Keywords: United States, six-month suspension, sanctions, Iran, nuclear program

On January 20, 2014, the US government (USG) issued guidance relating to the temporary suspension of certain US sanctions against Iran in order to implement the Joint Plan of Action (JPOA) agreed to on November 24, 2013 between Iran and the P5+1 (United States, United Kingdom, France, Russia, China, and Germany). In exchange for concessions by Iran related to its nuclear program, the United States is providing Iran with limited, targeted, and reversible sanctions relief.

Sanctions relief is limited to a six-month period beginning January 20, 2014, and ending on July 20, 2014 (JPOA Period). The temporary suspension of sanctions applies only to activities that are initiated and fully completed within this six-month period, including all aspects of the transaction, such as execution of contract, delivery, and payment. Except as otherwise noted, none of the permissible transactions summarized below may involve persons on the Specially Designated Nationals and Blocked Persons List maintained by the Office of Foreign Assets Control (OFAC SDN List), unless they are Iranian financial institutions designated solely pursuant to Executive Order (EO) 13599 (identified only with the tag [Iran] on the OFAC SDN List). Certain associated services ordinarily incident to an underlying activity for which sanctions relief has been provided are not sanctionable during the JPOA Period, such as the provision of insurance and reinsurance. However, aside from this limited exception, sanctions on the provision of insurance and reinsurance for certain types of activities involving Iran remain in effect.

US persons (including non-US entities owned or controlled by US persons) remain subject to current sanctions against Iran, with a limited exception for licensed transactions to ensure the safe operation of Iranian commercial passenger aircraft and to enable payments for certain humanitarian transactions. In addition, US persons must not facilitate activities permitted to be engaged in only by non-US persons under the JPOA.

The USG retains the authority to revoke this limited sanctions relief at any time if Iran fails to meet its commitments under the JPOA.

Limited Suspension of Sanctions

During the JPOA Period, the USG is suspending sanctions on non-US Persons with respect to the following activities involving Iran, summarized briefly below. Except as noted, the suspension does not apply to US persons.

IRAN'S EXPORT OF PETROCHEMICAL PRODUCTS

  • Sanctions are suspended on purchases of petrochemical products exported from Iran as well as associated services that are required to facilitate such transactions.1
  • Transactions may involve 14 petrochemical companies on the OFAC SDN List as identified by the USG, as long as the transactions are exclusively for the export of petrochemical products from Iran. To this extent, non-US persons will not be sanctioned for materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of, these 14 companies for the export of petrochemical products from Iran.
  • Foreign financial institutions will not be sanctioned for conducting or facilitating financial transactions related to purchases of petrochemical products exported from Iran provided that the transactions do not involve persons on the OFAC SDN List, other than the 14 petrochemical companies identified by the USG, and other than any Iranian financial institution listed solely pursuant to EO 13599.
  • All other sanctions on transactions with respect to Iran's petrochemical industry remain in place.

PROVISION OF GOODS AND SERVICES TO IRAN'S AUTOMOTIVE SECTOR

  • Sanctions are suspended on the sale, supply, or transfer to Iran of goods (including complete knock-down kits) and services (including shipping, warranty, insurance, and maintenance services) used in connection with the automotive sector, as well as associated services that are required to facilitate such transactions.
  • Foreign financial institutions will not be sanctioned for conducting or facilitating financial transactions related to the sale of goods and services to Iran used in connection with the automotive sector, provided that the transactions do not involve persons on the OFAC SDN List, other than any Iranian financial institution listed solely pursuant to EO 13599.

GOLD AND OTHER PRECIOUS METALS TRANSACTIONS WITH IRAN

  • Sanctions are suspended on the sale to and purchase from Iran of gold and other precious metals, as well as associated services that are required to facilitate such transactions. To this extent, non-US persons will not be sanctioned for materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of, the sale to Iran or the purchase or acquisition from Iran of gold and other precious metals, provided that the funds for these purchases are not drawn from Restricted Funds.2 The transactions must not involve persons on the OFAC SDN List, other than any political subdivision, agency, or instrumentality of the Government of Iran listed solely pursuant to EO 13599, and other than any Iranian financial institution listed solely pursuant to EO 13599.
  • Foreign financial institutions will not be sanctioned for conducting or facilitating financial transactions for the sale to Iran or the purchase or acquisition from Iran of gold and other precious metals, provided that the funds for these purchases are not drawn from Restricted Funds. The transactions must not involve persons on the OFAC SDN List, other than any political subdivision, agency, or instrumentality of the government of Iran listed solely pursuant to EO 13599, and other than any Iranian financial institution listed solely pursuant to EO 13599.

