On November 5, 2018, the U.S. government fully re-imposed sanctions on Iran as a result of the cessation of the United States’ participation in the Joint Comprehensive Plan of Action (JCPOA) (see Trump and Trade Update dated May 8, 2018). November 5 marked the end of the 180-day wind-down period for activities that had previously been allowed with Iran under the JCPOA. This deadline, along with the August 6, 2018 re-imposition of other sanctions toward Iran (see Trump and Trade Update dated August 6, 2018), now means that all U.S. sanctions lifted or waived in connection with the JCPOA have been re-imposed and are in full effect. On Friday November 2, 2018, Secretary of State Michael Pompeo and Secretary of the Treasury Steven Mnuchin held a special briefing to address the “snapback” of these sanctions on Iran’s energy, shipping, banking and shipbuilding industries that were lifted as part of the Iran nuclear deal.

Pompeo stated that “these sanctions hit at the core areas of Iran’s economy. They are necessary to spur changes we seek on the part of the regime.” Mnuchin announced: “The Treasury Department will add more than 700 names to our list of blocked entities. This includes hundreds of targets previously granted sanctions relief under the JCPOA, as well as more than 300 new designations.” The United States has temporarily granted eight countries (China, India, Italy, Greece, Japan, South Korea, Taiwan and Turkey) an “exemption” for specific circumstances dealing with the limited procurement of Iranian crude oil. Pompeo indicated, however, that “we will continue negotiations to get all the nations to zero.”

In a press release issued by the Office of Foreign Assets Control (OFAC), Mnuchin further stressed that “Treasury’s imposition of unprecedented financial pressure on Iran should make clear to the Iranian regime that they will face mounting financial isolation and economic stagnation until they fundamentally change their destabilizing behavior. Iran’s leaders must cease support for terrorism, stop proliferating ballistic missiles, end destructive regional activities, and abandon their nuclear ambitions immediately if they seek a path to sanctions relief.”

Sanctions previously lifted under the JCPOA have been re-imposed on the following industries, companies and organizations that have now been placed on the OFAC Specially Designated Nationals and Blocked Persons (SDN) List:

  • More than 70 Iran-linked financial institutions, including their foreign and domestic subsidiaries.
  • Iran’s Islamic Republic of Iran Shipping Lines (IRISL) and National Iranian Tanker Company (NITC), including 65 IRISL subsidiaries and associated individuals.
  • The Atomic Energy Organization of Iran (AEOI) as well as 23 AEOI subsidiaries and associated individuals.
  • Iran Air (the national airline of Iran) and 67 aircraft operated by Iran Air.

In a fact sheet issued by the White House, the Trump administration stated that sales of food, agricultural commodities, medicine and medical devices will continue to remain exempt from the sanctions.

For further information, the OFAC has published the full list of entities added to the SDN List and updated its frequently asked questions concerning the re-imposition of these sanctions.

U.S. Secretary of State Michael Pompeo announced on October 3, 2018, that the United States would terminate the 1955 “Treaty of Amity” with Iran. The decision was triggered by a ruling issued earlier in the day by the International Court of Justice (ICJ), which ordered the United States to “remove, by means of its choosing, any impediments arising from the measures announced on 8 May 2018 to the free exportation to the territory of the Islamic Republic of Iran of (i) medicines and medical devices; (ii) foodstuffs and agricultural commodities; and (iii) spare parts, equipment and associated services (including warranty, maintenance, repair services and inspections) necessary for the safety of civil aviation … .” (See also Trump and Trade Update dated May 8, 2018.)

During a press conference, Pompeo said, “In July, Iran brought a meritless case in the International Court of Justice alleging violations of the Treaty of Amity. … In light of how Iran has hypocritically and groundlessly abused the ICJ as a forum for attacking the United States, I am therefore announcing today that the United States is terminating the Treaty of Amity with Iran. I hope that Iran’s leaders will come to recognize that the only way to secure a bright future for its country is by ceasing their campaign of terror and destruction around the world.” Despite the move to terminate the treaty, Pompeo acknowledged, “Existing exceptions, authorizations, and licensing policies for humanitarian-related transactions and safety of flight will remain in effect.” He concluded his remarks by answering a question from CBS News, “We’ll see what the practical fallout is.”

