United States: New US And EU Guidance On Interim Agreement For Iran Sanctions Relief

As we have discussed previously, on November 24, 2013, the United States and the other members of the P5+1 (United Kingdom, France, Germany, Russia and China) reached agreement with Iran on the JPOA, an initial understanding on the disposition of Iran's nuclear program. The JPOA is a significant development in US-Iran relations, representing a first step towards a potential "mutually-agreed long-term comprehensive solution that would ensure Iran's nuclear programme will be exclusively peaceful." In exchange for Iran's suspension of certain sensitive nuclear activities, the US and EU agreed to ease certain sanctions on Iran for a six-month period beginning when the parties arrived at certain technical understandings under the JPOA.

On January 12, 2014, the P5+1 and Iran reached technical understandings under the JPOA that enabled its implementation as of January 20, 2014. As part of implementation, the US and EU temporarily eased a variety of Iran sanctions and issued specific guidance for compliance.

Challenges Ahead

Even though recent guidance in the US and EU has begun to define the contours of Iran sanctions relief under the JPOA, compliance will remain a significant challenge for many US and foreign firms. In light of the "limited, targeted, and reversible" nature of the sanctions relief, it is unlikely to materially impact the ability of most US firms to do business with Iran. For others, navigating a partial and temporary sanctions suspension will have to be handled with great caution: certain complex financial transactions could implicate restrictions beyond the scope of the JPOA relief, and we expect the US Department of the Treasury's Office of Foreign Assets Control (OFAC) to aggressively enforce sanctions measures outside of this scope over the next six months.

Based on past experience in these matters, US financial institutions will likely continue to abide by their own risk tolerance when it comes to possible transactions that may be subject to Iran sanctions relief under the JPOA. This could mean that many such firms will decide to refrain from processing transactions even if they fall within the scope of JPOA suspensions or are specifically licensed during this six-month period. These and other developments relating to implementation of the JPOA merit ongoing scrutiny over the coming weeks and months.

Key Provisions of US Guidance

The United States Departments of State and the Treasury jointly issued the "Guidance Relating to the Provision of Certain Temporary Sanctions Relief in Order to Implement the Joint Plan of Action Reached on November 24, 2013, Between the P5+1 and the Islamic Republic of Iran" (US Guidance).1 The United States is implementing the sanctions relief through a series of waivers and a new licensing policy issued by OFAC; no legislative action is required.

We note the following with respect to the US Guidance. First, it reiterates that the sanctions relief is extremely narrow in scope, noting that relief will be "limited, targeted, and reversible" and that OFAC will continue "to vigorously enforce our sanctions against Iran that are not subject to the limited relief." Indeed, we have seen OFAC enforcement actions continue since the January 20 implementation of the interim deal,2 and US officials have stated that the JPOA does not mean that Iran should be viewed as "open for business."

Second, the relief is only short-term and may be revoked "at any time if Iran fails to meet its commitments under the JPOA." The US Guidance notes that relief will be limited to transactions related to sanctionable conduct that were initiated after January 20, 2014 and that will be fully completed by July 20, 2014. In other words, absent an extension or other future guidance, sanctionable activity that commenced prior to January 20, 2014 or is concluded after July 20, 2014 would still face exposure to US sanctions enforcement because it would fall outside the six-month period of relief.

Third, the relief will not materially impact the ability of most US firms to do business with Iran. With only limited, potential exceptions (e.g., regarding civil aviation and humanitarian activities), the sanctions relief will not apply to US persons and US-owned or US-controlled foreign entities, which are still generally prohibited from engaging in transactions with Iran (and providing "associated services") under the JPOA.3

Fourth, Iran sanctions still generally apply to transactions with entities blocked by OFAC as Specially Designated Nationals (SDNs) for reasons other than their affiliation with the Government of Iran or their status as an Iranian depository institution (e.g., for proliferation or terrorist activities). This means, for example, that even though a particular type of transaction may otherwise be permitted under the JPOA, the transaction may still constitute sanctionable activity if it involves an SDN that is not specifically exempted in the US Guidance.4

