alerts & publications
The Iran Nuclear Deal: Nuclear Sanctions Lifted for Foreign Companies, Restrictions on US Firms Remain1월 20, 2016
On January 16, 2016 , the United States lifted nuclear-related sanctions on Iran, after the International Atomic Energy Agency (“IAEA”) verified that Iran complied with key measures designed to limit the country’s nuclear capabilities, as mandated by the Joint Comprehensive Plan of Action (“JCPOA”). A full description of the terms of the JCPOA and previous multilateral agreements leading to its passage can be found in prior client alerts: US International Economic Sanctions: A 2015 Round-Up; The Iran Nuclear Deal: Setting the Path Forward to Lift International Economic Sanctions; The Lausanne Nuclear Framework Agreement with Iran: A Path is Set for Congressional Review, but Key Substantive Questions Remain; US International Economic Sanctions: Ending 2014 With a Bang; The Interim Agreement on Iran’s Nuclear Program: Implications for Iran Sanctions; New Executive Order Extends Extraterritorial Reach of US Iran Sanctions; Broad New Legislation Further Expands Economic Sanctions Against Iran and Syria; New Iran and Syria Sanctions Pose Compliance Challenges for both US and non-US Businesses.
The key takeaway is that the JCPOA creates significant opportunities for non-US companies, but limited opportunities for US companies, in Iran: US nationals and companies remain largely prohibited from doing business with Iran, while non-US persons (particularly EU companies, which since 2010 have been subject to substantial restrictions) will neither be subject to home country limitations nor the threat of secondary US sanctions. The silver lining for US firms is that a new General License H (“GL H”) allows a US company’s existing foreign-established subsidiaries to re-enter Iran.1
Sanctions that Were Lifted
The US government has lifted only nuclear-related “secondary sanctions,” which are sanctions targeting non-US firms that engaged in a range of enumerated activities in Iran’s energy, petrochemical, financial, automotive, and transportation sectors in Iran. In particular, the following activities are no longer sanctionable for non-US persons, provided that such activities do not involve persons or entities on OFAC’s “Specially Designated National” (“SDN”) List.
Energy and Petrochemical Sectors:
- Purchase, acquire, sell, transport, or market Iranian crude oil.
- Invest in Iran’s oil, gas, or petrochemical sectors, including through participation in joint ventures.
- Provide goods, services, or technology in connection with Iran’s energy sector.
- Purchase, acquire, sell, transport, or market petroleum, petroleum products, petrochemical products, and natural gas from Iran, and provide associated services.
- Export, sell, or provide refined petroleum products and petrochemical products to Iran.
Financial Services and Banking:
- Engage in financial and banking transactions with individuals and entities removed from the SDN List and other sanctions lists. Individuals and entities that the US government removed on Implementation Day include the Central Bank of Iran and most other Iranian financial institutions, NIOC, NICO, NITC, and others specified in Attachment 3.
- Open and maintain correspondent accounts for Iranian financial institutions removed from the SDN List on Implementation Day.
- Provide financial messaging services to the CBI and other Iranian financial institutions removed from the SDN List on Implementation Day.
- Engage in transactions and other activity related to the Iranian rial.
- Sell, supply, or transfer goods and services used in connection with Iran’s automotive sector. However, non-US persons and US persons continue to be prohibited from exporting or re-exporting US-origin finished vehicles or U.S.-origin auto parts to Iran.
Shipping, Shipbuilding, and Port Sectors:
- Sell, supply, or transfer to or from Iran significant goods or services used in connection with Iran’s shipping and shipbuilding sectors, including port services such as bunkering, inspection, classification, and financing.
- Own, operate, control, or insure a vessel used to transport crude oil, petroleum products, petrochemical products, or natural gas.
- Provide underwriting services, insurance, or reinsurance for activities consistent with the JCPOA.
Sanctions that Remain in Effect
While the JCPOA’s easing of most secondary sanctions affords substantial latitude for non-US firms to do business with Iran, primary sanctions continue to broadly prohibit US firms from directly engaging in most transactions with Iran.
Non-nuclear sanctions adopted in response to Iranian support for terrorism, proliferation of WMD, and human rights abuses will also remain in force. The Obama Administration’s intent to limit sanctions relief to nuclear-related sanctions is made evident by the fact that in parallel to easing such sanctions, it imposed additional sanctions on certain entities and individuals involved in procurement on behalf of Iran’s ballistic missile program.
Finally, while most secondary sanctions were lifted, some remain. Most notably, these include sanctions for non-US persons who deal with persons or entities on the SDN List.
General License for US-Owned or -Controlled Foreign Entities
The only significant reduction in the scope of sanctions for most US companies derives from General License H, which authorizes (with a few exceptions) foreign subsidiaries of US companies to engage in transactions involving Iran. GL H does not authorize the following activities:
- The direct or indirect exportation or re-exportation of goods, technology, or services from the United States.
- Any transfer of funds to, from, or through the U.S. financial system.
- Any transactions with individuals or entities on the SDN List or any other sanctions lists.
- Activities related to Iran’s proliferation of WMD, support for international terrorism, or human rights abuses.
The primary US sanctions continue to prohibit US companies and US nationals from “facilitating” any activity by a foreign person involving Iran that a US person is prohibited from undertaking. This means that, unless authorized, no US parent company, and no US person employed by the parent company or one of its foreign subsidiaries, can provide any direction or support services to a foreign subsidiary seeking to engage in Iranian business within the scope of GL H.
Recognizing the reality of integrated operations in multinational companies, GL H contains the following two measures to help enable a foreign subsidiary to independently address business opportunities in Iran while ensuring that the US parent, other US affiliates, and U.S. nationals are not improperly involved. First, GL H permits the US parent to amend corporate policies and procedures to the extent necessary to allow US-owned or -controlled foreign entities to engage in activities authorized under GL H (for example, by establishing mechanisms to recuse US persons from being involved in such activity). Second, it authorizes the US parent to make available to those foreign entities any automated and globally integrated computer and business support systems necessary to store, collect, transmit, generate, or otherwise process documents or information related to transactions authorized under GL H.
Implications for US-Based Companies
US firms will remain largely prohibited from doing business in Iran. There are opportunities for US firms with foreign subsidiaries that are able to operate in Iran independently of US parent involvement, provided that such activities are undertaken consistent with the terms of OFAC’s GL H.
Implications for Non-US Companies
The lifting of US nuclear-related secondary sanctions (and parallel easing of the EU sanctions) presents opportunities for non-US firms to enter the Iranian market and engage in a wide variety of business dealings. Non-US firms should continue to be mindful that US goods and services cannot be involved in such activity (including most notably US dollar clearing by US financial institutions).
1 A US person is defined as any United States citizen, permanent resident alien, or any entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States. See 31 C.F.R. § 560.314.
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