The “Treaty of Amity, Economic Relations, and Consular Rights Between the United States and Iran” was entered into force on June 16, 1957, when both nations ratified its terms after its original signing August 15, 1955. Specific treaty provisions included:

  • Favorable and fair judicial treatment of nationals while traveling or living within the territory of the other party (Art II, Sec 4).
  • Recognition of a corporation/business entity’s juridical status within the territory of either party (Art III, Sec 1).
  • No restrictions or prohibitions on the importation or exportation of any product of the other party unless that product is restricted/prohibited in a similar manner from other nations (Art VIII, Sec 2).
  • Several provisions governing the treatment of consular staff and related diplomatic operations in each nation (Art XII – XIX). These clauses remained in effect despite the severance of U.S.-Iranian diplomatic relations on April 7, 1980.

Article XX of the treaty included specific carve outs for the importation/exportation of gold and silver, activities relating to fissionable materials, production or traffic of arms, and measures “necessary to protect its essential security interests.” The final article of the treaty stipulated that either party could terminate the treaty “by giving one year’s written notice” to the other party. Because of the U.S. notification this week, the treaty as written will remain in effect until October 2019.

In connection with President Donald Trump’s May 8, 2018 decision to cease U.S. participation in the Joint Comprehensive Plan of Action (JCPOA) and to re-impose all sanctions lifted or waived in connection with the JCPOA, the president has issued a new Iran-related Executive Order, “Reimposing Certain Sanctions With Respect to Iran.” This completes the first of two wind-down periods for the re-imposition of certain Iranian sanctions. The terms in the Executive Order are effective at 12:01 a.m. Eastern Daylight Time (EDT) on August 7, 2018. In addition, certain wind-down general licenses that allowed limited continued actions involving Iran will expire at 11:59 p.m. EDT on August 6, 2018. Continue Reading U.S. Treasury Re-Imposes Certain JCPOA-Related Sanctions on Iran

In response to the United States’ withdrawal from the Joint Comprehensive Plan of Action (JCPOA, also informally known as the Iran nuclear deal) on May 8, 2018, the European Union (EU) has announced that it will take several actions in an effort to continue the full implementation of the JCPOA and to protect EU businesses. These actions are:

  • Initiate the formal process to activate the “blocking statute” by updating the list of U.S. sanctions on Iran falling within its scope. The blocking statute forbids EU persons from complying with U.S. extraterritorial sanctions, allows companies to recover damages arising from such sanctions from the person causing them, and nullifies the effect in the EU of any foreign court judgments based on them. The intent is to have these blocking regulations in force before August 6, 2018, when the first wind-down period ends and certain U.S. trade and economic sanctions are reinstated.
  • Begin the formal process to remove obstacles for the European Investment Bank (EIB) to decide under the EU budget guarantee to finance activities outside the EU in Iran. This will allow the EIB to support EU investment in Iran and could be useful for small and medium-sized companies.

Before full implementation of these actions, the European Parliament and the Council of the European Union will have up to a two-month period to object to these measures. The EU has also encouraged the following actions:

  • As confidence-building measures, the European Commission will continue and strengthen the ongoing sectoral cooperation with, and assistance to, Iran, including in the energy sector and as to small and medium-sized companies. Financial assistance through development cooperation or partnership instruments will also be mobilized.
  • The Commission is encouraging member states to explore the possibility of one-off bank transfers to the Central Bank of Iran. This could help the Iranian authorities to receive their oil-related revenues, particularly with U.S. sanctions that could target EU entities active in oil transactions with Iran.

Once implemented, these measures will likely leave foreign companies in the difficult position of determining any associated risks and potential penalties of continuing business transactions in Iran in support of the EU position to maintain the terms of the JCPOA, or risk running afoul of U.S. secondary sanctions pertaining to Iran that seek to limit and possibly penalize non-U.S. companies that conduct business in Iran as well as in the United States.

