I. Introduction

On Tuesday, May 8, President Trump announced that the United States would end its participation in the Joint Comprehensive Plan of Action (JCPOA), signed by the Permanent Five Members of the Security Council plus Germany ("P5+1") and Iran in July 2015, and incorporated into United Nations (UN) Security Council Resolution 2231.1 The President also issued a National Security Presidential Memorandum (NSPM) directing the Secretaries of State and the Treasury to "immediately begin taking steps" to reimpose all of the U.S. sanctions lifted or waived in response to Iran's nuclear concessions under the JCPOA. Under pre-existing legislation, waivers of U.S. sanctions were due periodically, and President Trump took the occasion of one such waiver's expiration on May 12 to withdraw the United States completely from the deal. Concurrently, the U.S. Department of the Treasury published Frequently Asked Questions (FAQs) describing the sanctions that will be re-imposed and providing guidance concerning wind-down periods for activities that were previously authorized by actions implicating JCPOA. While the FAQs provided some assistance to companies that must now manage a wind-down of their Iran-linked business relationships, important questions about the new environment remain.

II. State of Iran Sanctions Prior to President Trump's Announcement

The JCPOA broadly traded Iranian concessions on its nuclear program for sanctions relief by the United States, Europe, and the UN. The sanctions relief under the JCPOA had three main components. First, the EU and U.S. removed a significant number of individuals and entities from the sanctions lists on which they appeared. Parties de-listed in January 2016, pursuant to the JCPOA, included many of Iran's largest state-owned banks, the National Iranian Oil Company (NIOC) and other petroleum-related companies, the Islamic Republic of Iran Shipping Lines (IRISL) and National Iranian Tanker Company (NITC), Iran's national air carrier, Iran Air, and many others. Second, the EU lifted most sanctions on Iran, retaining only those that had been imposed in response to concerns over non-nuclear related issues such as Iran's missile technology, human rights abuses, and support for international terrorism. Third, and perhaps most significantly, the United States waived the application of most (but not all) of its secondary sanctions, thereby removing risks that had impeded foreign companies from pursuing commercial opportunities in Iran, even when such activities neither had any U.S. nexus, nor violated EU sanctions. While the United States left most of its primary sanctions in place, it did ease restrictions applicable to foreign subsidiaries of U.S. companies.

III. Tuesday's Action

President Trump, in his May 8 announcement, stated that the United States is terminating U.S. participation in the JCPOA because the "Iran deal is defective at its core."2 President Trump directed his Administration to immediately begin the process of re-imposing sanctions related to the JCPOA, including by targeting industries that had been the subject of sanctions before the adoption of the JCPOA.3 Specifically, the United States will reimpose the core secondary sanctions imposed by a series of statutory measures spanning over a decade.4 The sanctions imposed by these statutes focus on the energy, petrochemical, financial services, shipping, insurance, precious metals and other core sectors of the Iranian economy. The Administration's action effectively resets the U.S. approach to Iran to the situation that prevailed prior to the JCPOA.

The President further directed that the Departments of State and the Treasury re-impose all sanctions within either 90 or 180 days from May 8, 2018, and designated the period from May 8 until then as a wind-down period to allow companies to terminate activities with Iran that were previously authorized pursuant to the JCPOA. President Trump also directed that steps taken to re-impose sanctions "should be accomplished in a manner that, to the extent reasonably practicable, shifts the financial burden of unwinding any transaction or course of dealing primarily onto Iran or the Iranian counterparty." The Department of the Treasury stated that decisions about enforcement actions against any firm after the wind-down periods will take into account whether the firm took appropriate action to reduce ties to Iran during the relevant wind-down periods.5

FAQs published by the Department of the Treasury's Office of Foreign Assets Control (OFAC) after the President's announcement answer some questions about the re-imposition of sanctions and the expectations of the U.S. government during the wind-down periods. The FAQs specifically noted that the following sanctions, among others, will "snap back" into place after either a 90- or 180-day wind-down period:

After a 90-day wind-down

  • Sanctions on, among other things, the purchase or acquisition of U.S. dollar banknotes by the Government of Iran, sanctions on Iran's trade in gold or precious metals, and sanctions on the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt.6

After a 180-day wind-down

  • Sanctions adopted pursuant to the 2012 National Defense Authorization Act (NDAA) designed to reduce exports of Iranian crude oil.7
  • Sanctions on the provision of specialized financial messaging services to Iranian financial institutions (e.g., through the SWIFT systems).8
  • Sanctions on Iran's port operators, shipping companies, petroleum companies, underwriting and insurance companies, and energy companies.9

