Worldwide: United States And European Union Ease Trade Sanctions Against Iran Pursuant To Nuclear Agreement

As widely reported, Saturday, January 16 was "Implementation Day" under the Joint Comprehensive Plan of Action (JCPOA), agreed to on July 14, 2015, by the P5+1 (China, France, Germany, Russia, the United Kingdom and the United States), the European Union (EU), and Iran. The United States and the EU have now taken far reaching steps to implement the JCPOA.

Background

On July 14, 2015, following two years of negotiations, the P5+1 and the EU concluded a landmark agreement with Iran, the JCPOA, under which, in exchange for Iran's commitments relating to its nuclear programs, the P5+1 agreed to suspend all US, EU and UN nuclear-related sanctions imposed on Iran. The JCPOA established an Implementation Plan with defined trigger dates, the most important of which was "Implementation Day," the date on which the EU and the United States were to lift relevant sanctions contingent on the International Atomic Energy Agency (IAEA) verifying completion by Iran of its nuclear-related commitments.  Implementation Day has now been declared to be January 16, 2016.

US Sanctions

In line with its commitments under the JCPOA, the United States has lifted its nuclear-related sanctions against Iran.  These were primarily "secondary" sanctions applicable to non-US parties and covered:

  • Iran's financial, banking, energy, petrochemical, shipping, shipbuilding and automotive sectors;
  • Iran's port operators;
  • The provision of insurance, re-insurance and underwriting services in connection with activities that are consistent with the JCPOA;
  • Iran's trade in gold and other precious metals;
  • Trade with Iran in graphite, raw or semi-finished metals such as aluminum and steel, coal, and certain software in connection with activities that are consistent with the JCPOA; and
  • The provision of associated services for each of the categories above.

The United States also removed a large number of individuals and entities from applicable prohibited party lists, and took steps to (1) allow for the export, reexport, sale, lease or transfer of commercial passenger aircraft and related parts and services to Iran for exclusively civil, commercial passenger aviation end-use; (2) license non-US entities that are owned or controlled by a US person to engage in activities that are consistent with the JCPOA and applicable US laws and regulations; and (3) license the importation into the United States of Iranian-origin carpets and foodstuffs. 

With the exception of these three categories of activities described above, none of the sanctions that were lifted include "primary" US sanctions against Iran that apply to US persons. Thus, US persons, including US companies, continue to be broadly prohibited from engaging in transactions or dealings with Iran and the Government of Iran unless such activities are exempt from regulation or authorized by OFAC (e.g., selling food and medicine to Iran).

Of particular interest to many US companies is the second of the three listed items, i.e., the licensing of US-owned or controlled non-US entities "to engage in activities that are consistent with the JCPOA and applicable US laws and regulations." The US Office of Foreign Assets Control (OFAC) has implemented this item by issuing General License H (GL H), authorizing US-owned or controlled foreign entities to engage in "transactions, directly or indirectly, with the Government of Iran, or any person subject to the jurisdiction of the Government of Iran that would otherwise be prohibited by 31 C.F.R. § 560.215." GL H effectively authorizes US-owned or controlled foreign entities to engage in any transaction involving Iran that a non-US person may engage in, except transactions involving:

  • The direct or indirect exportation or reexportation of goods, technology or services from the United States (without separate authorization from OFAC);
  • Any transfer of funds to, from or through the US financial system;
  • Any individual or entity on OFAC's prohibited party lists, or any activity that would be prohibited by non-Iran sanctions administered by OFAC if engaged in by a US person or in the United States;
  • Unless authorized by the US Department of Commerce, activity prohibited by, or requiring a license under, part 744 of the US Export Administration Regulations (EAR) or a person whose export privileges have been denied pursuant to part 764 or 766 of the EAR;
  • Any military, paramilitary, intelligence or law enforcement entity of the Government of Iran, or any officials, agents or affiliates thereof;
  • Any activity that is sanctionable under certain enumerated executive orders relating to Iran's proliferation of weapons of mass destruction and their means of delivery, including ballistic missiles; international terrorism; Syria; Yemen; or Iran's commission of human rights abuses against its citizens; and
  • Any nuclear activity involving Iran that is subject to the procurement channel established pursuant to paragraph 16 of UNSCR 2231 (2015) and section 6 of Annex IV of the JCPOA and that has not been approved through the procurement channel process.

In addition, GL H authorizes US persons to engage in certain activities otherwise prohibited by OFAC's regulations, namely activities related to the establishment or alteration of corporate policies and procedures to the extent necessary to allow US-owned or controlled foreign entities to engage in transactions involving Iran that are authorized under GL H, and making available to foreign entities they own or control certain automated and globally integrated business support systems.  With the exception of activities authorized in GL H, the prohibition on facilitation by United States persons under section 560.208 of OFAC's regulations remains in effect.