President Trump has announced that the United States will withdraw from the Joint Comprehensive Plan of Action (JCPOA, also informally known as the Iran nuclear deal) that was entered into in 2015 by Iran, the United States, China, France, Germany, Russia and the United Kingdom. The JCPOA was negotiated in an effort to ensure that Iran’s nuclear program would be used exclusively for non-military, peaceful means. On January 16, 2016, the JCPOA was formally implemented and certain trade and economic sanctions against Iran were relaxed by the other parties to the deal. From its inception, the Iran nuclear deal has had its share of proponents and critics, and was a hot-button issue during the 2016 presidential election. During the campaign, and since, President Trump repeatedly stated that the deal was “one of the worst and most one-sided transactions the United States has ever entered into.” In making today’s announcement, President Trump stated that the JCPOA was “defective at its core” since it would not prevent Iran from ultimately developing a nuclear bomb. He argued that the sunset provisions of the deal and the onsite inspection provisions were clearly inadequate, and at the time when the United States had “maximum leverage,” it entered into a deal that gave Iran, a “leading state sponsor of terrorism,” billions of dollars. The president called the agreement “a great embarrassment to me as a citizen and all citizens of the United States.” Continue Reading President Trump Announces U.S. Withdrawal from Iran Nuclear Deal

The Department of the Treasury’s Office of Foreign Assets Control (OFAC) has designated 14 individuals and entities for sanctions arising from serious human rights abuses and censorship in Iran and support of designated Iranian weapons proliferators. According to Treasury Secretary Steven T. Mnuchin, “The United States will not stand by while the Iranian regime continues to engage in human rights abuses and injustice. We are targeting the Iranian regime, including the head of Iran’s judiciary, for its appalling mistreatment of its citizens, including those imprisoned solely for exercising their right to freedom of peaceful assembly, and for censoring its own people as they stand up in protest against their government. We are also targeting Iran’s ballistic missile program and destabilizing activities, which it continues to prioritize over the economic well-being of the Iranian people.”

While the majority of these persons and entities are Iranian, several are located in Malaysia and China and have been sanctioned for their support of the Iranian regime. The full list is available on Treasury’s website. This decision is not formally related to an expected Trump administration announcement later today regarding an extension of the relaxation of sanctions on Iran under the Joint Comprehensive Plan of Action (i.e., JCPOA or Iran nuclear agreement) but indicates that the United States will continue to sanction Iran in non-nuclear areas outside the scope of the JCPOA.

President Trump has announced that he will continue to waive nuclear-related sanctions toward Iran despite his misgivings about the multi-party agreement with Iran known as the Joint Comprehensive Plan of Action (JCPOA, or commonly known as the Iran nuclear agreement) and Iran’s continued support for international terrorism, its human rights abuses and its continuing censorship at home. In a White House statement, the president indicated that “I have been very clear about my opinion of that deal. It gave Iran far too much in exchange for far too little.” He added, “Despite my strong inclination, I have not yet withdrawn the United States from the Iran nuclear deal.”* He then briefly identified his conditions for either fixing the agreement or ultimately withdrawing from the JCPOA.

While President Trump will continue to work with Congress on legislation regarding Iran, he indicated that it must have four “critical components”: (1) Iran must allow immediate inspections of potential nuclear sites; (2) Iran can never possess a nuclear weapon; (3) there must be no expiration date prohibiting Iran’s efforts to develop or acquire nuclear weapons under any deal; and (4) Iran’s long-range missile capabilities are inseparable from Iran’s nuclear weapons ambitions and will also be subject to severe sanctions. In closing, the president stated:

“Today, I am waiving the application of certain nuclear sanctions, but only in order to secure our European allies’ agreement to fix the terrible flaws of the Iran nuclear deal. This is a last chance. In the absence of such an agreement, the United States will not again waive sanctions in order to stay in the Iran nuclear deal. And if at any time I judge that such an agreement is not within reach, I will withdraw from the deal immediately. No one should doubt my word. I said I would not certify the nuclear deal—and I did not. I will also follow through on this pledge. I hereby call on key European countries to join with the United States in fixing significant flaws in the deal, countering Iranian aggression, and supporting the Iranian people. If other nations fail to act during this time, I will terminate our deal with Iran. Those who, for whatever reason, choose not to work with us will be siding with the Iranian regime’s nuclear ambitions, and against the people of Iran and the peaceful nations of the world.”

