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Trump Announces Withdrawal from Iran Nuclear Deal – What it May Mean for Iranian Business Operations

May 8, 2018
Business Law Blog Post

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Today, on May 8, 2018, President Trump announced his decision to withdrawal the U.S. from the Joint Comprehensive Plan of Action (JCPOA). The JCPOA is an agreement between Iran, China, France, Russia, the UK, the U.S., Germany and the EU in which the U.S. and these other countries agreed to reduce heavy sanctions against Iran in exchange for Iran’s cooperation with respect to its nuclear program. For example, under the JCPOA, Iran was not permitted to pursue certain nuclear reactor construction and was required to modernize and repurpose certain nuclear operations for peaceful purposes. In return, the U.S., the EU, and other countries eliminated certain sanctions on certain business activities in Iran. Under the JCPOA, the U.S. still prohibited most U.S. companies and individuals from doing business directly with Iran, but the JCPOA lifted many “secondary sanctions,” which generally applied to foreign companies and individuals whose conduct involving Iran occurred entirely outside of the U.S. jurisdiction.

The President has stated that the U.S. will begin to re-impose the U.S. nuclear related sanctions that were lifted to effectuate the JCPOA sanctions relief. These sanctions that were lifted or waived in connection with the JCPOA will be re-imposed as quickly as possible, and in no case later than 180 days. The Treasury’s Office of Foreign Asset Control (OFAC) administered the JCPOA and has issued an explanatory memorandum in connection with the President’s announcement. Although the memorandum does not have the force of law, it provides clarification as to the OFAC’s position with respect to the re-imposition of sanctions.

Presumably because many foreign companies and individuals with U.S. ties commenced business in the Iranian marketplace following the JCPOA, OFAC has stated that it will take steps necessary to establish a 90 day and a 180-day window period for activities involving Iran that were consistent with the U.S. sanctions relief provided for under the JCPOA. This wind down period is intended to minimize the impact of sanctions on the legitimate activities of those parties undertaken prior to May 8, 2018, but for those companies that made significant investment in the Iranian market, the sanctions will certainly hurt.

Certain sanctions like those related to Iran’s trade in gold, steel, and its automotive sector, among others, will be re-imposed following a 90-day wind down period, which will end on August 6, 2018.  Other sanctions, like sanctions in Iran’s energy sector, and the provision of insurance, among others, will be subject to the 180-day wind down period ending on November 4, 2018.  Furthermore, no later than November 5, 2018, the U.S. government will re-impose, as appropriate, the sanctions that applied to persons removed from the List of Specially Designated Nationals and Blocked Persons (SDN List) and/or other lists maintained by the U.S. government on January 16, 2016.

Based on the foregoing, we understand that following November 4, 2018 the OFAC currently expects that all the U.S. nuclear-related sanctions that had been lifted under the JCPOA will be re-imposed and in full effect. The OFAC recommends that people engaging in activity undertaken pursuant to the U.S. sanctions relief provided for in the JCPOA should take all steps necessary to wind down those activities by either August 6, 2018 or November 4, 2018, as applicable, and avoid engaging in any further financial transactions with Iran sanctioned parties after May 8, 2018, in order to avoid exposure to serious sanctions or another enforcement action under U.S. law. 

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