On July 18, 2017, the U.S. government imposed sanctions on 18 entities and individuals for supporting Iran's military, criminal organizations, and proliferation of weapons of mass destruction. Specifically, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) sanctioned 16 entities and individuals for supporting Iranian military procurement and the Islamic Revolutionary Guard Corps (IRGC). In addition, the U.S. Department of State sanctioned two Iranian entities for contributing to the proliferation of weapons of mass destruction via Iran's ballistic missile program. These designations indicate that the Trump administration continues to take a hard line on Iran and seeks new avenues to impose non-nuclear sanctions on Iran. At the same time, President Trump also certified to Congress that Iran remains in compliance with its obligations under the Joint Comprehensive Plan of Action (JCPOA). These combined developments indicate a two-pronged policy toward Iran -- formally maintaining the framework of the JCPOA, while putting pressure on Iran for its non-nuclear activities such as ballistic weapons development. However, this remains an unsettled area and companies doing business in Iran based should continue to be alert for potential changes in U.S. policy toward Iran.
OFAC designated seven entities and five individuals as Specially Designated Nationals (SDNs) for engaging in activities in support of Iran’s military, IRGC, or an Iran-based transnational criminal organization.1 In particular, the designated parties engaged in the development of unmanned aerial vehicles and military equipment for the IRGC, the production and maintenance of fast attack boats for the IRGC-Navy, or the procurement of electronic components for entities that support Iran’s military. OFAC also designated an organization and three related individuals or entities that orchestrated the theft of U.S. software programs for sale to the government of Iran. 2 It is notable that OFAC sanctioned parties in China and Turkey, in addition to Iran. These sanctions not only require U.S. persons to block an SDN’s assets and refrain from all transactions with an SDN, but also restrict non-U.S. persons from dealing with an SDN in certain circumstances.
Additionally, subsidiaries of U.S. companies doing business in Iran pursuant to OFAC’s General License H are not allowed to do business in Iran with SDNs. Additionally, the State Department designated two IRGC-related organizations that are responsible for research and development related to ballistic missiles.3 Because these new designations by OFAC and the State Department are not for nuclear activities, they are not forbidden by the JCPOA, which required the United States to lift its secondary sanctions (those affecting non-US purposes) imposed for nuclearrelated activities.
It is likely that these sanctions were timed to coincide with President Trump’s recertification of Iran’s compliance with the JCPOA. The Iran Nuclear Agreement Review Act requires the President to recertify to Congress every 90 days that Iran is in compliance with its obligations under the JCPOA. It was speculated that President Trump may not recertify Iranian compliance with the JCPOA, as the previous recertification also stated that President Trump had directed a review of the JCPOA. That review is still underway. Despite previous statements to the contrary, President Trump has thus far respected the JCPOA framework, although he has expressed strong disapproval of Iran’s conduct in the region.
These actions come at a time of uncertainty surrounding U.S. sanctions policy, particularly relating to Iran. The Senate’s Countering Iran’s Destabilizing Activities Act of 2017 (S. 722) passed with broad bipartisan support. It would impose several new sanctions on Iran, most notably designating the IRGC as both an SDN and a Foreign Terrorist Organization (FTO). U.S. secondary sanctions relating to non-U.S. persons dealing with FTOs are much broader than those relating to non-U.S. persons dealing with SDNs. If this bill becomes law, the U.S. could impose criminal penalties on any person worldwide who provided “material support” to the IRGC. The bill – which also imposes sanctions against Russia – is currently stalled in the House and faces an uncertain future before both Congress and the President.
The Trump administration continues to pursue a dual-track approach to Iran sanctions. Although the JCPOA remains in force, the Trump administration is taking an aggressive stance toward Iran on nonnuclear issues. The State Department makes this approach clear in its press release:
The Administration is continuing to conduct a full review of U.S. policy toward Iran. During the course of this review, the United States will continue to aggressively counter Iran’s malign activities in the region. While the review is ongoing, the United States will also continue to expect strict Iranian adherence to Iran’s nuclear commitments under the JCPOA and . . . the United States will continue to comply with its commitments under the JCPOA. . . . We also note Iran’s continued malign activities outside the nuclear issue undermine the positive contributions to regional and international peace and security that the deal was supposed to provide. The United States will continue to use sanctions to target those who lend support to Iran’s destabilizing behavior and above all, the United States will never allow the regime in Iran to acquire a nuclear weapon.
Companies doing business with Iran should continue to monitor developments in U.S. sanctions policy. Additional designations or legislation may affect the Iran-related activities of both U.S. and non-U.S. companies. In particular, they should ensure that any transactions and agreements account for the possibility of a U.S. sanctions “snap back” or additional U.S. sanctions on Iran.