In late December, the U.S. Department of Treasury was reportedly considering imposing new sanctions against nearly a dozen companies and individuals in Iran, Hong Kong, and the United Arab Emirates for their alleged role in developing Iran’s ballistic-missile program. The possibility of new sanctions arose after Iran conducted two ballistic missile launch tests in recent months. The White House has delayed the announcement, apparently the result of feverish diplomacy with Iran.
The Iran-related designations would be the first imposed by the Obama Administration after reaching a nuclear agreement with Iran in July. The United Nations Security Council has determined that one of the tests violated Resolution 1929, but has yet to take punitive action in response.
The possible Treasury sanctions relate to two Iran-linked networks alleged to be involved in developing the country’s missile program and include sanctions on many of the individuals involved. The sanctions would prohibit U.S. or foreign nationals from conducting business with the blacklisted firms, or any entities in which those firms hold a 50% or higher interest. U.S. persons are also required to freeze any assets the designated companies or individuals hold in the United States or within the possession or control of U.S. persons.
Meanwhile, in the wake of the terrorist attacks in Paris and San Bernardino, California, Congress has denied certain travelers, including those to Iran in the last five years, from being eligible to participate in the U.S. Visa Waiver Program (VWP), which allows visa free entry to the United States to visitors from certain eligible countries. In the year-end spending bill signed into law by President Obama, the eligibility criteria for VWP were amended to prohibit individuals who have been present in Iraq, Syria, Iran, or Sudan (or other countries designated by the U.S. government as supporting terrorism or “of concern”) at any time on or after March 1, 2011, from participating in the VWP.
The VWP, administered by the Department of Homeland Security (DHS), allows eligible citizens or nationals of countries which have met U.S. security requirements to travel to the United States without visas as tourists or business visitors for a stay up to 90 days.
Prospective VWP travelers undergo counterterrorism screening and must receive approval through DHS’ Electronic System for Travel Authorization (ESTA). Through ESTA, DHS evaluates whether individuals are eligible to travel to the United States before they are allowed to board a carrier bound for the United States. Those who register with ESTA can enter the United States as visitors under VWP without having to apply for a visitor visa at a U.S. consulate.
As a result of the new eligibility requirements, however, travelers to Iran—even those from visa waiver countries—may subsequently be unable to rely on visa free travel to the U.S. For example, travelers from the European Union, who previously would have been able to receive approval through ESTA to travel to the U.S. under VWP without a visa, may now have to apply at a U.S. Embassy for a non-immigrant visa to do so. This would effectively mean that various European, Japanese and other business people who visit Iran may have to apply for US visas (business visitor or tourist) at a U.S. consulate before they can enter the United States at any point in the future.
Iranian officials have asserted that the new VWP eligibility criterion violates the nuclear agreement, arguing that it amounts to a tax or sanction on international businessmen seeking to invest in the Iranian market.
U.S. officials, however, have indicated that the recent changes in visa requirements will not prevent the U.S. from meeting its commitments under the nuclear agreement. Most notably, on December 19, Secretary of State John Kerry wrote a letter to his Iranian counterpart in which he asserted that the changes to the VWP could be “waived.” On December 28, Secretary Kerry stated, “It is not the policy of the United States to prevent permissible business activities with Iran.”
The legislation does contain a waiver, but Congressional leaders dispute it can be used as broadly as the Administration envisions. It is still to be determined how this waiver dispute will play out.
Treasury had previously said that, before Implementation Day, non-U.S. companies (that are not owned by U.S. persons) and individuals will not be subject to U.S sanctions if they engage in initial discussions about potential business opportunities or travel to Iran to examine the possibilities of business relationships after sanctions are lifted.
Despite the new sanctions and possible visa restrictions, the Joint Comprehensive Plan of Action (JCPOA), the nuclear agreement between six of the world’s major powers and Iran, continues apace. On December 28, Iran shipped over 25,000 pounds of low-enriched uranium out of the country. This is a key step towards Implementation Day, the point at which International Atomic Energy Agency (IAEA) verifies that Iran has completed all of its nuclear commitments under the agreement, and upon which the U.S. will lift its nuclear-related “secondary” sanctions against Iran.
As noted in our prior alerts, the primary U.S. sanctions against Iran, which apply to U.S. companies and U.S. individuals, largely will remain in place.
Iran must take additional steps in order to gain the IAEA’s verification that it has fulfilled its commitments under the JCPOA, including removing much of its uranium enrichment infrastructure and rendering inoperable the existing core of the Arak Reactor.