In a later press briefing, White House officials stated that the administration intends to work with European allies for a follow-on agreement that puts in place certain triggers that Iran could not exceed. They stressed that this “would not entail direct negotiations with the Iranians, [sic] this would be something the United States works out with our European partners only. It would be an agreement amongst the United States and our European partners to re-impose multilateral sanctions should the Iranians surpass the new triggers that we would lay out.”

* Under the Iran Nuclear Agreement Review Act, implemented in 2015 at the time of the JCPOA, the president must certify to Congress every 90 days that the suspension of sanctions under the nuclear agreement is warranted and that Iran remains in compliance with its obligations to terminate its illicit nuclear weapons program. In July 2017, Trump reluctantly certified that Iran was in compliance with the terms of the JCPOA (see Trump and Trade Alert of July 18, 2017); however, in October 2017, the president declined to certify that Iran was in compliance with the agreement (see Trump and Trade Alert of October 13, 2017).

In brief remarks, President Trump announced that in addition to his administration’s new Iran strategy, he “cannot and will not” certify to Congress that the continued suspension of sanctions against Iran under the Joint Comprehensive Plan of Action (JCPOA) is appropriate. Reiterating his often stated claim that “the Iran Deal was one of the worst and most one-sided transactions the United States has ever entered into,” the president stated that he needed “negotiators who will much more strongly represent America’s interest.” The president added that, “Since the signing of the nuclear agreement, the regime’s dangerous aggression has only escalated. At the same time, it has received massive sanctions relief while continuing to develop its missiles program. Iran has also entered into lucrative business contracts with other parties to the agreement.”

Arguing that he will not “continue down a path whose predictable conclusion is more violence, more terror, and the very real threat of Iran’s nuclear breakout,” President Trump directed his administration to work with Congress and allies “to address the deal’s many serious flaws so that the Iranian regime can never threaten the world with nuclear weapons.” He added that should a solution not be reachable, “then the agreement will be terminated. It is under continuous review, and our participation can be cancelled by me, as President, at any time.”

After a nine-month review, consultations with his national security staff and discussions with members of Congress, President Trump has announced a new U.S. strategy on relations with Iran. In a statement, the White House announced that the “new Iran strategy focuses on neutralizing the Government of Iran’s destabilizing influence and constraining its aggression, particularly its support for terrorism and militants.” While not providing specifics, the announcement indicated that the United States would work to deny Iran, and particularly the Islamic Revolutionary Guard Corps (IRGC), funding; counter Iran’s efforts to develop its ballistic missiles and other asymmetric weapons capabilities; and “deny the Iranian regime all paths to a nuclear weapon.”

Regarding the Joint Comprehensive Plan of Action (JCPOA), Trump stated that Iran’s “activities severely undercut whatever positive contributions to ‘regional and international peace and security’ [the JCPOA] sought to achieve,” adding that Iranian officials have sought to “exploit loopholes and test the international community’s resolve.” While not yet making a full statement on whether he will refuse to re-certify to Congress Iranian compliance under the JCPOA, which must be done by October 15, 2017, Trump clearly indicated that current Iranian behavior cannot be tolerated and that “the deal must be strictly enforced, and the IAEA must fully utilize its inspection authorities.”

