Articles Posted in Iran Sanctions

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On January 16, 2016, known as “Implementation Day” under the Joint Comprehensive Plan of Action (JCPOA), the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued General License H, which allows foreign subsidiaries of U.S. companies to engage in business with Iran, but with strict limitation on the extent to which their parent companies can be involved. Prior to 2012, the U.S. embargo did not apply to companies incorporated abroad, including foreign subsidiaries of U.S. companies. Section 218 of The Iran Threat Reduction and Syria Human Rights Act of 2012 extended the reach of U.S. sanctions, making U.S. companies potentially liable if their foreign subsidiaries did business with Iran. As part of the JCPOA, the United States committed to rolling back this sanction.

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January 16, 2016 was “Implementation Day” under the Joint Comprehensive Plan of Action (JCPOA), bringing into effect the sanctions commitments of the United States and European Union (EU).  The International Atomic Energy Agency (IAEA) confirmed in Vienna that Iran had met its JCPOA milestones with respect to its nuclear program.  The U.S. sanctions changes involve partial relief within a complex regime with continuing primary sanctions and designations on Iranian parties which carry secondary sanctions.

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC)  issued Implementation Day guidance describing the changes to the U.S. sanctions program for Iran, which largely reflect what had been expected under the JCPOA.  This includes the ending of secondary sanctions on Iran related to nuclear weapons proliferation; delisting of over 400 Iranian and Iran-related Specially Designated Nationals (SDNs); issuance of general licenses for non-U.S. entities owned or controlled by U.S. persons to engage in certain activities in Iran, as well as for import to the United States of Iranian carpets and foodstuffs including pistachios and caviar; and adjustment of licensing policy to allow authorization of certain exports, sales, leasing and transfers of civilian passenger aircraft.  Existing authorizations for agricultural commodities (including food), medicine, and medical supplies remain unchanged.  Exports and reexports of U.S. origin products (as well as foreign-origin products with more than 10% U.S. content) still require a license, and U.S. persons still may not participate in business transactions with Iran unless licensed.

Following will be a series of posts on key aspects of the adjustments to U.S. and EU regulations relating to Iran.

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On October 18, 2015, both the United States and the European Union took action to prepare for future changes to sanctions policy which will be effective upon IAEA verification of Iran’s commitments under the Joint Comprehensive Plan of Action (JCPOA).  This was a required step under the JCPOA, termed “Adoption Day,” scheduled to occur ninety (90) days after the JCPOA was endorsed by the UN Security Council via resolution 2231.

Importantly, Adoption Day does not bring about any immediate sanctions relief.  OFAC reminded companies again about potential violations related to arranging agreements and contingent contracts with Iranian parties prior to Implementation Day.

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Under the terms of the Iran Nuclear Agreement Review Act, Congress had until September 18 to reject President Obama’s promised sanctions relief for Iran agreed to under the Joint Comprehensive Plan of Action (JCPOA). Although the House of Representatives voted to reject the deal, Senate Democrats blocked debate on a similar resolution, thus preventing a vote in the Senate. Consequently, Congress took no action, which means that the JCPOA will continue to be implemented on a step-by-step basis (see our blog post here for full details).  Looking ahead, there are several key issues for businesses contemplating entering the Iran market to consider.

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On July 14, 2015, representatives of the P5+1 countries reached an agreement with Iran on a “Joint Comprehensive Plan of Action” (JCPOA) regarding Iran’s Nuclear Program. Subject to review by several of the parties’ legislatures and after verification by the International Atomic Energy Agency (IAEA) of steps to be taken by Iran, the United States and the EU committed to provide sanctions relief, although the U.S. commitments are not as extensive.

The agreement is complex and some hurdles remain, particularly a vote by the U.S. Congress and a review by IAEA of Iran’s past activities and its implementation of the commitments. If there is full implementation as described below, sanctions reforms would substantially open the Iranian market to EU and other non-U.S. companies. Substantial restrictions would remain at least initially for U.S. companies and non-U.S. companies that they own or control, although U.S. policy would permit some trade and market participation in limited sectors.

This blog post provides a broad overview of the July 14 agreement. We will provide more detailed commentary in the coming days.

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On Tuesday, June 8 in Pillsbury’s London office, Pillsbury and the Eurasia Group hosted the first event in their Sanctions & Market Opportunities Series entitled “Iran Sanctions, Investment and Trade: Preparing for Divergent Outcomes.”

During the event, panelists discussed the likelihood for a final agreement related to Iran’s nuclear program and the eventual easing of international sanctions.  Panel members also discussed the current U.S. and EU sanctions regime and what may change in the event of an agreement or if talks fall apart.  As part of these discussions, the panel detailed the U.S. congressional review process that will occur in event of an agreement and how this process is impacting the negotiations and may hinder sanctions relief.

The audience of senior European business leaders received several key takeaways, including: Continue reading →

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On May 13, 2015 Senator Lisa Murkowski, Chair of the Senate Committee on Environment and Natural Resources, introduced the Energy Supply and Distribution Act of 2015 (S.1312), which if enacted would lift the crude oil export ban.

