Inevitably, President Trump's decision last week to pull the United States out of the Joint Comprehensive Plan of Action (JCPOA) and to re-impose US nuclear-related sanctions on Iran will have repercussions here.
We look at the possible consequences for New Zealand companies trading with Iran.
Sanctions to be re-imposed
The US has announced the re-imposition of all sanctions lifted or waived in connection with the JCPOA. This includes US secondary sanctions, which target non-US entities who engage in prohibited transactions (even where there is no nexus to the US), including transactions in Iran's energy, financial and shipping sectors.
Companies with existing contracts are being given a wind down period of either 90 or 180 days.
The 90-day window ends on 6 August 2018 after which the US will re-impose sanctions on:
- the purchase or acquisition of US dollars by the Iranian Government
- Iran's trade in gold and other precious metals
- the sale, supply or trade to or from Iran of graphite, raw or semi-finished metals such as aluminium and steel, coal and certain software for "integrating industrial processes"
- "significant" transactions related to the sale or purchase of Iranian rials, or the maintenance of significant funds or accounts outside Iran denominated in the Iranian rial
- the issuance of Iranian sovereign debt, and
- Iran's automotive sector.
At the end of the 180-day window on 4 November 2018, another set of sanctions will take effect, including on:
- Iran's port operators, and shipping and ship building sectors
- petroleum-related transactions with a number of Iranian oil companies
- transactions by foreign financial institutions with the Central Bank of Iran and other Iranian financial institutions
- certain financial messaging services to Iran's central bank and other Iranian financial institutions
- underwriting services, insurance, or reinsurance, and
- Iran's energy sector.
The US will also revoke certain permissions granted to Iran under the nuclear deal, including Iran's ability to export carpets and foods into the US, and will revoke certain licences, including licences for Boeing and Airbus to sell into Iran, under which they signed deals with Iran Air in 2016 worth a combined $USD40 billion.
Implications for New Zealand companies trading with Iran
Subject to limited exemptions or waivers, the "snapback" of US sanctions will affect all business activity that has opened up between New Zealand and Iran as a result of the JCPOA.
Last year, New Zealand exported NZ$120 million worth of goods to Iran, and NZ$151 million in 2016, with dairy products comprising three-quarters of those exports.
Some of that trade was permitted under general licences issued under the pre-JCPOA regime, including for agricultural products. At this stage, it appears pre-JCPOA general licences will remain in force.
However, all trade that was not permitted prior to the JCPOA will again be subject to US sanctions at the end of the relevant wind down period. This includes trade permitted in accordance with licences granted under the JCPOA, which are likely to be revoked.
The Trump administration has indicated that limited waivers and exemptions will be granted. For example, non-US, non-Iranian parties will be entitled to seek and receive payment for goods or services provided or delivered to an Iranian counterparty prior to the withdrawal of US sanctions.
A key issue for New Zealand companies seeking to engage with Iran has been, and will continue to be, access to finance. Even under the JCPOA, New Zealand banks were reluctant to facilitate transactions with Iran because of the risk of inadvertently breaching US primary sanctions, which remained in force.
Once US secondary sanctions are re-imposed, access to finance is likely to become even more difficult.
The international response
The other JCPOA parties, including the European Union, China, Russia, have expressed regret at the US decision and will be trying to keep the deal afloat.
Iranian President Hassan Rouhani has not confirmed whether Iran will remain in the JCPOA, and will take some time to consider Iran's response following negotiations with the remaining JCPOA signatories.
Internally, collapse of the JCPOA would be a major setback for Rouhani and the reformists who championed a diplomatic settlement to the nuclear standoff. He was re-elected last year but his popularity has been weakened by a currency crisis, demonstrations and problems in the banking sector.
The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.