November 06, 2018
As discussed here, on May 8, 2018, President Trump announced that the United States would withdraw from the Joint Comprehensive Plan of Action (“JCPOA”)—i.e., the nuclear deal with Iran—and re-impose Iran-related economic sanctions that had been lifted since the JCPOA entered into force in January 2016. The re-imposition of sanctions allowed for two transition periods. Thus, certain sanctions were re-imposed on August 7, following the first (90-day) transition period, and the remaining sanctions were re-imposed on November 5, following the second (180-day) transition period. In this Current, we review the sanctions that were re-imposed on November 5.
One of the most significant restrictions lifted when the United States started implementing the JCPOA in January 2016 concerned the activities of foreign entities owned or controlled by U.S. persons. Prior to January 2016, those entities had been subject to the same restrictions on dealings with Iran as their U.S. parents. Those restrictions were lifted pursuant to an authorization from the Office of Foreign Assets Control (“OFAC”) known as General License H. As of November 5, those restrictions have been re-imposed. At the same time, certain jurisdictions (including the European Union and Germany) have adopted “blocking” measures purporting to compel entities in those jurisdictions to refrain from complying with the re-imposed U.S. sanctions. This may put some entities in the uncomfortable position of having to choose between compliance with U.S. law and compliance with the laws of their home jurisdictions.
Moreover, as of November 5, the United States has re-imposed secondary sanctions on foreign individuals and entities (regardless of whether they are owned or controlled by U.S. persons) engaged in certain activities involving Iran. If a person engages in any of the activities in question, it risks penalties including loss of access to the U.S. market. The targeted activities are:
- Dealings involving Iran’s port operators and shipping and shipbuilding sectors, including the Islamic Republic of Iran Shipping Lines, South Shipping Line Iran, or their affiliates;
- The purchase of petroleum, petroleum products, or petrochemical products from Iran, and other petroleum-related transactions with, among others, the National Iranian Oil Company, Naftiran Intertrade Company, and National Iranian Tanker Company;
- Transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions;
- The provision of specialized financial messaging services to the Central Bank of Iran and other designated Iranian financial institutions;
- The provision of underwriting services, insurance, or reinsurance relating to Iran;
- Dealings involving Iran’s energy sector; and
- Dealings with individuals and entities on the Specially Designated Nationals and Blocked Persons List (“SDN List”).
Notably with respect to the restriction on purchases of petroleum and petroleum products from Iran, the United States granted temporary exemptions to eight countries that depend heavily on the supply of oil and gas from Iran but that significantly reduced such purchases during the wind-down period : China, Greece, India, Italy, Japan, South Korea, Taiwan, and Turkey.
Also effective November 5, OFAC added over 700 persons to the SDN List, including hundreds that previously had been removed from the SDN List pursuant to the JCPOA.
The secondary sanctions re-imposed earlier (August 7) target non-U.S. persons for involvement in:
- The purchase or acquisition of U.S. dollar banknotes by the Government of Iran;
- Iranian trade in gold or precious metals;
- The direct or indirect sale, supply, or transfer to or from Iran of graphite, raw or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes;
- Significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds outside the territory of Iran denominated in the Iranian rial;
- The purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt; and
- Dealings involving the Iranian automotive sector.
This Current is not intended to provide legal advice. If you have any questions regarding its content, please contact Ted Posner (firstname.lastname@example.org; 202.682.7064) or Timothy Welch (email@example.com; 202.682.7132).