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United States, EU Implement Significant Iran Sanctions Relief

On January 16, 2016, the United States and the European Union (“EU”) significantly eased their sanctions against Iran, following verification by the International Atomic Energy Agency (“IAEA”) that Iran had carried out its commitments under the Joint Comprehensive Plan of Action (“JCPOA”), the multilateral agreement signed in mid-July 2015 in which Iran agreed to accept certain limitations on its nuclear program.

Specifically, the United States dramatically reduced—but did not altogether eliminate—its “secondary” sanctions, which target non-U.S. companies not owned or controlled by U.S. persons that engage in certain activities in or involving Iran.  In contrast, and as expected, the “primary” U.S. sanctions that prohibit U.S. persons and their owned or controlled non-U.S. affiliates from engaging in virtually any dealings with Iran (absent U.S. government licensing) will remain in place.  Significantly, however, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) issued general licenses and a statement of licensing policy that ease certain aspects of these “primary” U.S. sanctions.

Most notably, OFAC issued a general license that broadly authorizes non-U.S. companies owned or controlled by U.S. persons to trade and otherwise deal with Iran, subject to certain continuing restrictions on the involvement of U.S. persons and the provision of U.S.-regulated goods and technologies.  The OFAC general license also authorizes U.S. persons to engage in activities related to the establishment or alteration of policies and procedures of a U.S. company or its owned or controlled non-U.S. subsidiaries to the extent necessary to allow the non-U.S. subsidiaries to engage in otherwise newly permissible dealings with Iran.  The general license also permits U.S. parent companies to make available to their non-U.S. subsidiaries certain automated and globally integrated information technology systems necessary to process documents or information related to the non-U.S. subsidiaries’ permissible Iran-related dealings.

Additionally, consistent with the JCPOA, the United States removed more than 400 Iranian individuals and entities from its various sanctions lists, including the List of Specially Designated Nationals and Blocked Persons (“SDN List”).  As a general matter, U.S. persons and their owned or controlled non-U.S. subsidiaries still cannot deal with parties that remain on the SDN List (or entities owned 50% or more, individually or in the aggregate, by one or more SDNs) absent U.S. government licensing, and dealings with SDNs also may give rise to the imposition of various secondary sanctions that remain in place.

Further, on January 17, in a move underscoring that the sanctions relief implemented pursuant to the JCPOA was related only to Iran’s decision to curtail key aspects of its nuclear program, OFAC designated 11 individuals and entities involved in procurement on behalf of Iran’s ballistic missile programs.  These new designations come in the wake of ballistic missile tests conducted by Iran in October and November 2015.

Finally, as expected, the EU has eased its Iran sanctions program to a much more substantial extent than the United States.  Although a number of key EU restrictions remain in place, the EU has now removed most of its Iran sanctions program, including asset freezing measures against a number of major Iranian financial institutions and oil/gas companies, energy sector investment and related trade controls restrictions, notification / authorization requirements for certain transfers of funds to or from Iranian parties, and prohibitions against the provision of insurance and other financial services to Iranian parties.

© 2020 Covington & Burling LLPNational Law Review, Volume VI, Number 19

TRENDING LEGAL ANALYSIS


About this Author

Kimberly Strosnider, International trade attorney, Covington
Partner

Kim Strosnider advises companies on the application of international trade controls, including export controls, economic sanctions, and antiboycott laws and regulations.

A vice-chair of the firm’s International Trade & Finance practice group, Ms. Strosnider counsels clients across a range of industries on trade control matters, including resolving complex compliance, enforcement, licensing, and jurisdiction/classification issues. She regularly advocates for clients before the key trade controls agencies, including the U.S. Departments of State, Commerce, and...

202-662-5816
Peter Flanagan, International trade attorney, Covington
Partner

Peter Flanagan counsels clients on a broad range of compliance requirements affecting international trade and investment. These include most notably export controls, economic sanctions constraints, defense trade limitations, and the implications of related non-U.S. requirements. He also has experience in financial services regulation.

Mr. Flanagan has advised leading companies in the oil and gas sector, pharmaceutical and medical technology companies, defense contractors, manufacturing entities, financial institutions and private equity firms, software and high-technology concerns, and university-affiliated laboratories. Consistently ranked as a top-tier practitioner, Mr. Flanagan has deep experience in assisting multinational clients with complex compliance, enforcement, and licensing matters before the key U.S. trade controls agencies, including the U.S. Departments of Treasury, Commerce, and State.

202-662-5163
David Lorello, International trade lawyer, Covington
Partner

David Lorello is a partner in the firm’s London office and serves as a vice chair of the firm’s International Trade and Finance practice group.  Mr. Lorello advises clients concerning a range of international regulatory, white collar, and commercial matters under both European and US laws.  Mr. Lorello is recognized in the leading peer review publications for his work on trade controls and anti-corruption compliance and investigations matters, with Chambers Global ...

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Joshua Williams, International trade attorney, Covington
Associate

Josh Williams advises clients across a range of complex international regulatory and public policy matters. Mr. Williams has particular expertise in economic sanctions programs administered by the Treasury Department and State Department and export control regulations administered by the State Department, Commerce Department, and Census Bureau, as well as deep experience representing clients in Foreign Corrupt Practices Act investigations.

Mr. Williams has advised clients in a wide variety of industries, including the defense, aerospace, manufacturing, financial...

202.662.5618
Corinne Goldstein, Export Controls attorney, Economic Sanctions lawyer, Covington and Burling law firm
Partner

Corinne Goldstein counsels clients on US export controls, economic sanctions, and anti-boycott programs. She advises leading companies in the financial services, oil and gas, pharmaceutical, biotechnology, defense, and general manufacturing sectors. Her work includes advising on interpretive issues, developing compliance and training programs, securing licenses, and representing clients in enforcement proceedings.

Ms. Goldstein's environmental practice focuses principally on the environmental aspects of corporate transactions. She routinely...

202-662-5534