On May 8, 2018, President Trump announced that he was terminating the United States’ participation in
the Joint Comprehensive Plan of Action (“JCPOA”) with Iran and issued a National Security
Presidential Memorandum (“NSPM”) directing his administration to immediately begin the process of
fully re-imposing sanctions that target critical sectors of Iran’s economy, including the energy,
petrochemical, and financial sectors.
Depending on the particular sanctions measure, the United States
will provide either a 90-day or 180-day period in which activities permitted under or consistent with the
JCPOA can be wound down.
Following the conclusion of the applicable wind-down period, persons
engaged in such activities involving Iran will face exposure to secondary sanctions or enforcement
actions under U.S. law. After November 4, 2018, all U.S. sanctions (both primary and secondary) that
had been waived or lifted under the JCPOA are expected to be re-imposed and in full effect, though it
remains to be seen how vigorously the U.S. government will implement secondary sanctions targeting
foreign companies that continue to do business with Iran after that date.
Consistent with the NSPM, the State Department has revoked waivers of statutory sanctions under the
Iran Sanctions Act of 1996, the Iran Freedom and Counter-proliferation Act of 2012, the Iran Threat
Reduction and Syria Human Rights of 2012, and the National Defense Authorization Act for Fiscal Year
2012 (“NDAA”) required to implement the JCPOA, and issued new waivers to implement the President’s
direction to re-impose all sanctions lifted under the JCPOA following limited wind-down periods.
Additionally, the Treasury Department’s Office of Foreign Assets Control (“OFAC”) has issued guidance
in the form of responses to frequently asked questions (“FAQs”) outlining how it expects to implement the
re-imposition of sanctions, including details on timing and the scope of permitted wind-down activities.
Key elements of this guidance are summarized below.
Sanctions Re-imposed After August 6, 2018
Following the 90-day wind-down period that ends on August 6, 2018, the U.S. government will re-impose
the following secondary sanctions that were waived or lifted pursuant to the JCPOA:
Sanctions on the purchase or acquisition of U.S. dollar banknotes by the Government of Iran;
Sanctions on Iran’s trade in gold or precious metals;
Sanctions on the direct or After August 6, 2018, foreign persons engaged in these activities, or in the provision of associated services related to these activities, will face potential exposure to secondary sanctions.
The 90-day wind-down period will also apply to the following activities that have been authorized under
U.S. primary sanctions relating to Iran under the JCPOA:
The importation into the United States of Iranian-origin carpets and foodstuffs and certain related
financial transactions pursuant to general licenses under the Iranian Transactions and Sanctions
Regulations, 31 C.F.R. part 560 (“ITSR”);
Activities undertaken pursuant to specific licenses issued in connection with the Statement of
Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial
Passenger Aircraft and Related Parts and Services (“Commercial Aircraft SLP”); and
Activities undertaken pursuant to General License (“GL”) I relating to contingent contracts for
activities eligible for authorization under the Commercial Aircraft SLP (FAQ 1.2).
As soon as is administratively practicable, OFAC intends to revoke these authorizations and replace them
with more limited authorizations permitting the wind-down of previously licensed activities (FAQs 4.2, 4.3,
and 4.5). Effective immediately, OFAC will no longer evaluate specific license applications under the
Commercial Aircraft SLP, although it will continue to consider license applications for exports and
reexports of goods, services, and technology to Iran to insure the safety of civil aviation and safe
operation of U.S.-origin commercial passenger aircraft, pursuant to § 560.528 of the ITSR (FAQ 4.1).
Sanctions Re-imposed After November 4, 2018
Following the 180-day wind-down period that ends on November 4, 2018, the U.S. government will reimpose
the following secondary sanctions that were waived or lifted pursuant to the JCPOA:
Sanctions on Iran’s port operators and shipping and shipbuilding sectors, including on the Islamic
Republic of Iran Shipping Lines, South Shipping Line Iran, or their affiliates;
Sanctions on petroleum-related transactions with, among others, the National Iranian Oil
Company, Naftiran Intertrade Company, and National Iranian Tanker Company, including the
purchase of petroleum, petroleum products, or petrochemical products from Iran;
Sanctions on transactions by foreign financial institutions with the Central Bank of Iran and
designated Iranian financial institutions under Section 1245 of the NDAA;
Sanctions on the provision of specialized financial messaging services to the Central Bank of Iran
and Iranian financial institutions described in Section 104(c)(2)(E)(ii) of the Comprehensive Iran
Sanctions and Divestment Act of 2010; Sanctions on the provision of underwriting services, insurance, or reinsurance; and
Sanctions on Iran’s energy sector (FAQ 1.3).
After November 4, 2018, foreign persons engaged in these activities, or in the provision of associated
services related to these activities, will face potential exposure to secondary sanctions.
Additionally, no later than November 5, 2018, the U.S. government will re-impose, as appropriate,
sanctions on persons removed from OFAC’s List of Specially Designated Nationals and Blocked Persons
(“SDN List”) or other sanctions lists on JCPOA Implementation Day, January 16, 2016 (FAQs 1.3, 3.2).
This will include reintegrating into the SDN List persons identified as meeting the definition of
“Government of Iran” or “Iranian financial institution” that are currently included on OFAC’s List of Persons
Blocked Solely Pursuant to Executive Order. 13599 (FAQ 3.1). Significant transactions with Iranian
persons on the SDN List, including persons that are re-listed pursuant to these efforts, are sanctionable.