EU Sanctions

In accordance with the JCPOA, the EU lifted most of its economic and financial sanctions imposed in connection with Iran's nuclear program. Although several restrictions on doing business with Iran remain in place, the EU's new measures considerably enhance the scope for EU and Iranian companies to do business by opening up opportunities in a number of key areas, including oil, gas and petrochemicals; finance; and trade in gold and precious metals.

Like the United States, the EU removed a number of individuals and entities, including the Central Bank of Iran and the National Iranian Oil Company, from its restricted parties list, lifting asset freezes and visa bans.  More broadly than the United States, the lifting by the EU of its nuclear-related sanctions against Iran removed EU sanctions, with limited exceptions, on the following activities, including associated services:

  • Financial transfers to and from Iran. The transfer of funds between EU persons and non-listed Iranian persons is now permitted, and no authorization or notification of transfers is required.
  • Banking activities, including the establishment of new correspondent banking relationships and the opening of branches, subsidiaries or representative offices of non-listed Iranian banks in the EU. 
  • EU financial and credit institutions are allowed to open representative offices, branches, subsidiaries or joint ventures, as well as banks accounts, in Iran.
  • The supply of specialized financial messaging services (including SWIFT).
  • Insurance and re-insurance activities.
  • Financial support for trade with Iran, including export credit, guarantees or insurance.
  • The sale or purchase of public bonds from Iran.
  • The sale, supply, transfer and export of key equipment/technology (including equipment in the oil, gas and petrochemical sectors), and the import or purchase of crude oil, petrochemicals and gas (originating in Iran or having been exported from Iran);
  • The sale, purchase, supply, transfer, import, and export of gold, precious metals, and diamonds;
  • The sale, supply, transfer, and export of naval equipment and technology for ship building, maintenance or refit;
  • The provision of vessels for the transport or storage of oil and petrochemical products; the provision of bunkering or ship supply services, or any other servicing of vessels (not carrying prohibited items); and the provision of fuel, engineering and maintenance services to Iranian cargo aircraft (not carrying prohibited items);
  • The grant of financial loans or credit to Iranian persons active in the oil and gas sectors.

"Associated services" include transactions necessary and ordinarily incident to the foregoing, including technical assistance, training, insurance, re-insurance, brokering, transportation and financial services.

Reports indicate that EU interests will promptly move to take advantage of Iranian business opportunities opened by the lifting of sanctions.  For example, the European Commissioner for Climate and Energy, Miguel Arias Cañete, publicly stated that the European Commission will undertake a first "technical assessment mission" in February 2016 to explore energy ties with Iran. It is widely reported that the technical assessment mission will likely be followed by a visit by high-level Commission staff, possibly with a business delegation.

While the majority of EU sanctions concerning Iran's nuclear program have been lifted, certain restrictions remain in place.  Notably, certain proliferation-related activities now require an advance authorization from the relevant EU Member State, including certain proliferation-sensitive transfers and activities; the supply, transfer or export of certain software; and the sale, supply, transfer or export of certain graphite and raw or semi-finished metals and the provision of associated services.  Certain other EU sanctions against Iran also remain in place, including an arms embargo and the prohibition on the supply, transfer, export or procurement of certain missile technology.  Certain Iranian persons and entities remain subject to EU sanctions, including several Iranian banks.  Also, human rights- and terrorism-based sanctions remain in place, including the listing of 84 persons and one entity, and a ban on exports to Iran of equipment that may be used for internal repression and monitoring telecommunications.

Thus, although EU sanctions have been significantly relaxed, companies will still need to conduct proper diligence when conducting business with Iran and Iranian persons.

Conclusion

The easing of US and EU sanctions under the JCPOA opens significant new opportunities for business with Iran. However, because the sanctions that were lifted may "snap back" into place in the event that Iran fails to uphold its nuclear commitments under the terms of the JCPOA, businesses are well advised to proceed with caution and to continue to monitor related trade compliance developments closely.

Links

Following are links to OFAC's Guidance on Implementation Day and General License H:

Following are links to EU Council Notice (2016/C 15I/01), the EU Financial Sanctions relief notice, and the EU's External Action Service Information Note on EU sanctions to be lifted:

United States and European Union Ease Trade Sanctions Against Iran Pursuant to Nuclear Agreement

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.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
Pinsent Masons LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
Pinsent Masons LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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