Last week, Trump announced that he would not certify Iran’s compliance with the Nuclear Deal. Domestic U.S. legislation (the Iran Nuclear Agreement Act of 2015) requires the President to certify Iran’s compliance with the terms of the deal every 90 days. The President could, however, sign an Executive Order at any time resuming the sanctions suspended pursuant to the agreement. In other words, if Trump truly wanted to terminate the agreement with Iran, he could do so unilaterally at his discretion. There are no constraints to his abandoning the agreement.
No Immediate Effect
Trump’s October 13 announcement does not represent an immediate change to the U.S. sanctions targeting Iran. His non-certification does not terminate the agreement, and the secondary sanctions targeting Iran remain suspended. Congress will ultimately decide if the United States resumes its suspended sanctions and will expedite consideration of any legislation to reinstate the sanctions if such bills are proposed within 60 days of October 13.
The previous administration indicated that if Congress were to “snap back” the sanctions, it would grant a 180-day wind-down period to allow non-U.S. companies to end trade with Iran that was made permissible under the agreement. This prospective statement of policy is not binding on the current administration. Therefore, non-U.S. companies should closely monitor developments and not assume that the U.S. government will grant a six-month period to allow for disengagement with Iran.
European Council Reaction
In response to Trump’s announcement, the European Union released a statement reasserting its commitment to the Nuclear Deal. The European Council explicitly stated “that the International Atomic Energy Agency has verified 8 times that Iran is implementing all its nuclear related commitments following a comprehensive and strict monitoring system.” The Council also expressed its disagreement with Trump inserting Iran’s missile development and destabilizing activities as implied terms of the agreement.
In 1996, the EU passed a so-called “blocking statute” (Council Regulation (EC) No 2271/96) prohibiting European compliance with certain U.S. sanctions that conflict with domestic EU law. The EU would likely enact a similar regulation to limit the extraterritorial reach of U.S. secondary sanctions if the United States abandoned the agreement. Such a regulation would not inoculate non-U.S. companies from potential civil monetary penalties. The Office of Foreign Assets Control (OFAC) would, however, consider this conflict of law in determining the appropriate enforcement response and/or the amount of any civil monetary penalty.
Terrorism Designation of the Islamic Revolutionary Guard Corps
OFAC designated the Islamic Revolutionary Guard Corps (IRGC) under its counterterrorism authority concurrently with Trump’s de-certification announcement. The United States had not previously designated the entire IRGC under a counterterrorism authority. In 2007, the United States listed a branch of the IRGC (the Qods Force) as a supporter of various terrorist organizations.
Section 105 of the Countering America’s Adversaries Through Sanctions Act directs the President to designate the IRGC pursuant to Executive Order 13224. The terrorism designation of the entire IRGC organization simply complies with this Congressional mandate.
The counterterrorism designation triggers significantly increased financial intelligence collection by the United States. The United States government now has access to all SWIFT payment messages sent on behalf of any entity associated with the IRGC, pursuant to the Terrorist Finance Tracking Program (TFTP). This financial intelligence will provide Treasury significant investigative leads into IRGC-controlled sectors of the Iranian economy, including transportation, manufacturing, and construction. These leads will become designations and enforcement actions in the coming months.
We will continue to follow changes in the Iran sanctions program and publish updates as new developments arise.