OFAC - Iran Wind-Down of JCPOA Related Activity

2nd August 2018 revised by Bachir El Nakib (CAMS), Senior Consultant, Compliance Alert (LLC).

The United States, through the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC), employs economic sanctions programs for a variety of purposes, including:

  • Diplomatic;
  • Criminal Enforcement;
  • Economic;
  • Humanitarian; and
  • National Security.

Initially, economic sanctions were adopted pursuant to the 1917 Trading with the Enemy Act (TWEA). Modern sanctions, since 1977, have largely fallen under the statutory authority of the International Emergency Economic Powers Act (IEEPA). The IEEPA authorizes the president to implement economic sanctions:

(T)o deal with any usual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy, or economy of the Unites States, if the President declares a national emergency with respect to such threat.

50 U.S.C. Section 1701(a).

Who is Regulated

Contrary to popular belief, OFAC economic sanctions programs do not regulate the targeted nations, persons, and organizations. Rather, all economic sanctions regulate United States persons. A United States person includes:

  • U.S. citizens, wherever located;
  • Permanent U.S. resident aliens (also known as lawful permanent residents or LPRs), wherever located;
  • Entities organised under U.S.Law (e.g. corporation);
  • All entities and persons located in the United States; and
  • Entities owned or controlled by U.S. citizens

Types of Economic Sanctions

Currently, there are numerous economic sanctions programs that target countries, persons, entities, and organizations. The traditional type of economic sanctions are country-based sanctions, which prohibit virtually all activity and transactions involving a certain country. The U.S. government has begun to use other kinds of sanctions known as list-based sanctions. List-based sanctions (also known as smart sanctions), target particular persons, entities, and organizations, rather than an entire nation or regime. In the last five or so years, the U.S. has been implementing a new kind of supplementary sanction, known as secondary sanctions, which target third country actors doing business with targeted regimes, persons, and organizations.

Country-Based Sanctions 

There are five major country-based sanctions programs currently in effect, broadly regulating nearly all transactions with:

  • Iran;
  • Central African Republic;
  • Syria;
  • Cuba; and
  • North Korea

Burma (Myanmar) used to be on this list, but since 2011 the U.S. government largely lifted the country-based sanctions because of significant democratic reforms taking place in Burma.

Country-based sanctions function by prohibiting certain defined transactions and sometimes travel, within the country’s territory, with persons who ordinarily reside in within the country, and with the targeted governmental regime. Each sanctions programs has its own regulatory scheme, but they generally prohibit:

  • Trade in goods,
  • Trade in services,
  • Trade in technology, and
  • Financial transactions.

At times, the sanctions include prohibiting the vesting of property. This can make it problematic when a U.S. person inherits property from a family member living in one of the nations listed above.

The oldest of these country-based sanctions programs, those involving Cuba, are also the broadest. They prohibit transactions with Cuban individuals and non-governmental organizations even in third countries.  U.S. persons are usually obligated to block the property of every Cuban national in their possession.  In that respect, the Cuba sanctions program is unique among country-based sanctions.

Country-based sanctions, though painted with a broad brush, also have general licenses which allow certain types of activity, like the provision of legal services, the exchange of information and informational materials, personal communications, humanitarian aid, and journalistic projects. Although many of the sanctions programs share similar exemptions, the general licenses differ across the various sanctions program.

Nonetheless, the use of country-based sanctions has decreased with the advent of more flexible list-based programs (described in further detail below). Although sanctions programs that target entire nations may be more punitive to governments that are considered enemies of the United States, the use of broad sanctions regulations have also harmed the civilian populations of such nations.

List-Based Sanctions (Smart Sanctions)

The use of list-based sanctions, or smart sanctions, has allowed the U.S. government to more precisely target persons and groups who pose a threat to national security, foreign policy, and economy of the United States. Indeed, list-based sanctions have been particularly helpful from a law enforcement perspective of OFAC sanctions.

OFAC prohibits transactions between U.S. persons and individuals, entities (e.g., corporations), and organizations on the Specially Designated Nationals and Blocked Persons List, or SDN list. The SDN list, which is amended on an “as-needed” basis, targets persons involved with:

  • Terrorism;
  • Narcotics trafficking; Weapons proliferation; 
  • Human rights abuses;
  • Genocide; and
  • Transnational Organized Crime.

