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US Announces Withdrawal from JCPOA

Today, President Trump announced his intention to withdraw the United States from the Joint Comprehensive Plan of Action (JCPOA) and to impose the “highest level of economic sanctions” on Iran. The Office of Foreign Assets Control quickly thereafter published FAQs that discuss how the sanctions will be implemented.

Importantly, the President’s announcement was not only limited to a decision not to renew a waiver under Section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (NDAA) that was to expire on May 12, but also applies to all waivers covered by the JCPOA under other statutory provisions as well. The effect will be to “snap back” all of the sanctions that were previously in place prior to implementation of the JCPOA.

There will, however, be a delayed implementation of the snap-back, with a 90-day wind down period for some activities, and a 180-day wind down for others.

By August 6, 2018, the following sanctions will be fully reinstated:

  • Sanctions on the purchase or acquisition of U.S. dollar banknotes by the Government of Iran;
  • Sanctions on Iran’s trade in gold or precious metals;
  • Sanctions on the 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;
  • Sanctions on 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;
  • Sanctions on the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt; and
  • Sanctions on Iran’s automotive sector.

Following the 90-day wind down period, OFAC will revoke the specific licenses it has issued authorizing activities undertaken in connection with the Statement of Licensing Policy for Commercial Aircraft. OFAC indicated it would consider resubmission of license requests related to safety of flight and did not revoke General License J, which allows for temporary sojourn of commercial aircraft on scheduled flights by non-U.S. carriers into Iran.

By November 5, 2018, the following sanctions will be reinstated:

  • Sanctions on Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines (IRISL), South Shipping Line Iran, or their affiliates;
  • Sanctions on 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;
  • Sanctions on transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions under Section 1245 NDAA;
  • Sanctions on the provision of 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);
  • Sanctions on the provision of underwriting services, insurance, or reinsurance; and
  • Sanctions on Iran’s energy sector.

Also effective November 5, OFAC will revoke General License H, which has authorized foreign subsidiaries of US companies to engage in transactions with Iran under limited conditions.

Finally, effective November 5, the US government will re-impose sanctions that applied to persons removed from the List of Specially Designated Nationals and Blocked Persons (SDN List) and/or other lists maintained by the US government on January 16, 2016.

Additional details on how the snap back will be implemented likely will be published in the coming weeks.

Today’s announcement significantly changes the landscape regarding Iran. It is possible the wind down periods will be used as a tactic to press for European support of the US position, as European companies will be exposed when the sanctions are re-imposed. If so, it is possible there could be further extensions of the wind down periods to accommodate specific situations, but this should not be considered likely. The EU has taken the position that it will continue to observe the JCPOA as long as Iran remains compliant.