In January 2014, the P5+1 (China, France, Germany, Russia, the UK and the US) agreed a six month suspension of EU and US sanctions against Iran as part of the Geneva Joint Plan of Action (the "JPoA"). It was announced on 21 July 2014 that the JPoA will be extended until 24 November 2014 to allow negotiations between the P5+1 and Iran to continue.
Our previous briefing sets out the specific relaxations to the EU and US sanctions contained in the JPoA. In summary, the relaxations to the EU sanctions (which, as noted above will now remain in force for a further four months) include:
- A suspension of the prohibitions on transport of crude oil and petroleum products originating in Iran or being exported from Iran and on financing or financial assistance, insurance or re-insurance in relation to the purchase, import and transport of such products;
- A suspension of the prohibitions on the import, purchase, transport, financing and insurance of Iranian-origin petrochemical products;
- Suspension of the restrictions on trade in gold, diamonds and precious metals with the Iranian government;
- An additional licensing ground permitting the making available of funds to the Ministry of Petroleum in relation to the import or purchase of Iranian-origin petrochemical products; and
- Increased notification and authorisation thresholds for the transfer of funds to and from Iranian banks and Iranian persons.
The relaxations to the US sanctions regime (which continue in place) include the following:
- Dealings with certain Iranian persons and banks are permitted for the purpose of the export of petrochemical products to non-US persons;
- Non-US persons can engage in transactions for the sale, supply or transfer to Iran of goods or services to be used in connection with the automotive industry;
- Non-US persons can engage in transactions relating to the export of Iranian crude oil to China, India, Japan, the Republic of Korea, Taiwan and Turkey including associated insurance and transportation services; and
- Restrictions relating to the purchase or acquisition of gold and precious metals by Iran remain suspended,
(again, further detail can be found in our previous briefing).
The US Department of State has confirmed that Iran will be allowed access to $2.8 billion of its restricted assets, although it notes that Iran will not receive any more funds during the next four months than it did during the preceding six months, and that the vast majority of frozen oil funds will remain inaccessible. The Department of the Treasury and Department of State have issued guidance on the sanctions relief under the JPoA.
It is important to recognise that, notwithstanding the sanctions relief outlined above, a stringent sanctions regime remains in force, including a wide-ranging asset freeze. We therefore anticipate that EU companies and banks will continue to adopt a cautious approach to dealing with Iran. In the longer term, reports indicate that progress has been made during the previous six months of talks, but it remains to be seen whether the P5+1 can reach agreement with Iran on its nuclear enrichment programme and accordingly whether further sanctions relief will be agreed by November, when the four month extension will expire.