The U.S. government has demonstrated a preference for list-based sanctions for two reasons. First, smart sanctions are able to target bad actors without the substantial collateral country-based sanctions impose on a targeted nation’s population. Second, list-based sanctions can be effectively enforced through automated screening, which enables U.S. persons to check clients and businesses against the SDN list.

Because of their flexibility and precision, smart sanctions are now the standard for OFAC sanctions programs. List-based sanctions have become the norm for law enforcement-based economic sanctions programs. In addition, the U.S. enforces UN Security Council resolutions with list-based sanctions. 

Secondary Sanctions

Secondary sanctions are a relatively new kind of sanction that has been implemented frequently over the past five years, particularly relating to Iran. These kinds of sanctions supplement other sanctions programs by targeting non-U.S. persons (primarily foreign financial institutions and foreign sanctions evaders) who do business with individuals, countries, regimes, and organizations in Iran.

For example, if the volume of transactions between a foreign financial institution and Iran are significant enough, that foreign financial institution risks being designated pursuant to one of the legal authorities authorizing the use secondary sanctions.  Once designated, secondary sanctions can prohibit U.S. persons from doing business with that foreign financial institutions or require U.S. banks to limit or restrict that foreign financial institution’s correspondent accounts in the United States.

As of the time, this page was written, secondary sanctions have applied only to Iran, though that can and may change.

Sectoral Sanctions

The difference between OFAC sectoral sanctions and traditional sanctions is the entities on a sectoral sanctions identification list are not subject to blanket prohibitions. In fact, citizens of the United States are prohibited from engaging with those persons in sectoral-specific transactions.

The Ukraine-related sanctions program was the first of its kind to have sectoral sanctions and it specifically targeted Russia’s financial and energy sectors.

Specific types of transactions, such as financial and energy-related transactions, are prohibited for US persons and, like the Venezuelan sanctions, the OFAC 50 percent rule is strictly enforced in the context of the Ukraine-related sectoral sanctions.

Iran Sanctions Program

Wind-down of JCPOA Related Activity and the Re-imposition of Sanctions

All of the sanctions in existence prior to the JCPOA including nuclear-related secondary sanctions will be in effect on November 5, 2018. Wind-down of Iran-related activities pursuant to authorizations provided by the JCPOA is required in the next 90 or 180 days depending on the nature of the transaction. Anyone engaging in any activities which are contrary to the current sanctions laws could be liable for such activities.

OFAC amended the Iranian Transactions and Sanctions Regulations (“ITSR”) to implement the President’s May 8th, 2018 decision to withdraw from the JCPOA, as outlined in the National Security Presidential Memorandum (“NSPM”):

• §560.534 – Winding down of transactions related to the importation into the United States of, and dealings in, certain foodstuffs and carpets.

– All transaction ordinarily incident and necessary to the wind-down of the following activities are authorized through 11:59PM ET on August 6, 2018: The importation of Iranian origin goods including foodstuffs intended for human consumption and carpets/textiles.

• §560.535 – Winding down of transactions related to letters of credit and brokering services relating to certain foodstuffs and carpets.
– All transaction ordinarily incident and necessary to the wind-down of the following activities are authorized through 11:59PM ET on August 6, 2018:
§ U.S. financial institutions issuing letters of credit in favor of a beneficiary in Iran, the Government of Iran, Iranian financial institutions, or any blocked persons.
§ U.S. financial institutions issuing, advising, negotiating, or confirming letters of credit to pay for transactions related to Iranian-origin goods from the Government of Iran, an Iranian financial institution, or any blocked persons.
§ U.S. persons acting as brokers for the purchase or sale of the permitted Iranian-origin goods provided that the goods are not for exportation or supply, direct/indirectly, to Iran, the Government of Iran, an Iranian financial institution, or any blocked persons.

