- The secretary of state and the secretary of the treasury will immediately take steps to re-impose all U.S. sanctions lifted or waived in connection with the nuclear deal.
- The United States will begin the process of implementing 90-day and 180-day wind-down periods for activities involving Iran that were consistent with the U.S. sanctions relief specified in the nuclear deal.
- The withdrawal of the United States from the Iran nuclear deal occurs despite the urging of world leaders for the United States to stay in the deal.
On May 8, 2018, President Trump signed a Presidential Memorandum officially withdrawing the United States from the Joint Comprehensive Plan of Action (JCPOA, informally known as the Iran nuclear deal) that was entered into in 2015 by Iran, the United States, China, France, Germany, Russia and the United Kingdom. The JCPOA was negotiated in an effort to ensure that Iran’s nuclear program would be used exclusively for non-military, peaceful means. On January 16, 2016, the JCPOA was formally implemented and certain trade and economic sanctions against Iran were relaxed by the other parties to the deal. For additional background and historical information on the negotiations and implementation of the JCPOA, see Thompson Hine International Trade Updates dated July 15, 2015, October 20, 2015 and January 22, 2016.
From its inception, the Iran nuclear deal has had its share of proponents and critics, and was a hot-button issue during the 2016 presidential election. During the campaign, and since, President Trump repeatedly stated that the deal was “one of the worst and most one-sided transactions the United States has ever entered into.” In his remarks on the withdrawal, President Trump stated that the JCPOA was “defective at its core” since it would not prevent Iran from ultimately developing a nuclear bomb. He argued that the sunset provisions of the deal and the onsite inspection provisions were clearly inadequate, and at the time when the United States had “maximum leverage,” it entered into a deal that gave Iran, a “leading state sponsor of terrorism,” billions of dollars. The withdrawal comes as no great surprise as President Trump had previously made clear that he was reluctantly continuing to waive nuclear-related sanctions on Iran and in January 2018 had set forth conditions for either fixing the agreement or ultimately withdrawing.
The Presidential Memorandum states that it is now the policy of the United states that “Iran be denied a nuclear weapon and intercontinental ballistic missiles; that Iran’s network and campaign of regional aggression be neutralized; to disrupt, degrade, or deny the Islamic Revolutionary Guards Corps and its surrogates access to the resources that sustain their destabilizing activities; and to counter Iran’s aggressive development of missiles and other asymmetric and conventional weapons capabilities.” In establishing this policy, the president directed the secretary of state and the secretary of the treasury to take immediate steps to re-impose all United States sanctions lifted or waived in connection with the JCPOA. President Trump also indicated that the secretary of defense must “prepare to meet, swiftly and decisively, all possible modes of Iranian aggression against the United States, our allies, and our partners.” The White House issued a Fact Sheet that provides further information on the goals and aims of this policy, including that the Iranian regime must:
- Never develop a nuclear weapon;
- Never have an intercontinental ballistic missile (ICBM) and cease proliferating ballistic missiles;
- Cease its support for international terrorism;
- Cease escalating and supporting the conflict in Yemen; and
- End cyber-attacks against the United States and its allies.
On May 21, 2018, Secretary of State Mike Pompeo spoke about the new Iran strategy to be executed outside of the JCPOA. The United States will apply “unprecedented” financial pressure on Iran; work closely with allies to deter Iranian aggression; and “advocate tirelessly for the Iranian people.” Secretary Pompeo stated that the United States is “open to new steps with not only our allies and partners, but with Iran as well. But only if Iran is willing to make major changes.” In his speech, the secretary provided a lengthy list of U.S. demands from Iran.
Re-Imposition of Iranian Sanctions
With the withdrawal from the Iran nuclear deal, the United States will begin the process of implementing 90-day and 180-day wind-down periods for activities involving Iran that were consistent with the U.S. sanctions relief specified in the JCPOA. The Department of the Treasury’s Office of Foreign Assets Control (OFAC) will begin the process of revoking, or amending, as appropriate, general and specific licenses issued in connection with the JCPOA. It will also issue new authorizations to allow the wind down of transactions and activities that were authorized pursuant to the revoked or amended general and specific licenses. At the end of the 90-day (August 6, 2018) and 180-day (November 4, 2018) wind-down periods, the applicable U.S. sanctions against Iran will come back into full effect. OFAC made clear that all aspects of any transaction must be complete prior to the wind-down deadlines, including delivery of products. However, in limited circumstances, OFAC has noted that it will allow receipt of payment after the end of the wind-down period for previously completed transactions.
90-Day Wind-Down Period
Beginning on August 6, 2018, OFAC will re-impose the following Iranian sanctions:
- Sanctions on the purchase or acquisition of U.S. dollar banknotes by the government of Iran;
- Sanctions on Iran’s trade in gold or precious metals;
- Sanctions on the direct or indirect sale, supply, or transfer to or from Iran of graphite, raw, or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes;
- Sanctions on significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds or accounts outside the territory of Iran denominated in the Iranian rial;
- Sanctions on the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt; and
- Sanctions on Iran’s automotive sector.
