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Implementation Day Is Here – So What Now?

Implementation Day Is Here – So What Now?

On 16 January 2016 certain EU and US sanctions against Iran were lifted, paving the way for Western companies to do business there. But with a World Bank report ranking Iran at 118 out of 189 countries in terms of ease of doing business, will the road to business success in Iran be smooth?

EU Sanctions - what is now allowed?

Most oil and gas related activities which were prohibited will now be allowed, and restrictions on certain persons, entities or bodies that were subject to asset freezes and travel bans due to their involvement in Iranian oil and gas activities have been removed. 

EU Sanctions - what remains prohibited/requires authorisation?

Certain individuals, entities or bodies will remain subject to asset freezes and travel bans. The export of goods which could be diverted to nuclear proliferation uses requires a licence, as does the export of products which could be used in connection with Iran’s military programme or for the benefit of the Iranian Revolutionary Guard Corps. The supply of goods and technology on the Missile Technology Control Regimes List (included in the UK Military List and the EU Dual Use List) remains prohibited. Export of certain precious metals such as graphite and raw or semi-finished metals also requires a licence.

US Sanctions

Most secondary US sanctions will be lifted. This means that there will no longer be US restrictions placed on non-US companies or persons when dealing with the Iranian oil and gas sector, unless the non-US companies or persons are subsidiaries of US companies or are subject to US primary sanctions. Overseas subsidiaries of US companies may be able to obtain a licence in certain circumstances. (See our previous blog here for more details)

What will happen if Iran doesn’t fulfil its side of the bargain?

Here the terms of the deal have been widely criticised as ambiguous and contradictory. In short the EU and US may re-introduce any of the sanctions which have been lifted if Iran fails to fulfil any of its commitments under the deal. Whilst the EU has said that protection will be provided for ongoing contracts concluded while sanctions relief was in force,  the US government has suggested that it will not “grandfather” long term agreements entered into after sanctions were lifted and before snapback. This means that any activities pursued after reinstatement of US sanctions could mean breach of US law, regardless of any contracts in place during the period of relief. 

Careful consideration will need to be given to contract wording to guard against the possibility of reinstatement of EU and/or US sanctions.

Is it all plain sailing from here?

Despite the clear business opportunities sanctions relief brings, the different culture in Iran may present Western businesses with some further compliance hurdles. The TI Corruption Perceptions Index ranks Iran high in terms of risk of exposure to corruption. As such, any UK business in Iran should be supported by a robust Anti Bribery and Corruption Programme. 

The JCPOA is undoubtedly one of the most important political and diplomatic deals for decades. That said, the success of the deal will be driven largely by Iran’s commitment to keeping its side of the bargain, and with tensions mounting in the Middle East, only time will tell if the deal will succeed.

Lynne Moss
Senior Associate

LChalmers