IRAN'S EXPORT OF CRUDE OIL AND REPATRIATION OF REVENUE

  • China, India, Japan, the Republic of Korea, Taiwan, and Turkey are permitted to maintain their current average levels of imports of crude oil from Iran.
  • Sanctions are suspended on transactions for the export of petroleum and petroleum products from Iran to China, India, Japan, the Republic of Korea, Taiwan, or Turkey, as well as on associated insurance and transportation services, provided that the transactions do not involve persons on the OFAC SDN List, other than the National Iranian Oil Company (NIOC) or the National Iranian Tanker Company (NITC), and other than any Iranian financial institution listed solely pursuant to EO 13599. To this extent, non-US persons will not be sanctioned for materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services to or in support of, exports of petroleum and petroleum products from Iran to China, India, Japan, the Republic of Korea, Taiwan, or Turkey, nor for associated insurance and transportation services.
  • Foreign financial institutions will not be sanctioned for conducting or facilitating financial transactions for the export of petroleum and petroleum products from Iran to China, India, Japan, the Republic of Korea, Taiwan, or Turkey, nor for associated insurance and transportation services, provided that the transactions do not involve persons on the OFAC SDN List, other than the NIOC or the NITC, and other than any Iranian financial institution listed solely pursuant to EO 13599.
  • Sanctions are suspended on a limited number of transactions for the release in installments of revenue (totaling $4.2 billion) to Iran for receipt at participating foreign financial institutions in selected jurisdictions. Foreign financial institutions will be notified in writing by the USG that an installment release is not sanctionable.
  • All other sanctions pertaining to the purchase of Iranian crude oil, investment in Iran's energy sector, and the provision of goods and services to Iran's energy sector, remain in place.

CERTAIN HUMANITARIAN TRANSACTIONS

  • The P5+1 and Iran are establishing financial channels to facilitate certain humanitarian transactions. These include the purchase of, and payment for, the export of food, agricultural commodities, medicine, and medical devices to Iran; medical expenses incurred abroad by Iranians; Iran's payments of its UN obligations; and payments for governmental tuition assistance for Iranian students studying abroad. Foreign financial institutions will be contacted directly by the USG and provided specific guidance concerning this new mechanism.
  • Preexisting exceptions for the export of food, agricultural commodities, medicine, and medical devices to Iran continue to be applicable.

LICENSED TRANSACTIONS TO ENSURE THE SAFETY OF IRAN'S CIVIL AVIATION INDUSTRY

  • OFAC has established a favorable licensing policy under which US persons (including USowned or controlled foreign entities) and non- US persons wishing to export US-origin goods can request a specific license to engage in transactions during the JPOA Period to ensure the safe operation of Iranian commercial passenger aircraft, including transactions involving Iran Air, but excluding all other Iranian airlines listed on the OFAC SDN List. Activities that may be licensed include the exportation and re-exportation of: (i) services related to the inspection of commercial aircraft and parts in Iran or a third country; (ii) services related to the repair or servicing of commercial aircraft in Iran or a third country; and (iii) goods or technology, including spare parts, to Iran or a third country.
  • Foreign financial institutions will not be sanctioned for conducting or facilitating financial transactions relating to these activities, provided that the transactions do not involve persons on the OFAC SDN List, other than Iran Air, and other than any Iranian financial institution listed solely pursuant to EO 13599.
  • Sanctions are suspended on non-US persons that materially assist, sponsor, or provide financial, material, or technological support for, or goods or services to or in support of, Iran Air in connection with activities intended to ensure the safe operation of Iranian commercial passenger aircraft, provided that such activities do not involve persons on the OFAC SDN List, other than Iran Air, and other than any Iranian financial institution listed solely pursuant to EO 13599.

Conclusion

In sum, although the short-term US suspension of certain sanctions against Iran will not affect US persons (including their foreign subsidiaries) outside the civil aviation arena and payments for certain humanitarian trade, there may be opportunities in selected areas for non-US persons to engage in commercial activities that had been prohibited. Nevertheless, the many restrictions that remain, and the prospect that even the limited suspension will expire in six months, counsel anyone pursuing Iran-related business to proceed with great caution. The guidance issued by the USG to implement the JPOA with Iran may be found at:

The European Union recently announced relaxation of Iran sanctions pursuant to the JPOA. For information about these changes, please see our Legal Update of January 16, 2014 at:

Footnotes

1. The term "associated service" means any necessary service – including any insurance, transportation or financial service – ordinarily incident to the underlying activity for which sanctions relief has been provided pursuant to the JPOA, provided that such service may not involve persons on the SDN List, except as otherwise noted above.

2. The term "Restricted Funds" refers to: (i) any existing and future revenues from the sale of Iranian petroleum or petroleum products, wherever they may be held, and (ii) any Central Bank of Iran ("CBI") funds, with certain exceptions for non-petroleum CBI funds held at a foreign country's central bank.

Originally published on 21 January 2014

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Originally published January 21, 2014

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