On July 19, 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. Pursuant to this agreement, the United States and the European Union extended the limited economic sanctions relief that they had provided under the JPOA through November 24, 2014.
Extension of US Sanctions Relief
As we have previously advised, pursuant to the JPOA, the United States relaxed certain economic sanctions against Iran for a period to run from January 20, 2014 through July 20, 2014. The limited sanctions relief 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. Crucially, 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.
In order to continue the negotiations regarding Iran’s nuclear program, the P5+1 countries and Iran have agreed to extend the JPOA, and therefore the US government has extended the temporary sanctions relief through November 24, 2014. The United States implemented the extension of relief through the publication on July 21, 2014 of guidance and Frequently Asked Questions issued by the US Department of Treasury, Office of Foreign Assets Control (OFAC), as well as an Amended Statement of Licensing Policy regarding safety-related activities in support of Iran’s civil aviation industry. With one exception related to insurance payments discussed below, OFAC has extended the sanctions relief through November 24, 2014 without any change. The temporary suspension of sanctions now applies to activities (including payments) that are “initiated and completed entirely” between January 20, 2014 and November 24, 2014 (the JPOA Period), but not to activities undertaken before or after the JPOA Period.
Regarding insurance payments for certain claims made after the JPOA Period, OFAC now has provided definitive guidance that payments for claims arising from incidents that occur during the JPOA Period can be made after November 24, 2014, provided that the underlying transactions and activities are authorized under the JPOA and occur during the JPOA Period. OFAC previously had encouraged insurers to consult with OFAC as to whether such payments after the JPOA Period were authorized.
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 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.
On July 21, 2014, the European Union extended the suspension of prohibitions through November 24, 2014 by adopting Council Decision 2014/480/CFSP, which amended Council Decision 2010/413/CFSP concerning restrictive measures against Iran. The European Union extended the suspension of prohibitions without any change so that the same activities or transactions would continue to be authorized through November 24, 2014, as long as they are “executed” (i.e., initiated and completed) between January 20, 2014 and November 24, 2014.
The relaxation of sanctions pursuant to the JPOA appears likely to remain in effect through November 24, 2014, although the United States continues to emphasize (including in the OFAC guidance described above) that such relief is “reversible.” It is not clear whether the P5+ 1 countries and Iran will reach a final agreement by November 24, 2014—a development that could have a far-ranging impact on US and EU sanctions against Iran—or if they will agree to extend the agreement again or terminate negotiations altogether (which could lead to the relief being rolled back). The situation remains fluid and difficult to predict, as it is subject to complex diplomatic considerations.