Co-sponsored with Sen. Heidi Heitkamp (D-ND) and twelve Republicans, the bill would permit exports of domestically produced crude oil without a Federal license “notwithstanding any other provision of law” (other than crude oil stored in the Strategic Petroleum Reserve), except to countries subject to U.S. sanctions. The bill would direct the Secretary of Energy to develop a standard definition of the term “condensate” and would express the sense of the Congress that processed condensate is a petroleum product.

S.1312 follows the bill introduced in the House of Representatives by Rep. Joe Barton (R-TX) last February, which would prohibit any official of the Federal Government from imposing or enforcing any restriction on the export of crude oil.

Both bills seek to cut through the layers of legislation and regulation implementing statutes enacted in the 1970’s that have prohibited exports of domestically produced crude oil except in limited circumstances, such as section 103 of the Energy Policy and Conservation Act, section 28(u) of the Mineral Leasing Act of 1920 and section 28 of the Outer Continental Shelf Lands Act.

Although these statutes give the President authority to lift export restrictions by means of specific authorizations or national interest determinations, the Administration has chosen not to expand the types of permitted transactions but has allowed the Commerce Department (which implements the Export Administration Regulations) to continue to license transactions such as swaps and exchanges in accordance with previously established policy. Preempting Sen. Murkowski’s focus on condensates, the Commerce Department late last year issued FAQ’s clarifying the circumstances under which processed condensate would be considered a refined product not subject to definition of crude oil and therefore not subject to the ban. A number of companies have since received commodity jurisdiction determinations for condensates. Continue reading →

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Eurasia Group

The United States, UK, France, Germany, China and Russia announced in early April the parameters for a Joint Comprehensive Plan of Action regarding Iran’s Nuclear Program. However, a final agreement will not occur—if it occurs at all—until June 2015.

Savvy companies are planning now for either a potential relaxation of sanctions or a collapse of the process and the introduction of new, more severe sanctions policies impacting business.

The Eurasia Group and Pillsbury invite you to join us for a morning seminar on Iran sanctions, the current state of negotiations, likely outcomes and potential market opportunities. We will also discuss the current international sanctions regimes and the political developments in the United States impacting the future of U.S.-Iran relations.

This event is the first in a series organized by Pillsbury and the Eurasia Group to help businesses plan for changes in the legal regimes affecting international trade. Future events will examine changes impacting Russia, Cuba and Myanmar.

9 June 2015
09:00 – 11:00

Pillsbury’s London office
Level 21, Tower 42
25 Old Broad Street
London EC2N 1HQ

Schedule
09:00 – Registration and breakfast
09:30 – Seminar and Q&A session
11:00 – Networking

Topics include:

  • Eurasia Group’s forecast on the outcome of negotiations
  • Pillsbury’s assessment of evolving U.S., UK, EU and UN Iran sanctions: what they are, what may change, and when
  • What can companies do now to prepare for the successful conclusion of talks
  • What would the failure of negotiations mean
  • The impact the U.S. Congress may have on any outcome

Speakers:
Cliff Kupchan, Chairman, Eurasia Group
Nancy Fischer, Partner, Pillsbury
Aaron Hutman, Counsel, Pillsbury
Steven Farmer, Counsel, Pillsbury
Matthew Oresman, Counsel, Pillsbury
For further information, please contact Vera Kapysh at vera.kapysh@pillsburylaw.com / 44(0)207 847 9545.

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On Friday, May 8, the Senate overwhelmingly approved the Iran Nuclear Agreement Review Act, which would give Congress a role in approving any agreement with Iran concerning its nuclear program. The Senate approved the bill 98-1, with Sen. Tom Cotton (R-AK) the only dissenting vote. The House of Representatives could vote on the legislation as early as this week.

As discussed in a previous post, on April 2, 2015 representatives of the United States, Great Britain, France, Germany, China and Russia (collectively, the “P5+1” countries) announced that they had agreed with Iran on the Parameters for a Joint Comprehensive Plan of Action. The parties now have until June 30, 2015 to reach a final agreement. One of the major open issues is what sanctions on Iran would be removed and when. Complicating this negotiation, especially following passage of the Iran Nuclear Agreement Review Act, is President Obama’s authority to lift U.S. sanctions on his own authority.

Under the legislation passed by the Senate, Congress would have 30 days to review the agreement and the proposed sanctions relief plan (longer under certain circumstances). Congress may then enact a joint resolution in favor of the agreement, enact a joint resolution opposing the agreement, or take no action. If Congress approves the agreement or takes no action, the President may then grant sanctions relief in line with the authority that currently exists under relevant statutes. If Congress votes to disapprove of the agreement, the President can veto the joint resolution and, if Congress fails to override the veto, he can still move forward with sanctions relief. However, if that veto is overridden by a 2/3 vote of both houses of Congress, then the President would be prohibited from lifting sanctions. Continue reading →

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On April 2, 2015 representatives of the United States, Britain, France, Germany, China and Russia (collectively, the “P5+1” countries) announced that they had agreed with the Islamic Republic of Iran on the Parameters for a Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran’s Nuclear Program (the “Parameters” or “Framework Agreement”). The Parameters establish a comprehensive framework regarding Iran’s nuclear energy industry and capabilities. The parties have not yet drafted the text of the final agreement and will continue to negotiate implementation details, probably until the June 30, 2015 deadline (with some indications that the deadline could be extended). Meanwhile, U.S., EU and UN sanctions will remain in place until Iran demonstrates verifiable compliance with the key terms of the agreement.

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