Within a 180-day wind-down

  • OFAC will re-impose the sanctions that applied to persons removed from the Specially Designated Nationals and Blocked Persons (SDN) List and/or other lists maintained by OFAC on January 16, 2016.10
  • OFAC expects to move persons identified as meeting the definition of "Government of Iran" or "Iranian financial institution" from the List of Persons Blocked Solely Pursuant to E.O. 13599 to the SDN List.11

Additionally, OFAC will revoke the following licenses or statements of licensing policy:

After a 90-day wind-down

  • General licenses authorizing the importation of, and dealings in, certain foodstuffs and carpets, and letters of credit and brokering services relating to such imports.12
  • Licenses required to engage in economic activities in Iran or involving Iranian counterparties, including licenses issued pursuant to the JCPOA's Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services.13

After a 180-day wind-down

  • General License H, which allowed certain foreign subsidiaries of U.S. companies to engage in limited activities regarding Iran.14

IV. Strategic Questions for the U.S., Iran, European Union, and Others

Iran, the United States, the EU, and others, including Japan, South Korea, and China, face difficult strategic questions in the aftermath of the U.S. withdrawal from the JCPOA. Notably, Iran must decide its next steps—principally, whether to continue abiding by the nuclear restrictions embodied in the JCPOA. On May 8, President Hassan Rouhani stated that Iran would remain committed to the deal despite the U.S.'s withdrawal, if Iran "achieve[s] the deal's goals in cooperation with other members of the deal." If it continues to play by the JCPOA's rules, Iran may send a message that it has abided by the rules while the United States has not in an attempt to drive a wedge between the United States and its European allies.

Iran may also choose to avail itself of the JCOPA's dispute resolution mechanism, which has not been publicly used thus far. While the United States may choose not to participate in this process—and may even argue that it is not subject to the dispute settlement rules now that it has withdrawn from the agreement—the process may push the EU to formally acknowledge the United States' noncompliance with the JCPOA, creating further cleavages between the United States and the EU.

The United States must decide its enforcement posture once the 90- and 180-day wind-down periods are over. During the period from 1996 to 2010, the United States did not impose secondary sanctions on Iran authorized by the Iran Sanctions Act, and, despite Congress enhancing secondary sanctions authority under the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, secondary sanctions were imposed sparingly from then until the JCPOA.15 But President Trump has indicated that his Administration will aggressively enforce the reinstated secondary sanctions,16 including an announcement that more Iranian sanctions may come as early as next week.17 While foreign companies and governments would be wise to take these statements into account, the Administration will face diplomatic and economic pressure when it actually comes time to enforce the new sanctions against a company doing business in Iran that might have its principal place of business in the territory of a close ally.

Going forward, the EU also has important decisions to make. EU leaders have already articulated their commitment to the JCPOA.18 But being committed to the JCPOA means (at a minimum) allowing European companies to do business in Iran, thereby placing those companies directly in the crosshairs of revived U.S. secondary sanctions. European political leaders therefore have difficult decisions to make about what guidance to give companies about doing business in Iran and whether to offer any legal protections, in the form of "blocking" sanctions, to these companies.19 Compounding these challenges, the EU's decisions will have to come at a time when it is already engaged in negotiations with the U.S. over its decision to increase tariffs on imports of steel and aluminum, which could significantly impact EU exports of these products.

Japan, South Korea, and China will also have difficult decisions to make regarding the risk that secondary sanctions will pose to their companies. If they choose to keep buying oil and related petroleum products from Iran, they can push for exemptions under the secondary sanctions authorities, but there is no guarantee any such exemptions will be forthcoming. And if they are not, those countries risk a situation in which the U.S. may impose secondary sanctions on banks or businesses located in close allies (Japan and South Korea), or against firms in a country that has the capacity to retaliate against important U.S. interests (China).

All parties must also determine how much to invest in renewed diplomatic activities surrounding the JCPOA. While the Trump Administration has said that it is open to renewed negotiations, it is not clear what the substance of such talks will be.

V. Compliance Concerns for the Private Sector

In addition to the strategic and diplomatic challenges outlined above, the United States' withdrawal from the JCPOA will have significant implications for companies whose business activities involving Iran had been effectively authorized by U.S. sanctions waivers and licensing since January 2016. A first challenge will come with wind-down activities themselves. U.S. and non-U.S. companies should take appropriate action to terminate commercial relationships with Iran during the applicable wind-down periods, including by concluding existing contracts.20 But companies that did not have effective sanctions-related provisions in their contracts may face commercial challenges in attempting to unwind their business. OFAC will likely issue further guidance on the scope of authorized activities during the wind-down periods in the coming weeks.

