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On July 14, 2015, China, France, Germany, Russia, the UK, US, EU, and Iran agreed to a Joint Comprehensive Plan of Action (JCPOA) by which sanctions against Iran will be lifted in exchange for Iran’s agreement never to “seek, develop or acquire any nuclear weapons”. However, U.S. sanctions will not be lifted completely, or overnight. First, the parties to the JCPOA as well as the U.N. Security Council must endorse the agreement, followed by a 90-day wait-period before the parties are required to start taking steps to implement their commitments. Then, the IAEA (International Atomic Energy Agency) must verify implementation by Iran of the nuclear restrictions set out in the JCPOA, a process that the parties currently anticipate will take at least six to nine months. Assuming this can be verified, the first steps toward sanctions relief will begin on “Implementation Day” – the day the IAEA issues a report confirming Iran’s initial compliance with nuclear related measures in the agreement. 

On that date, the U.S. will “seek such legislative action as may be appropriate” to terminate certain sanctions listed in an annex to the JCPOA. This annex does not cover sanctions implemented under Executive Order 13059, which bans the exportation of all goods and services to Iran, or Executive Order 12613, which bans imports from Iran. In fact, the sanctions relief contemplated by the JCPOA is almost entirely directed toward non-U.S. persons. U.S. persons and U.S.-owned or -controlled foreign entities will continue to be generally prohibited from conducting the types of transactions outlined in the agreement, unless authorized to do so by the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). As the Obama administration has stated, “U.S. statutory sanctions focused on Iran’s support for terrorism, human rights abuses, and missile activities will remain in effect and continue to be enforced.” What the agreement does permit is non-U.S. person trading activity in certain industries, including the following Iranian sectors:
  • oil, gas and petrochemicals 
  • shipping and shipbuilding 
  • port operators 
  • gold and other precious metals
  • graphite, raw or semi-finished metals such as aluminum and steel, and coal
  • software for integrating industrial processes
  • automotive sector, and 
  • commercial passenger aircraft and related parts and services
  • Iranian-origin carpets and foodstuffs (only importation permitted)

In addition, the restrictions on transactions by non-U.S. persons and U.S.-owned or -controlled foreign entities with most Iranian banks and financial institutions, including the Central Bank of Iran, will be lifted, permitting investments, foreign exchange transactions, the issuance of letters of credit, transactions in Iranian Rial, the transfer of Iranian revenues abroad, the opening and maintenance of correspondent and payable through-accounts at non-U.S. financial institutions, the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt (including governmental bonds), and the provision of underwriting services, insurance, and reinsurance.

Further, a large number of Iranian individuals, companies, ships, and aircrafts will be removed from the U.S. Specially Designated Nationals List, the Foreign Sanctions Evaders List, and other Office of Foreign Assets Control administered sanctions lists. This latter action is particularly controversial because the list includes certain individuals considered terrorists by many, such as Qassem Suleimani, leader of Iran’s campaign against U.S. soldiers in Iraq, and Ahmad Vahidi, mastermind of the 1994 Jewish community center bombing in Argentina that killed 85 people.

Additional sanctions relief will be years in the making. Pursuant to the JCPOA, a 2010 U.N. Security Council resolution prohibiting member countries from selling conventional arms to Iran (including heavy weapons such as tanks, combat aircraft, and missile launchers), and a 2007 resolution banning member states from buying or receiving arms from Iran, will both be repealed in no less than five years. Eight years after (a) the date the JCPOA is adopted by the parties and endorsed by the U.N. Security Council or (b) the date on which the Director General of the IAEA submits a report stating that the IAEA has concluded that all nuclear material in Iran remains dedicated for use in peaceful activities, whichever is earlier, the U.S. will “seek such legislative action as may be appropriate” to remove certain U.S. sanctions set forth in an annex to the JCPOA that currently prohibit the provision of nuclear-related commodities and services for nuclear activities (e.g. ballistic missiles).

Under the framework established by the legislature, a simple majority of the House and Senate must approve of the JCPOA in a vote held after a 60-day review period, likely in September. Congressional approval of the JCPOA is not assured, but President Obama has stated he would veto any resolution of disapproval. This would require opponents of the agreement to obtain a two-thirds vote of Congress to override presidential action.

At this point the road to the broader sanctions relief contemplated by the JCPOA is long and uncertain. In the interim, the U.S. and other parties to the agreement have agreed to extend the limited sanctions relief provided under the November 24, 2013, Joint Plan of Action (JPOA) through Implementation Day.
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