• §560.536 – Winding down of transactions related to the negotiation of contingent contracts for activities eligible for authorization under the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services.
– All transaction ordinarily incident and necessary to the wind-down of the following activities are authorized through 11:59PM ET on November 4, 2018:
§ U.S. persons engaging in all transactions related to the negotiation of contingent contracts (performance of contract contingent upon OFAC issuance of specific license) for activities that were, at the time of the negotiation, eligible for authorization under the now-rescinded Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services (“JCPOA SLP”)

• §560.537 – Winding down of transactions relating to foreign entities owned or controlled by a U.S. person.
– All transaction ordinarily incident and necessary to the wind-down of the following activities are authorized through 11:59PM ET on November 4, 2018:
§ A U.S.-owned foreign subsidiary engaging in transactions, directly or indirectly, with the Government of Iran or any person subject to the jurisdiction of the Government of Iran.
§ Activities related to the establishment or alterations in operating procedures of a U.S. entity or a U.S.-owned foreign subsidiary, to the extent to allow a foreign subsidiary to engage in the relevant authorized transactions.
§ Activities that provide U.S.-owned foreign subsidiaries with business support systems (e.g. email, computer systems, etc.) to collect and/or process documents and information related to the relevant authorized transactions.

Upon conclusion of the 90-day wind-down period on August 6, 2018, the United States will reimpose the following sanctions:

  • The purchase or acquisition of U.S. dollars by the Government of Iran;
  • Iran’s trade in gold and 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.
  • The purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt;
  • Iran’s automotive sector
  • Revocation of the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services (“JCPOA SLP”) 

Upon conclusion of the 180-day wind-down period on November 4, 2018, the United States will reimpose the following sanctions:

  • Iran’s port operators and shipping and shipbuilding sectors.
  • Petroleum-related transactions for petroleum, petroleum products, or petrochemical products from Iran.
  • Transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions under §1245 of the National Defense Authorization Act for Fiscal Year 2012 (“NDAA”).
  • Provision of specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions described in §104(c)(2)(E)(ii) of the Comprehensive Iran Sanctions and Divestment Act of 2010.
  • Provision of underwriting services, insurance, or reinsurance
  • Iran’s energy sector

Iran Sanctions Regime

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) administers a complex and comprehensive sanctions regime against Iran. The Iran sanctions prohibit virtually all direct and indirect transactions involving Iran, the Government of Iran, persons who ordinarily reside in Iran, and entities either located in Iran or formed under Iranian law. The JCPOA also created new business risks.

The Iran sanctions also prohibit the exportation, re-exportation, sale, or supply of goods to a person in a third country undertaken with knowledge or reason to know that the goods are intended specifically for supply, transshipment, or re-exportation — directly or indirectly — to Iran or the Government of Iran. 

Although the Iran sanctions are broad, there are several well-developed exemptions, general licenses, and statements of licensing policy that permit U.S. businesses and U.S. persons to undertake transactions that would otherwise be prohibited. The sanctions targeting Iran are also unique because the Secretary of the Treasury and the President are authorized to target foreign persons and foreign financial institutions who do business with Iran by imposing secondary sanctions against them.

 OFAC’s Legal Authorities for Iran Sanctions

OFAC sanctions targeting Iran are authorized pursuant to many overlapping legal authorities. Iran sanctions are primarily implemented pursuant to the International Emergency and Economic Powers Act. The President annually declares a national emergency with respect to Iran, which authorizes the continued applicability of the Iranian Transactions and Sanctions Regulations. There are numerous executive orders that build upon and expand the nature of the emergency Iran poses to the national security and foreign policy objectives of the United States.

 There are also other important statutes that impose sanctions against Iran.  They include:

 Some of these authorities empower the President to utilize national emergency powers to implement Iran sanctions at his discretion. Other authorities obligate OFAC to implement and enforce sanctions against Iran. These are commonly referred to as congressionally mandated OFAC sanctions. Some even authorize OFAC and the President to impose secondary sanctions against third country persons who continue to transact with Iran.