A second challenge will be the divergence in approach between the U.S. and its major trading partners, particularly in Europe and Asia. International financial institutions are likely to take a conservative approach and will avoid running afoul of U.S. sanctions, even inadvertently, and even when technically authorized to engage in a particular transaction. Some companies will remain authorized to conduct limited commercial activities with Iran, and particularly with respect to the petrochemical industry. Others may simply ignore U.S. threats to impose secondary sanctions and remain in the Iranian market. Managing such risks in dealings with commercial partners that have different approaches and appetites for continuing business with Iran will likely pose significant challenges for international financial institutions and global companies.

VI. Conclusion

The U.S. withdrawal from the JCPOA greatly complicates diplomatic and commercial activities surrounding Iran. It will likely enhance tensions not only between Iran and the United States, but also between the United States and the EU, and between the United States and countries like Russia and China. Having played a significant hand against the JCPOA, the United States will have to determine whether it will double down in adopting an aggressive enforcement posture, including by imposing secondary sanctions on foreign entities for doing business in Iran. The wind-down periods present an important time for U.S. and non-U.S. companies to assess their exposure to U.S. sanctions against Iran and to prepare for the re-imposition of pre-JCPOA prohibitions.


1 See generally S.C. Res. 2231 (July 20, 2015).

2 President Donald J. Trump, Remarks by President Trump on the Joint Comprehensive Plan of Action (May 8, 2018).


4 NATIONAL SECURITY PRESIDENTIAL MEMORANDUM/NSPM-11, CEASING UNITED STATES PARTICIPATION IN THE JOINT COMPREHENSIVE PLAN OF ACTION AND TAKING ADDITIONAL ACTION TO COUNTER IRAN'S MALIGN INFLUENCE AND DENY IRAN ALL PATHS TO A NUCLEAR WEAPON (2018). These sanctions were put in place by the National Defense Authorization Act for Fiscal Year 2012, the Iran Threat Reduction and Syria Human Rights Act of 2012, the Iran Freedom and Counter-proliferation Act of 2012, and the Iran Sanctions Act of 1996.

5 OFFICE OF FOREIGN ASSET CONTROLS, DEP'T OF THE TREASURY, FREQUENTLY ASKED QUESTIONS REGARDING THE RE-IMPOSITION OF SANCTIONS PURSUANT TO THE MAY 8, 2018 NATIONAL SECURITY PRESIDENTIAL MEMORANDUM RELATING TO THE JOINT COMPREHENSIVE PLAN OF ACTION (JCPOA), 2.2 (2018) [hereinafter FAQ] ("When considering a potential enforcement or sanctions action with respect to activities engaged in after August 6, 2018, or November 4, 2018, as applicable, OFAC will evaluate efforts and steps taken to wind down activities and will assess whether any new business was entered into involving Iran during the applicable wind-down period.").

6 FAQ 1.2.

7 FAQ 5.1.

8 Id.

9 FAQ 1.3.

10 FAQ 3.1.

11 Id.

12 FAQ 4.5.

13 FAQ 4.1–4.5.

14 FAQ 4.4.

15 See, e.g., Press Release, U.S. Dep't of Treasury, Treasury Sanctions Kunlun Bank in China and Elaf Bank in Iraq for Business with Designated Iranian Banks (July 31, 2012); U.S. Dep't State, Press Release, Three Companies Sanctioned Under the Amended Iran Sanctions Act (Jan. 12, 2012); U.S. Dep't State, Press Release, Seven Companies Sanctioned Under the Amended Iran Sanctions Act (May 24, 2011).

16 President Donald J. Trump, Remarks by President Trump on the Joint Comprehensive Plan of Action (May 8, 2018) ("We will be instituting the highest level of economic sanction. Any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States").

17 Sarah Huckabee Sanders, White House Press Secretary, Daily Press Briefings (May 9, 2018).

18 Press Release, Prime Minister's Office, United Kingdom, Joint statement from Prime Minister May, Chancellor Merkel and President Macron Following President Trump's Statement on Iran (May 8, 2018).

19 See Patrick Wintour, EU Moves to Protect European Firms from US Sanctions on Iran, THE GUARDIAN (May 9, 2018).

20 FAQ 2.1-2.2.

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