Congressional Activity on Iran

On October 12, 2017, the House Foreign Affairs Committee, chaired by Rep. Ed Royce (R-CA), passed the Iran Ballistic Missiles and International Sanctions Enforcement Act (HR 1698). The legislation seeks to expand sanctions against Iran for its continuing efforts to develop intercontinental ballistic missile capabilities. In remarks prior to the committee markup of HR 1698, Chairman Royce stated, “As flawed as the [JCPOA] deal is, I believe we must now enforce the hell out of it. Let’s work with allies to make certain that international inspectors have better access to possible nuclear sites, and we should address the fundamental sunset shortcoming, as our allies have recognized.” Committee member statements, witness testimony and a webcast of the October 11, 2017 hearing on the legislation are available on the House Foreign Affairs Committee’s website. The legislation currently has 320 cosponsors in the House of Representatives. HR 1698 will next be reported to the full House for further debate and consideration.

In the Senate, on October 13, 2017, Senators Bob Corker (R-TN) and Tom Cotton (R-AK) announced their intention to introduce legislation to amend the Iran Nuclear Agreement Review Act of 2015 (Public Law No. 114-17), to address certain provisions in the JCPOA, particularly an elimination of the deal’s sunset on limitations placed on Iran’s future development of any nuclear program. The legislation, which has not yet been formally introduced, would penalize Iran if it fails to abide by guidelines related to centrifuge research and development. Ultimately, under the proposed restrictions in the legislation, any violations by Iran could result in the reinstatement of U.S. sanctions, especially if it were to come within a year of gaining nuclear capability.

The White House has acknowledged that while no decision is final, President Trump is likely to decline to recertify that Iran is in compliance with the terms of the Joint Comprehensive Plan of Action (JCPOA), which is more commonly known as the Iran nuclear deal. Trump is expected to publicly announce his position on the JCPOA and an overall strategy toward Iran next week; any final determination must be issued by October 15, 2017. Until then, the Trump and Trade team offers this summary of the 2015 law that would be triggered should Trump not recertify to Congress that Iran is in compliance with the JCPOA.

Under the Iran Nuclear Agreement Review Act of 2015 (Public Law No. 114-17), the president must submit to Congress every 90 days a compliance certification indicating that (1) Iran is fully implementing the terms of the JCPOA, (2) it has not committed a material breach, (3) it has taken no actions to advance its nuclear weapons program, and (4) the suspension of sanctions remains warranted. Under this law, there are clear and detailed provisions pertaining to congressional oversight of Iranian compliance under the JCPOA should the president not submit a certification of Iran’s compliance. Subsection (e) of the law provides for expedited consideration of “qualifying legislation” introduced within 60 calendar days of the date when the president does not submit a certification stating Iran is in compliance with the JCPOA.

The term “qualifying legislation” is defined to mean only a bill that (1) is titled, “A bill reinstating statutory sanctions imposed with respect to Iran” and (2) states, after the enacting clause, “Any statutory sanctions imposed with respect to Iran pursuant to __________ that were waived, suspended, reduced, or otherwise relieved pursuant to an agreement submitted pursuant to section 135(a) of the Atomic Energy Act of 1954 are hereby reinstated and any action by the United States Government to facilitate the release of funds or assets to Iran pursuant to such agreement, or provide any further waiver, suspension, reduction, or other relief pursuant to such agreement is hereby prohibited,” with the blank space filled with the law or laws under which sanctions are to be reinstated. Such qualifying legislation must be introduced in the House by either the majority leader or minority leader or in the Senate by the majority leader or minority leader (or one of their designees).

Any such legislation is to receive expedited consideration; if any committee to which the bill has been referred has not reported out the bill within 10 legislative days, that committee will no longer have oversight of the bill. Each chamber (House and Senate) has slightly different rules under the law in which to consider any bill. In the House, all points of order against any qualifying legislation are waived as are any motions against its consideration; two hours of debate are allowed; and no motions for reconsideration will be allowed. In the Senate, all points of order pertaining to any qualifying legislation are also waived; no motions to postpone or reconsider will be allowed, but certain (undefined) debatable motions and appeals can be considered; 10 hours of debate are allowed; and no motion to recommit will be allowed. If one chamber does not introduced qualifying legislation and the other chamber considers and passes such legislation, that bill once passed over to the other chamber must be considered under the expedited procedures (as previously discussed) under this law.

Stay tuned …