Impact of Sanctions

  • Petrochemical Products;
  • Gold and Precious Metals;
  • Civil Aviation;

Iranian Transactions and Sanctions Regulations (31 CFR Part 560)

OFAC promulgated the Iranian Transactions and Sanctions Regulations (ITSR) at 31 C.F.R. Part 560 to implement most of the sanctions targeting Iran.  The ITSR is the primary set of regulations that make up the country-based sanctions against Iran.  In addition, OFAC posts on its websites general licenses on an as-needed basis.  Longstanding general licenses from the website are eventually incorporated into the text of the regulations.

OFAC Prohibited Exports, Imports, and Transhipments Involving Iran

The sanctions broadly prohibit “the importation into the United States of any goods or services of Iranian origin or owned or controlled by the Government of Iran, other than information and informational materials.” See Section 560.201.

The sanctions also broadly prohibit the exportation, re-exportation, sale, or supply of goods, technology, or services to Iran. See Section 560.204. The prohibition includes the indirect exportation or transshipments of goods, technology, or services to Iran, including the Government of Iran.

Even if an exported good is not destined for Iran, a person or business may run afoul of the sanctions. This is because transshipments through Iran to third countries are also prohibited. See Section 560.403.

This is significant because many U.S. businesses have a presence in the Middle East and Central Asia. Businesses shipping parts to Dubai, Afghanistan, Pakistan, Oman, and other neighboring countries must be alert and ensure that none of the goods are being transshipped through Iran to their final destinations.

The mere act of having the goods go through Iran is considered a violation of the ITSR.

OFAC Prohibited Trade-Related Transactions with Iran

U.S. persons and businesses, wherever they may be located, are prohibited from engaging in any transaction or dealings with or related to:

  1. Goods or services of Iranian origin or owned or controlled by the Government of Iran; or
  2. Goods, technology, or services for exportation, re-exportation, sale, or supply — directly or indirectly — to Iran or the Government of Iran.

Section 560.206(a)(1)-(2)

Prohibited “transactions or dealings” are broadly construed to include any purchasing, selling, transporting, swapping, brokering, approving, financing, facilitating, or guarantees related to Iran.  Therefore, even if a U.S. business is only involved in shipping or financing an underlying export to Iran, that U.S. business would be in violation of the sanctions.

OFAC Prohibited Facilitation by U.S. Persons of Transactions Between Foreign Persons and Iran

The Iran sanctions also prohibit what is known as “facilitation.” The regulation specifically states that “no United States person, wherever located, may approve, finance, facilitate, or guarantee any transaction by a foreign person where the transaction by that foreign person would be prohibited by this part if performed by a United States person or within the United States.” See Section 560.208.

Facilitation is so broadly construed that it even prohibits a U.S. business or individual from referring business to a foreign person (located in a third country) if the referred business would be prohibited if performed by the U.S. person. See Section 560.417(b).

Such a broad prohibition of a common business courtesy can easily cause a person to violate the sanctions against Iran. Avoiding an inadvertent violation of the law can be achieved by consulting with an attorney who has experience handling OFAC sanctions issues.

OFAC Prohibited Investment in Iran

Section 560.207 prohibits U.S. persons from investing in Iran or in property owned or controlled by the Government of Iran. This prohibition includes investments in companies that may be owned or controlled by the Iranian Government that may operate overseas.

In several instances, the U.S. government has prosecuted investment-related cases under the theory that contributing to or placing funds in an Iranian bank account constitutes a prohibited investment in Iran. This theory is becoming more prevalent as Iranian banks try to encourage deposits in the face of crippling inflation by sky-rocketing interest rates, some of which have risen as high as 20 percent. With such high rates of return, however, deposits can reasonably be construed by OFAC and the Department of Justice as prohibited investments.

This theory of prosecution is also consistent with the definition of “new investment,” which broadly states that the term means “[a] commitment or contribution of funds or other assets . . . or [a] loan or other extension of credit.” See Section 560.316.


The Iran Deal

The Iran Deal, known as the Joint Comprehensive Plan of Action (JCPOA), was an agreement reached between the P5+1 countries and Iran over its nuclear program. In exchange for some sanctions relief, Iran has agreed to curb some of its nuclear-related programs. The Iran Deal was implemented in January 2016. The United States withdrew from the Iran Deal in May 2018.