Fifth, the US Guidance addresses certain indirect transactions with Iran involving "associated services"-particularly relevant for non-US financial services, insurance, and logistics firms. It defines "associated services" as "any necessary services-including any insurance, transportation, or financial services-ordinarily incident to the underlying activity covered by the JPOA."5 US officials have underscored that such associated services only encompass those services necessary to transport an underlying good that is covered by the sanctions relief and not those required to facilitate investment activity. As described below, such services are now authorized in certain circumstances associated with the export of petrochemical products, the auto industry, gold and other precious metals, and the civil aviation industry.6 It remains unclear, however, how certain associated services, such as insurance and reinsurance services, which typically result in contracts and claim payments well beyond a six-month period, will be handled under the US Guidance.

Specifically, the US Guidance and related compliance information covers seven areas:          

Sanctions Related to Iran's Export of Petrochemical Products

The first area of relief covers certain sanctions on purchases by non-US persons of petrochemical products exported from Iran, as well as associated services that are required to carry out such transactions. As part of this relief, such transactions exclusively for the export of Iran's petrochemicals may involve certain specified Iranian depository institutions, as well as 14 other Iranian entities on the SDN List that are specified in an Annex to the US Guidance.

Sanctions Related to Iran's Auto Industry

The second area of sanctions relief covers the sale, supply, or transfer to Iran of goods (including complete knock-down kits, or CKDs) and services (including shipping, warranty, insurance and maintenance services) used in connection with the automotive sector by non-US persons, as well as associated services that are required to facilitate such transactions. Such transactions may not involve any person on the SDN List, other than certain specified Iranian depository institutions.

Sanctions Related to Gold and Other Precious Metals

The third area of sanctions relief covers the sale to and purchase from Iran of gold and other precious metals by non-US persons, as well as associated services that are required to carry out such transactions. Such transactions may not involve persons on the SDN List, other than certain specified Iranian depository institutions or certain specified political subdivisions, agencies or instrumentalities of the Government of Iran. Finally, the funds for these purchases of gold and other precious metals may not be drawn from certain "Restricted Funds."7

Sanctions Related to Civil Aviation

The fourth area of sanctions relief covers Iran's civil aviation industry. OFAC has issued a new Statement of Licensing Policy on Activities Related to the Safety of Iran's Civil Aviation Industry (SLP) on the supply and installation of spare parts to ensure the safe operation of Iranian commercial passenger aircraft (including Iran Air) and associated services and safety-related inspections and repairs. US persons, US-owned or -controlled foreign entities, and persons involved in the export of US-origin goods may be granted a specific license from OFAC under this SLP. US officials have noted that OFAC may seek to expedite the licensing process to accommodate the six-month JPOA window but underscored that the licensing process will remain highly technical and complex. Furthermore, sanctions on the conduct of activities by non-US persons related to the safe operation of Iranian civilian aircraft have been temporarily suspended.

Sanctions Related to Iran's Export of Crude Oil

The fifth area of sanctions relief involves Iran's export of crude oil.8 Although the regime for oil sanctions on Iran remains intact, the United States has agreed to not seek further reductions from current purchasers of Iranian crude oil (China, India, Japan, the Republic of Korea, Taiwan and Turkey). These nations may maintain their current average level of imports from Iran but may not increase their average quantities of Iranian crude oil imports during that period. All other US sanctions on Iran's energy sector (such as those relating to the provision of goods, services or investment) remain in force.

Facilitation of Humanitarian and Certain Other Transactions

The sixth area of sanctions relief relates to the establishment of a mechanism to purchase and pay for the export of food, agricultural commodities, medicine and medical devices to Iran, as well as Iran's payments of its United Nations obligations, Iran's payments for medical expenses incurred abroad by Iranian citizens, and Iran's payments of an agreed amount of governmental tuition assistance for Iranian students studying abroad. Foreign financial institutions who may become involved in hosting this new mechanism will be contacted directly by the US government for further guidance.