The 180-day wind-down period will also apply to activities of foreign entities owned or controlled by U.S.
persons authorized pursuant to GL H, which generally permits such entities to engage in transactions
involving Iran (FAQ 1.3). OFAC intends as soon as is administratively practicable to revoke GL H, and
replace it with a narrower authorization to wind down authorized activities (FAQ 4.4). With the revocation
of GL H, foreign subsidiaries of U.S. companies will once again be required to comply with the
prohibitions of the ITSR.
Guidance on Scope of Permitted Wind-Down Activities
OFAC has clarified in FAQ 2.1 that a non-U.S., non-Iranian person may, following the conclusion of the
applicable wind-down period on August 6, 2018 or November 4, 2018:
Receive payment for goods or services fully provided or delivered to an Iranian counterparty
prior to the end of the 90-day or 180-day wind-down period, as applicable, provided that the
transaction is pursuant to a written contract or written agreement entered into prior to May 8,
2018, and that such activities were consistent with U.S. sanctions in effect at the time of delivery
or provision; or
Receive repayment for loans or credits extended to an Iranian counterparty prior to the end of
the 90-day or 180-day wind-down period, as applicable, provided that such loans or credits were
extended pursuant to a written contract or written agreement entered into prior to May 8, 2018,
and such activities were consistent with U.S. sanctions in effect at the time the loans or credits
were extended.
OFAC cautioned, however, that the provision or delivery of additional goods or services and/or the
extension of additional loans or credits to an Iranian counterparty after August 6, 2018, or November 4,
2018, as applicable, including pursuant to written contracts or written agreements entered into prior to
May 8, 2018, may result in the imposition of U.S. sanctions unless such activities are exempt from
regulation, authorized by OFAC, or otherwise not sanctionable (FAQ 2.1).
For U.S. persons (and foreign entities owned or controlled by U.S. persons in the case of GL H), OFAC
indicated that it anticipates issuing wind-down general licenses authorizing all transactions ordinarily
incident and necessary to wind down activities that were previously authorized pursuant to General
License H, General License I, or the general licenses set forth at 31 C.F.R. §§ 560.534 and 560.535 and
to receive payments according to the terms of a written contract or written agreement entered into prior to
May 8, 2018, for goods or services fully provided or delivered pursuant to an OFAC authorization (FAQ
2.1).
OFAC issued a separate FAQ purporting to address whether new activity involving Iran was permitted if
consistent with the JCPOA and conducted entirely within the applicable wind down period, but did not
clearly respond to this question. Instead, it merely noted that such new business might be considered in
the context of enforcement and secondary sanctions determinations made with respect to activities
engaged in after August 6, 2018, or November 4, 2018, as applicable (FAQ 2.2). When available, the text
of the wind-down general licenses OFAC plans to issue may provide additional clarity on this point, at
least in the context of primary sanctions.
Reaction and the Way Forward
The leaders of the United Kingdom, France, and Germany issued a joint statement expressing regret
and concern over the United States’ withdrawal from the JCPOA. The statement emphasized the three
countries’ continuing commitment to the JCPOA, called on Iran to remain in compliance with its
commitments under the agreement, and urged the United States to avoid taking action that would
obstruct the implementation of the JCPOA by the remaining parties.
The Russian Ministry of Foreign
Affairs issued a statement condemning the United States for violating its commitments under the JCPOA
and reiterating Russia’s commitment to the agreement. Iranian Foreign Minister Javid Zarif indicated in
tweet that Iran’s response to the United States’ withdrawal will be determined after engaging in diplomatic
efforts to examine whether the remaining JCPOA participants can ensure its full benefits for Iran.
Collectively, these statements suggest the possibility that the other JCPOA parties may “muddle through”
without U.S. participation, with Iran continuing to adhere to its nuclear commitments and countries other
than the United States, and in particular the European Union and its members, continuing to provide
sanctions relief.
Ultimately, however, the viability of that path, and the risks faced by non-U.S. companies considering
whether to continue to do business with Iran under the JCPOA, will depend on how aggressively the
United States is willing to enforce the secondary sanctions that it is re-imposing. Initial signals in that
regard suggest that the re-imposition of sanctions will not be merely cosmetic.
President Trump himself
stated that the United States “will be instituting the highest level of economic sanction,” and that “[a]ny
nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned.” OFAC
indicated in its published guidance that the United States intends to resume efforts to reduce Iran’s crude
oil sales. (FAQ 5.1)
These efforts will be backed by the potential threat of correspondent account
sanctions targeting foreign financial institutions and central banks under section 1245(d) of the 2012
NDAA once the 180-day wind-down period applicable to sanctions under that authority has ended,
subject to exceptions from such sanctions for countries determined by the State Department to have
significantly reduced purchases of crude oil from Iran. (FAQ 5.2).
Richard Grenell, the U.S. Ambassador
to Germany, tweeted a warning that “German companies doing business in Iran should wind down
operations immediately,” although other State Department officials speaking at a background briefing
for press were more measured, indicating that the United States would seek cooperation with secondary
sanctions through engagement in the first instance, rather than enforcement. It remains to be seen
whether these words will be backed up by actions, particularly in the face of diplomatic resistance and
potential countermeasures by U.S. allies and partners.
