AIC's General Counsel, Steptoe & Johnson LLP, published an important analysis of sanctions relief following the recently-signed nuclear accord.
Ed Krauland, Anthony Rapa, Bibek Pandey, Jack Hayes, Stephen Heifetz, Meredith Rathbone, Alexis Early, Andy Irwin, Richard Battaglia, Maury Shenk, Jeffrey Cottle, Helen Aldridge, and Guy Soussan
On July 14, 2015, the “P5+1” countries (the United States, the United Kingdom, France, China, Russia, and Germany, also referred to as the “the E3/EU+3”) announced an agreement to curtail significantly Iran’s nuclear program in exchange for providing phased economic sanctions relief. The Joint Comprehensive Plan of Action (JCPOA) creates a framework, subject to International Atomic Energy Agency (IAEA) monitoring, under which Iran will cease certain non-compliant nuclear activities and develop its civil nuclear energy program over a period of 15 years. See Annex I, Annex II (with attachments), Annex III, Annex IV, and Annex V to the JCPOA. See also our previous international law advisories regarding Iran sanctions.
The JCPOA calls for Iran to take certain initial steps with regard to its nuclear program in exchange for sanctions relief. Once the IAEA certifies that Iran has taken these steps – a process that is expected to take several months – the United States and European Union will lift many (but not all) economic sanctions targeting major sectors of the Iranian economy, including the energy, financial, shipping, shipbuilding, and automotive industries. The United States and European Union also will remove certain individuals, entities, vessels, and aircraft from sanctions lists. In parallel, the P5+1 have also committed to pass a UN Security Council resolution to lift provisions of previous resolutions regarding the Iranian nuclear program.
Most of the US sanctions relief is directed at “secondary” sanctions applicable to non-US persons, with a narrower class of relief applicable to US persons and foreign entities owned or controlled by US persons. Most of the agreed-upon sanctions relief will occur when the IAEA verifies that Iran has implemented measures to restrict its uranium enrichment, nuclear fuel reprocessing, and production and storage of fissile material; additional sanctions relief will occur much later, upon further verification of Iran's peaceful nuclear development years down the road. Notably, most aspects of the US embargo against Iran, which restricts most trade between US persons (and their foreign subsidiaries) and Iran, will remain intact except as noted below. The United States also will leave intact certain secondary sanctions imposed due to Iran’s human rights record, support for terrorism, and proliferation of weapons of mass destruction.
The EU sanctions relief is much broader than the US sanctions relief, and will eventually lift all of the EU sanctions on Iran. The initial round of sanctions relief will lift restrictions on Iran-related funds transfers, trade finance, and insurance; imports of Iranian crude oil, natural gas, and petrochemicals, as well as investment in, and exports of key equipment to, those industries; Iran-related trade in gold and precious metals; and trade related to the shipping and shipbuilding industries. Later on, following further IAEA verification of Iran’s compliance with the JCPOA – a period that could take up to eight years – the European Union will lift restrictions on exports of dual-use items, certain industrial metals, and certain software. Finally, ten years after the initial adoption of the JCPOA, the EU will lift remaining sanctions related to nuclear proliferation.
Until sanctions relief is triggered under the JCPOA, the temporary sanctions relief set out in the preliminary Joint Plan of Action (JPOA) remains effective. To read more about the current state of Iran sanctions relief, please see Steptoe’s alert on the JPOA here (and subsequent updates here, here, and here.) See also a statement on the JCPOA released by the US Treasury Department, Office of Foreign Assets Control (OFAC) and Frequently Asked Questions guidance issued by the UK Foreign & Commonwealth Office.