Repatriation of Iranian Revenue Held Abroad

Finally, the P5+1 and Iran have agreed on a process to authorize the release in installments of approximately $4.2 billion of Iran's Restricted Funds over the JPOA period. The US government is working directly with relevant foreign financial institutions and, unless an institution is contacted by the US government in writing that an installment release is not sanctionable, any release or receipt of these installments would expose the institution to US sanctions. Between February 1 and July 20, 2014, the guidance envisions a schedule of eight installments between $450 and $550 million to Iran, subject to Iran fulfilling its JPOA obligations.

Key Provisions of EU Guidance

On January 20, 2014, the EU amended its Regulation 267/2012 concerning Iran sanctions to give effect to the JPOA. Like the US sanctions relief, the EU relief provides only a six-month window during which contracts may be initiated and executed. Likewise, the remainder of EU sanctions remain in force.

EU guidance, to date, has only reiterated the following changes to the EU's sanctions regime pursuant to the January 20 amendment:

  • suspends the prohibition on the provision of insurance, reinsurance and transport in relation to Iranian crude oil sales to its current customers;
  • suspends the prohibition on the import, purchase or transport of Iranian petrochemical products and related services;
  • suspends the prohibition on the provision of vessels to enable the transport of Iranian crude oil and petrochemical products;
  • suspends the ban on trade in gold and precious metals with the Iranian government, its public bodies and the Central Bank of Iran; and
  • increases by tenfold the thresholds for authorizing financial transfers to and from Iran in order to ease legitimate trade with Iran.

The Potential for Enhanced US Sanctions Legislation

Many in Congress remain skeptical of the JPOA and have sought to proceed with new, tougher sanctions legislation against Iran that would take effect in the event Iran failed to meet its commitments under the JPOA. Although this effort has been met with strong resistance by the Obama Administration, which has issued a veto threat, a key legislative proposal in the US Senate (The Nuclear Weapon Free Iran Act of 2013) has garnered nearly 60 co-sponsors. At the moment, however, a vote on new legislation appears unlikely, as Senate Majority Leader Harry Reid has stated, "We're going to wait and see how this plays out."

1 In conjunction with the US Guidance, the US government released a "Frequently Asked Questions Relating to the Sanctions Relief Provided for in the Joint Plan of Action (JPOA) between the P5+1 and the Islamic Republic of Iran" sheet.

2 This includes a $152 million settlement agreement announced on January 23, 2014 between OFAC and Clearstream Banking, S.A. to resolve OFAC's investigation surrounding Clearstream's use of its omnibus account with a US financial institution to hold securities on behalf of the Central Bank of Iran.

3 The JPOA therefore maintains a global limitation on sanctions relief for many non-US firms.

4 For example, OFAC has noted that transactions with the Tidewater Middle East Co., a key Iranian ports operator that has been listed as an SDN for its relationship to the Iranian Revolutionary Guard Corps, will still be considered sanctionable activity, even if the transaction is related to activities that have been otherwise granted sanctions relief under the JPOA. It is possible, however, that additional port facilities may become available for such activities without exposure to sanctions.

5 Provided, however, that unless otherwise noted, such services may not involve persons identified on OFAC's List of Specially Designated Nationals and Blocked Persons (SDN List).

6 For these sectors, the US Guidance generally waives "correspondent or payable-through account" sanctions with respect to foreign financial institutions over the JPOA period.

7 The term "Restricted Funds" refers here to: (i) any existing and future revenues from the sale of Iranian petroleum or petroleum products, wherever they may be held, and (ii) any Central Bank of Iran (CBI) funds, with certain exceptions for non-petroleum CBI funds held at a foreign country's central bank.

8 Most details of this area of relief had already been presented in November 2013. See "White House Fact Sheet: First Step Understandings Regarding the Islamic Republic of Iran's Nuclear Program," November 23, 2013.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Katrina Carroll
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions