In the days since the recent announcement of the nuclear accord between Iran and the United States and its allies, many clients have asked about the impact of the deal on their foreign operations. Unfortunately, our response has generally been, “Not much.” The fact is, while the Joint Comprehensive Plan of Action (JCPOA) certainly is newsworthy, its effect on most U.S. companies is quite limited. Here, we summarize the top five points to remember about the JCPOA before setting up shop in Tehran.

  1. The deal has no immediate effect on U.S. sanctions. Before the United States implements any sanctions relief, the JCPOA itself will have to navigate the treacherous path to U.S. implementation. During that process, it faces staunch opponents in Congress and could depend upon a threatened Presidential veto. Even after agreeing to the deal’s terms, the United States is not obligated to lift any sanctions unless and until Iran meets certain nuclear obligations defined in the agreement and verified by the International Atomic Energy Agency. Those obligations – which are complex and significant – are likely to require some time to complete.
  2. Until Iran meets its obligations, the only sanctions relief is that provided in the Joint Plan of Action (JPOA). Until further notice, the JPOA reached in November 2013 provides the only Iran-related sanctions relief. Certain licenses issued pursuant to the JPOA remain in effect according to their terms.
  3. Most U.S. sanctions relief under the JCPOA will help non-U.S. companies. The majority of the restrictions the United States has committed to lift under the JCPOA are so-called “secondary sanctions” (i.e., those that affect non-U.S., rather than U.S., companies). Among the sectors to be aided by secondary sanctions relief are financial and banking; oil, gas, and petrochemical; energy; shipping and shipbuilding; and automotive. For the most part, though, the sanctions relief will apply only to non-U.S. companies; most transactions between U.S. companies and Iran or Iranian entities will remain off-limits.
  4. The U.N. Security Council is expected to lift the Iranian arms embargo . . . in the next ten years. If Iran complies with its JCPOA obligations, the U.N. Security Council will lift the embargo that currently prohibits arms sales to Iran. It is anticipated that the embargoes on conventional weapons and ballistic missiles will be lifted within five and eight years, respectively. Only then will U.S. export controls laws likely be amended to reflect the changed U.N. policy.
  5. The JCPOA provides some (limited) primary sanctions relief. While the majority of U.S. sanctions relief is aimed at non-U.S. persons, the United States has agreed to scale back primary sanctions in certain areas. Most notably, once Iran meets its obligations, the United States will allow the sale of commercial passenger aircraft and related parts and services to Iran. Also of significance, with regard to non-U.S. persons that are owned or controlled by U.S. persons (and are therefore currently subject to most primary sanctions restrictions), the United States has committed to license activities with Iran that are consistent with the JCPOA. In other words, in the future, non-U.S. subsidiaries of U.S. companies can expect permission to engage in certain activities in Iran that remain off-limits to their U.S. parent companies.

As these points show, the JCPOA is likely to bring about real and significant changes in U.S. sanctions against Iran. But – despite the political clamoring –the deal’s anticipated impact should not be overstated. While it is no doubt significant for the Iranian people, the U.S. sanctions relief contemplated by the deal is likely to be both gradual and moderate. And, unfortunately for many clients, most U.S. companies are unlikely to feel any real effects of the deal in the near future. Accordingly, even if the United States fulfills its commitments under the JCPOA, it will remain as important as ever that U.S. companies and their affiliates closely monitor – and implement effective compliance strategies to ensure compliance with – the comprehensive U.S. sanctions program against Iran.