legislation that would impose new sanctions on Iran if the parties failed to reach an agreement by the November deadline. That legislation did not advance, but such an approach could be applied to the new 2015 deadline. Other variants are possible. Since this is the second extension of the negotiations, opponents of the president would argue Iran is just stalling and that new sanctions are necessary to prod the negotiations or to establish a post-negotiations sanctions regime. Many Democrats might have trouble opposing this legislation, raising the prospect that the bill could pass with the two-thirds majority required in both the House and Senate to overcome a presidential veto. All of this will be played out over the next several months, but the threat of new sanctions legislation being enacted is real.