May 9, 2018
By: Saskia Rietbroek, Principal, SanctionsAlert.com
On May 8, 2018, President Trump announced that the U.S. would be withdrawing from the Iran nuclear deal. The agreement, officially known as the Joint Comprehensive Plan of Action (JCPOA), was reached in 2015 by Iran and major world powers – U.K., China, France, Germany, Russia and the U.S (the ‘P5’) in hopes of halting Iran’s nuclear capabilities. The decision to withdraw leaves the JCPOA in tatters and creates a host of new challenges for sanctions compliance officers worldwide.
“It has turned my world upside down,” says a compliance officer from an international insurance company.
The U.S. government says it will restore the strict sanctions it imposed on Iran before the 2015 deal and is considering new penalties. It is important to note that the JCPOA is not a treaty, but rather a political arrangement put into force largely through presidential executive orders, which the President can revoke without the approval of Congress.
Mr. Trump’s decision to restore nuclear-related sanctions is effective immediately, and will affect many industries, including aircraft, oil and gas, banking.
OFAC FAQs Signal Important Compliance Deadlines
The same day, the Office of Foreign Assets Control (OFAC) issued FAQs to try and clarify its position. Among other things, it states that it will give businesses time – either 90 days or 180 days – for an “orderly wind down of activities.” The FAQs also identify some key deadlines for compliance:
August 6, 2018: sanctions are re-imposed and enforcement begins on:
- Purchase or acquisition of U.S. dollar banknotes by the Government of Iran; Issued on May 8, 2018;
- Trade in Iran’s gold or precious metals;
- 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 or accounts outside the territory of Iran denominated in the Iranian rial;
- Purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt;
- Iran’s automotive sector;
- Importation into the U.S. of Iranian-origin carpets and foodstuffs and certain related financial transactions pursuant to general licenses under the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR); and
- Activities undertaken pursuant to specific licenses issued in connection with the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services (JCPOA SLP).
November 4, 2018: sanctions are re-imposed and enforcement begins on:
- Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Rep Islamic Republic of Iran Shipping Lines (IRISL), South Shipping Line Iran, or their affiliates;
- Petroleum-related transactions with, among others, the National Iranian Oil Company (NIOC), Naftiran Intertrade Company (NICO), and National Iranian Tanker Company (NITC), including the purchase of petroleum, petroleum products, or petrochemical products from Iran;
- Transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions under Section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (NDAA);
- Specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions described in Section 104(c)(2)(E)(ii) of the Comprehensive Iran Sanctions and Divestment Act of 2010 (CISADA);
- Underwriting services, insurance, or reinsurance; and
- Sanctions on Iran’s energy sector.
Persons engaging in activity undertaken pursuant to the U.S. sanctions relief provided for in the JCPOA should take the steps necessary to wind down those activities by either August 6, 2018, or November 4, 2018, as applicable, to avoid exposure to sanctions or an enforcement action under U.S. law.
The Survival of the JCPOA May Depend on Global Committment
Though U.S. withdrawal from the JCPOA will make a serious impact on the world, the future of the JCPOA largely depends on the reaction of its other signatories. For now, the U.K., China, France, Germany and Russia remain parties to the agreement.
On May 8th, shortly after the U.S. announcement to withdraw, the leaders of France, the U.K., and Germany issued a statement saying that “It is with regret and concern that we, the Leaders of France, Germany and the United Kingdom take note of President Trump’s decision to withdraw the United States of America from the Joint Comprehensive Plan of Action. Together, we emphasise our continuing commitment to the JCPoA.”
If all remaining parties to the deal agree to maintain it, the fall-out resulting from there instatement of U.S. sanctions may be less severe.
Key Documents and Resources
SanctionsAlert.com has collected a few resources that may serve as further guidance for sanctions compliance officers:
- Remarks by President Trump on the Joint Comprehensive Plan of Action (May 8, 2018)
- PRESIDENTIAL MEMORANDA – Ceasing U.S. Participation in the JCPOA and Taking Additional Action to Counter Iran’s Malign Influence and Deny Iran All Paths to a Nuclear Weapon (May 8, 2018)
- OFAC FAQs (May 8, 2018)
- OFAC Statement (May 8, 2018)
- Department of Treasury Press Release (May 8, 2018)
- Statement from Mike Pompeo, Secretary of State (May 8, 2018)
- Joint statement from Prime Minister May, Chancellor Merkel and President Macron following President Trump’s statement on Iran (May 8, 2018)