The signing of the Joint Comprehensive Plan of Action (or the “Iran Deal”) in 2015 was hailed as a significant milestone for international relations with Iran, and was seen as a means to encourage businesses worldwide to take advantage of commercial opportunities there. Weighty sanctions which had been in place for decades were lifted, opening the door for the possibility of significant investment and the introduction of new technology in Iran.

Regrettably, after 3 short years and many months of posturing on the issue, President Trump announced on 8th May 2018 that the US would withdraw from the Iran Deal, and that it would begin the process of reinstating all sanctions against Iran which were previously lifted. The UK, France and Germany have collectively reinforced their commitment to honour their side of the deal, so with no signs of the EU or UN following the US example, it will be for individual businesses to determine how they respond to the reinstatement of the US sanctions. However, the re-introduction of US sanctions could have significant implications for businesses and individuals already dealing with Iran.

Secondary Sanctions

For the US the focus of the Iran Deal was to relax certain “secondary sanctions”, which previously prevented non-US subsidiaries of US parent companies, or non-US companies owned or controlled by US persons, from doing business in Iran. The Iran Deal allowed such business to proceed under a general licence (General Licence H) provided certain conditions were met. Now that the US has withdrawn from the Iran Deal, such secondary sanctions will “snap back”, preventing affected non-US entities from doing business in Iran.

Any company or individual doing business in Iran will need to determine whether or not they are covered by these secondary sanctions. If the answer is not obvious, then that company or individual will need to ask itself whether or not it is willing to take the risk that the proposed activity could be prohibited under US law.

Winding Down Periods

There are 90 day and 180 day wind down periods which have been built into the Iran Deal. The first of these expired on 6th August 2018, and re-imposed certain sanctions related to purchase and/or acquisition of US dollar banknotes, trade in gold or precious metals and graphite, raw or semi-finished metals, amongst others.

The second of these wind down periods expires on 4th November 2018, and despite the best efforts of the UK, France and Germany to secure waivers for EU companies and individuals, the remaining sanctions which were previously lifted will be re-introduced, with General Licence H being replaced by a new wind down licence. Of most significance these sanctions relate to the petroleum and energy sectors in Iran. The second wind down period will allow such non-US companies covered by the secondary sanctions to make arrangements to withdraw from Iran.

Issues to Consider

If you or your business could be affected by the US sanctions you should check whether or not you currently have any business connections in Iran and what arrangements you have put in place to allow you to withdraw as quickly and cost effectively as possible, in advance of the deadline on 4th November.

It would also be wise to review whether or not you are involved in any “new” activities entered into after 8th May 2018. Even if you do not think you are caught by secondary sanctions you should still be mindful of the “catch all” provisions related to the prohibitions against re-export of US origin goods to Iran, use of the US banking system and dealing with a US Specially Designated National (SDN).

Banks will also be mindful of the re-instated sanctions, and even if your proposed business activity does not fall foul of the US provisions, it would be worth checking that your bank is prepared to process any Iran-related transactions before entering into any contracts.