Sanctions Against Iran: Changing, Not Gone

July 21, 2015

On July 14, the P5+1 powers reached an agreement (the “JCPOA”) easing sanctions on Iran in return for restrictions on Iran’s nuclear program. The JCPOA was endorsed by the US Security Council on July 20, 2015. While some of the details remain unclear, and U.S. authorities have promised that additional guidance is forthcoming, the attached memorandum focuses on providing a general overview of the sanctions aspects of the agreement.

In summary:

  • The JCPOA provides no sanctions relief prior to the date on which the International Atomic Energy Agency (IAEA) certifies that Iran has completed a number of steps to constrain its nuclear activities (the “Implementation Day”). The effective date of sanctions relief is months away, and it is unlikely to occur before the end of the year.
  • The U.S. Congress now has roughly a two-month period to review the JCPOA, but action to block it would require a supermajority of both houses of Congress.
  • When the Implementation Day occurs, most significant EU and UN sanctions against Iran will be suspended.
  • Also upon the Implementation Day, many U.S. secondary sanctions against Iran (targeting companies dealing with Iran outside U.S. jurisdiction) will be suspended, most notably those targeting the Iranian energy sector and financial sector.
  • However, U.S. direct sanctions will remain in force, meaning that dealings with Iran within U.S. jurisdiction, importantly including any U.S. dollar clearing operations involving Iranian interests, will remain prohibited. U.S. interests generally will not be able to do business in Iran.
  • Moreover, a much more limited but still significant framework of U.S. secondary sanctions targeting dealings involving specific Iranian actors and activities will remain in place, introducing compliance complexities for non-US transactions.

Should there be a dispute over whether the JCPOA has been breached, there is a political dispute resolution mechanism. However, if agreement is not reached, individual countries remain free to re-impose sanctions. The precise “snap-back” mechanism at national level remains unclear; any re-imposition of sanctions may or may not be co-extensive with current sanctions.