Under the terms of the JCPOA, U.S. persons remained prohibited from engaging in the many activities covered under the re-imposed sanctions. However, the JCPOA included a commitment by the United States to lift a range of “secondary sanctions” that were generally directed towards non-U.S. companies for certain activities and transactions involving Iran even though occurring entirely outside of the jurisdiction of the United States. Withdrawal from the JCPOA will result in the re-imposition of secondary sanctions. Thus, non-U.S. persons engaged in activities subject to the above listed sanctions that do not wind down any business activities with Iran will risk running afoul of U.S. sanctions and potentially impact their ability to do business in and with the United States.
In addition, as of August 6, 2018, the United States will revoke the following JCPOA-related authorizations:
- The importation into the United States of Iranian-origin carpets and foodstuffs and certain related financial transactions;
- Activities undertaken pursuant to specific licenses issued in connection with the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services (SLP) (OFAC has noted that upon rescinding the SLP, and thus, negating any existing approved licenses or any pending license applications, it will still consider license applications under the narrow provisions of “safety of flight” regulations); and
- Activities undertaken pursuant to General License I which authorized U.S. persons to enter into, and to engage in transactions that are ordinarily incident to the negotiation of and entry into, contingent contracts for activities eligible for authorization under the SLP.
With the re-issuance of these “primary” sanctions, business activities that U.S. person and companies, mainly in the commercial passenger aircraft sector, had in Iran or with Iranian companies under the JCPOA will be further limited.
180-Day Wind-Down Period
Beginning on November 4, 2018, OFAC will re-impose the following Iranian sanctions:
- Sanctions on Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines, South Shipping Line Iran, or their affiliates;
- Sanctions on petroleum-related transactions with, among others, the National Iranian Oil Company, Naftiran Intertrade Company, and National Iranian Tanker Company, including the purchase of petroleum, petroleum products, or petrochemical products from Iran;
- Sanctions on transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions;
- Sanctions on the provision of specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions;
- Sanctions on the provision of underwriting services, insurance, or reinsurance; and
- Sanctions on Iran’s energy sector.
In addition, the U.S. government will revoke the authorization for U.S.-owned or -controlled foreign subsidiaries to wind down certain activities with the government of Iran or persons subject to the jurisdiction of the government of Iran that were previously authorized pursuant to General License H. This general license allowed U.S.-owned or -controlled foreign companies or subsidiaries to engage in certain limited business activities with Iranian entities so long as certain conditions were met and no U.S. persons or U.S.-origin goods were involved in the transactions.
Furthermore, no later than November 5, 2018, OFAC will re‑impose, as appropriate, the sanctions that applied to persons that had been removed under the terms of the JCPOA from the Specially Designated Nationals and Blocked Persons (SDN) List and/or other lists maintained by the U.S. government. Such persons/entities will include those meeting the definition of “Government of Iran” or “Iranian financial institution.” It is anticipated that over 400 Iranian persons and entities will be placed back on the SDN List.
Prior to August 6, 2018, or November 4, 2018, as applicable, persons engaging in activity consistent with the U.S. sanctions relief allowed under the JCPOA must take steps to wind down operations by these dates to avoid exposure to OFAC sanctions. When considering a potential enforcement or sanctions action with respect to any activities engaged in after these dates, OFAC has made clear that it will evaluate efforts and steps taken to wind down activities and will assess whether any new business was entered into involving Iran during the wind-down period.
International Response to the U.S. Withdrawal
Prior to the May 8, 2018 announcement, European leaders urged President Trump not to withdraw from the Iran nuclear deal. French President Emmanuel Macron, German Chancellor Angela Merkel and British Foreign Secretary Boris Johnson each visited with the president and acknowledged the JCPOA had flaws but could be improved. They suggested potential new sanctions for Iran’s continued ballistic missile development and armed support for the Syrian regime. In the aftermath of the announced withdrawal, and the issuance of a Joint Statement, these European countries have reiterated and recommitted to remaining in the deal. Currently, they state there will be no re-imposition of European Union, United Nations, or other non-U.S. sanctions against Iran. However, the ability of non‑U.S. companies and persons – especially those in Europe – to continue to do business in Iran without running afoul of U.S. sanctions could present a significant risk. While still too early to determine the final outcome, it is possible that the European Union could implement “Blocking Regulations,” which would prohibit European companies from complying with U.S. sanctions against Iran.
Iranian leaders have vacillated since the announced withdrawal. The Iranian government has officially stated that none of the provisions of the JCPOA “are negotiable in any manner” and that it will seek guarantees from the other parties to the deal. Mohammad Javad Zarif, Iran’s foreign minister, said Iran will likely leave the deal and may resume its nuclear program if the entire agreement collapses. Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei and President Hassan Rouhani have indicated that Iran will remain a party to the JCPOA while discussions with China, Russia, France, Germany and the United Kingdom remain ongoing as to how the parties might proceed absent the United States.