On Monday, August 6, 2018, President Trump issued a new Executive Order (New Iran EO) that reimposes Iran sanctions previously revoked as part of the Joint Comprehensive Plan of Action (JCPOA), consolidates the relevant authorities into one single document, and broadens the scope of previous sanctions restrictions. This action coincides with the expiration of the 90-day wind down period for a number of transactions previously authorized as part of the Agreement. OFAC also updated and issued additional Frequently Asked Questions with respect to this New Iran EO.
Reimposition of Sanctions Authorities and Revocation of Previous EO’s
In accordance with President Trump’s May 8, 2018 decision to withdraw from the JCPOA, the New Iran EO reimposes the relevant provisions of EOs 13574, 13590, 13622, and 13645 previously revoked by EO 13716. Accordingly, as of 12:01 a.m. eastern daylight time (EDT) Tuesday, August 7, 2018, sanctions targeting the following areas were reinstated:
- The purchase or acquisition of U.S. dollar banknotes by the Government of Iran.
- Iran’s trade in gold or precious metals.
- The direct or indirect sale, supply, or transfer to or from Iran of graphite, raw, or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes.
- Significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds or accounts outside the territory of Iran denominated in the Iranian rial.
- Purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt.
- Iran’s automotive sector.
Further, as of August 7, 2018, the wind down period terminated for transactions related to the export/re-export of Iran commercial passenger aircraft pursuant to General License I, and transactions regarding U.S. imports of, and dealings in, Iranian-origin foodstuffs and carpets, and related letters of credit and brokering services. The next wind down deadline is November 4, 2018, and relates to transactions pursuant to General License H, and sanctions targeting the following areas: Iran’s port operators and shipping/ship-building sectors; petroleum-related transactions; financial transactions and specialized messaging services with the Central Bank of Iran; underwriting and insurance services; and Iran’s energy sector.
The New Iran EO also revokes EOs 13716 and 13628 and supersedes these authorities by incorporating the blocking sanctions previously provided in sections 2 and 3, and subsection 3(c) respectively.
Expansion of Sanctions in Effect Prior to JCPOA
The New Iran EO further broadens the scope of sanctions in effect prior the implementation of the JCPOA, January 16, 2016. OFAC details this expansion in Frequently Asked Question # 601, and we have summarized those changes below:
- New Designation Authority: The New Iran EO provides new authority to designate as Specially Designated Nationals (SDNs) any person that on or after November 5, 2018, provided material support, or goods and services in support of, persons designated for engaging in the following transactions: (1) providing support, or goods and services in support of the purchase or acquisition of U.S. bank notes or precious metals by the GOI; (2) providing support, or goods and services in support of the National Iranian Oil Company (NIOC), the Naftiran Intertrade Company (NICO), or the Central Bank of Iran (CBI); or (3) being part of the Iranian energy sector, shipping, or shipbuilding sectors, being a port operator in Iran, or providing significant support of persons designated under section 1244(c)(1)(A) of the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) or other SDNs.
- New Restrictions on Financial Institutions: The New Iran EO provides the authority to prohibit or significantly restrict correspondent and payable-through accounts of foreign financial institutions determined to have knowingly conducted or facilitated significant transactions on or after November 5, 2018, with persons designated pursuant to the new authorities described above.
- Expanded Menu of Sanctions for Petroleum Transactions: The New EO expands the menu of sanctions available to be imposed on persons that on or after November 5, 2018, knowingly engaged in significant transactions related to Iranian petroleum products and petrochemicals, including: (1) Visa restrictions on controlling officers and shareholders; (2) certain secondary sanctions on principal executive officers of a SDN; and (3) prohibitions on investing in or purchasing debt and equity instruments from a sanctioned person.
- Expanding Restrictions on Foreign Subsidiaries of U.S. Companies: The New EO also expands sanctions restrictions on foreign subsidiaries of U.S. owned or controlled companies by prohibiting transactions with persons blocked for any of the following activity: (1) providing material support for, or goods and services in support of, persons designated pursuant to Iran sanctions; and (2) being part of the Iranian energy sector, shipping, or shipbuilding sectors, being a port operator in Iran, or providing significant support of persons designated under section 1244(c)(1)(A) of the Iran Freedom and Counter-Proliferation Act of 2012 (IFCA) or other SDNs. Note that this expanded restriction does not eliminate the authorization to wind down transactions pursuant to General License H by November 4, 2018.
The expansion of pre-JCPOA sanctions may come as some surprise to the business community, but largely fall within the Trump Administration’s new policy towards Iran. In his May 8th National Security Memorandum, President Trump hinted that the process of restoring sanctions could entail revising relevant sanctions regulations. These revisions make clear that after the November 4th wind-down date, any person, including U.S. persons, that attempts to directly or indirectly provide support in any way to persons designated under pre-JCPOA sanctions restrictions will also risk designation.
These renewed and expanded U.S. sanctions against Iran creates an increasingly complex landscape for companies operating globally, as it is impossible to comply with both sets of restrictions. However, a few large European companies have already suspended plans to invest in Iran.