The Iran Decision: Back to the Future

By David Adams – May 2018

The Iran Decision

On May 8, President Trump announced that he was withdrawing the United States from the Joint Comprehensive Plan of Action (JCPOA) signed by the United States, France, Germany, the United Kingdom, the European Union, Russia, China and Iran in 2015. The President made the announcement in advance of the deadline to extend the waivers of sanctions on certain oil-related transactions with Iran’s central bank. However, rather than focus on that narrow decision, the President chose the opportunity to withdraw entirely and re-instate the sanctions regime that existed prior to the implementation of the JCPOA on January 16, 2016. The decision caused an immediate spike in oil prices, a deep rift in the transatlantic alliance and uncertainty among businesses with interests in Iran and the United States.

What exactly did the president do? 

President Trump’s National Security Memorandum gave the relevant agencies 180 days to, “immediately begin taking steps to re-impose all United States sanctions lifted or waived in connections with the JCPOA, including those under the National Defense Authorization Act of 2012, the Iran Sanctions Act of 1996, the Iran Threat Reduction and Syria Human Rights Act of 2012, and the Iran Freedom and Counter-proliferation Act of 2012.” The memorandum also directed the Secretaries of State and Treasury to coordinate on further executive actions that may be necessary. This includes re-listing persons removed from sanctions lists; revising sanctions regulations; issuing limited waivers during the wind-down period; and, preparing necessary guidance to educate the US and non-US business communities on the scope of prohibited and sanctionable activity, and the need to unwind any such dealings with Iranian persons. The memorandum also directs that these steps be accomplished in a manner that shifts the financial burden of unwinding any transactions onto Iran.

What happens next?

A background briefing provided by senior State Department officials yielded to bits of clarity on implementation of the sanctions. The 180-day wind-down period applies to crude oil-related activities including transportation. All other transactions will have 90 days but beyond that little additional detail was offered. 

Treasury Secretary Steven Mnuchin weighed in very publicly by noting that Boeing’s licenses to sell aircraft to Iran – worth $20 billion by some estimates – would be revoked. The new United States Ambassador to Germany Richard Grennell tweeted that, “German companies doing business in Iran should wind down operations immediately.” When asked about pressuring European allies, Andrew Peek, the Deputy Assistant Secretary of State for Near Eastern Affairs, said, “We’re certainly going to be pushing and asking and cajoling them to disinvest, absolutely.”

The Europeans, for their part, are revisiting the strategy they used in 1996 to protect EU firms from US sanctions with regard to both Cuba and Iran. Legislation adopted by the EU led to negotiations and ultimately a deal with the Clinton Administration not to sanction EU companies for transaction with either nation. The EU strategy from 20 years ago also included appeals to the World Trade Organization against what they described as, “extra-territorial legislation.”

There needs to be some time to allow the regulatory and legal dust to settle but so far both sides of the Atlantic seem to be gearing up to aggressively pursue their interests.  For clients with interests in Europe and beyond, the only certain thing at this point is uncertainty.

David Adams brings to Cogent clients an invaluable combination of legislative and foreign policy expertise. David has served as Assistant Secretary of State for Legislative Affairs to Secretary of State Hillary Clinton and was instrumental in facilitating the Iran Threat Reduction and the civil nuclear cooperation agreements with Russia and Australia. Previously, as Deputy Assistant Secretary for House Affairs, he was also key to the development of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, as well as approval of major arms sales to Saudi Arabia and Iraq and a civil nuclear cooperation agreement with the United Arab Emirates. For David’s complete bio, click here.