On November 24, 2013, Iran and the United States, along with Russia, China, France, and the UK, announced a six-month interim deal that temporarily curbs Iran’s nuclear program in exchange for limited sanction relief.
The aim of the accord is to give the international players time to pursue a more comprehensive agreement. In the interim, the following changes will take place:
- Return of Iranian oil sale assets worth $4.2 billion (frozen in foreign banks)
- US providing $6 to $7 billion in sanction relief, which includes the $4.2 billion in frozen oil assets
- Potential effects on current Iranian sanctions (see description below)
It should be noted that the sanctions being lifted appear to be largely secondary in nature. In other words, their lifting will allow non-US companies to engage in trade with Iran without the immediate risk of US sanctions (at least for the next six months). The sole exceptions to this rule appear to be the authorization for export of replacement parts for civil aircraft and the establishment of a financial channel for humanitarian exports. While the former may help a few aircraft parts exporters, the latter could be of substantial assistance to a wide variety of companies desirous of exporting medicine, medical devices, and agricultural products to Iran, but who, due to the secondary financial sanctions, were having a very difficult time being paid for their legal exports.
In any event, no commercial action should be taken until the US and other governments announce precisely how, legally, they intend to implement this deal. Even after more details are forthcoming, companies who could benefit would be well-advised to move very cautiously before entering any new transaction. The US Congress is considering additional Iran sanctions that would be imposed at the end of the six-month interim period if the deal does not work as desired.
The sanctions that would be lifted as a result of the interim accord and the potential relevant legal provisions are as follows:
Iran’s Crude Oil:
- All parties to pause efforts for further sanctions on Iranian crude oil.
- US and EU lift sanctions associated with insurance and transportation services relating to oil sales.
- Potential1 Relevant US Sanctions: Iranian Threat Reduction and Syrian Human Rights Act (“ITRSHRA”) Section 202, expanding Section 5(a)(7) and (8) of the Iran Sanctions Act of 1996, 50 U.S.C. § 1701 note).
Gold and Precious Metals:
- US and EU to suspend sanctions on gold and precious metals trade with Iran, as well as associated services.
- The key potential beneficiaries are gold traders in Turkey and the United Arab Emirates (UAE), with whom Iran did the most gold trade prior to sanctions.
- Potential1 Relevant US Sanctions: E.O. 13622; National Defense Authorization Act for Fiscal Year 2013 Iran Freedom and Counter-Proliferation Act of 2012 (the IFCA) Section 1245(a)(1)(A).
Iran’s Automotive Industry:
- US to suspend sanctions on Iran’s auto industry, as well as associated services.
- Potential1 Relevant US Sanctions: E.O. 13645 Sections 3, 5, 6, and 7.
- US to grant Iran access to replacement parts and associated services for flight safety of civilian aircrafts.
- Iran has a small, outdated fleet of aircraft in need of repair. This allows the country to maintain its aging commercial fleet.
- The US Administration could issue export licenses to allow the export of replacement parts, as the Export Administration Regulations Applications (15 CFR 746.7) and the Office of Foreign Assets Control Regulations (31 CFR 560.528) specifically allow the US to consider license applications for the safety of civil aviation and safe operation of US-origin aircraft on a case-by-case basis rather than the usual policy of denial.
- US and EU to suspend sanctions on Iran’s petrochemical exports and associated services (any service, such as insurance, transportation, or financial, subject to the underlying US or EU sanction, insofar as each service is related to the sanction and required to facilitate the desired transactions).
- Potential1 Relevant US Sanctions: ITRSHRA Section 201 expanding Section 5(a)(6) of the Iran Sanctions Act of 1996, 50 USC 1701 note; E.O. 13574, 13590, 13622.
Financial Channel to Facilitate Humanitarian Trade:
- US and EU to establish a financial channel to facilitate humanitarian trade for Iran's domestic needs using Iranian oil revenues held abroad. Humanitarian trade would be defined as transactions involving food and agricultural products, medicine, medical devices, and medical expenses incurred abroad.
- Specific foreign and Iranian banks will be designated to make up the financial channel.
- The channel could also be used to pay Iran's UN obligations and direct tuition payments to universities and colleges for Iranian students studying abroad, up to an agreed amount for the six month period.
This limited sanction relief will reportedly be accomplished by executive order, allowing the Obama Administration to make the deal without having to appeal to Congress, which is currently not favorable to easing sanctions. Therefore, more specifics on the easement of US Iranian sanctions are still to follow.