Sanctions Enforcement After Re-imposition of Nuclear-related Sanctions – May 8, 2018

On May 8th, 2018 President Trump’s administration announced a decision to cease US participation in the JCPOA, and to begin reimposing, following a wind-down period, the U.S. nuclear-related sanctions that were lifted to effectuate the JCPOA sanctions relief. The President’s National Security Presidential Memorandum (“NSPM”) directs the Secretaries of State and Treasury to prepare for the immediate re-imposition of all U.S sanctions waived in connection with the JCPOA no later than 180 days from the issuance date of the NSPM.

To implement the withdrawal from the JCPOA, the Departments of State and the Treasury have established a 90-day and a 180-day wind-down period for activities involving Iran that were consistent with the U.S. sanctions relief provided under the JCPOA.

Following the two wind-down periods, OFAC expects that all the U.S. nuclear-related sanctions that had been lifted under the JCPOA will be re-imposed and in full effect following on November 4, 2018.

OFAC provides in relevant parts in the NSPM:

Sanctions Re-Imposed After August 6, 2018 (After the 90-day wind-down period)

The following sanctions will be reimposed upon conclusion of the 90-day wind-down period that ends on August 6, 2018:

  1. Sanctions on the purchase or acquisition of U.S. dollar banknotes by the Government of Iran;
  2. Sanctions on Iran’s trade in gold or precious metals;
  3. Sanctions on 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;
  4. Sanctions on 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;
  5. Sanctions on the purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt; and
  6. Sanctions on Iran’s automotive sector.

The following JCPOA-related authorizations under U.S. primary sanctions regarding Iran will also be revoked:

  1. The importation into the United States of Iranian-origin carpets and foodstuffs and certain related financial transactions pursuant to general licenses under the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR);
  2. Activities undertaken pursuant to specific licenses issued in connection with the Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services (JCPOA SLP); and
  3. Activities undertaken pursuant to General License I relating to contingent contracts for activities eligible for authorization under the JCPOA SLP.

 

Persons currently engaged in activities listed above should take the necessary steps to wind down those activities by August 6, 2018 so as to avoid exposure to sanctions or enforcement actions under U.S. law.

 

Sanctions Re-Imposed After November 4, 2018 (After the 180-day wind-down period)

The following sanctions will be reimposed upon conclusion of the 180-day wind-down period that ends on November 4, 2018.

  1. Sanctions on Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines (IRISL), South Shipping Line Iran, or their affiliates;
  2. Sanctions on petroleum-related transactions with, among others, the National Iranian Oil Company (NIOC), Naftiran Intertrade Company (NICO), and National Iranian Tanker Company (NITC), including the purchase of petroleum, petroleum products, or petrochemical products from Iran;
  3. Sanctions on transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions under Section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (NDAA);
  4. Sanctions on the provision of specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions described in Section 104(c)(2)(E)(ii) of the Comprehensive Iran Sanctions and Divestment Act of 2010 (CISADA);
  5. Sanctions on the provision of underwriting services, insurance, or reinsurance; and
  6. Sanctions on Iran’s energy sector.

 

Additionally, November 5, 2018, will mark the U.S. government’s revocation of authorizations for U.S.-owned or U.S.-controlled foreign entities to wind down certain activities with the Government of Iran or Iranian persons and entities that were previously authorized pursuant to General License H.

Also, by November 5th, the U.S. government will reimpose, as appropriate, sanctions that applied to persons and entities removed from the List of Specifically Designated Nationals and Blocked Persons (SDN List) and/or other lists maintained by the U.S. government on January 16, 2016.

Persons currently engaged in activities listed above should take the necessary steps to wind down those activities by November 4, 2018 so as to avoid exposure to sanctions or enforcement actions under U.S. law.

 

The Wind-Down Period

The U.S. government has been known to work with U.S. or third-country companies to minimize the impact of sanctions on legitimate activities undertaken prior to the imposition of sanctions.

To implement the May 8, 2018 NSPM, the Departments of State and Treasury established the 90-day and 180-day wind-down periods for activities involving Iran that were consistent with U.S. sanctions under the JCPOA.

Although JCPOA-related statutory waivers have been revoked to implement the NSPM, the necessary sanctions waivers have been issued to provide appropriate wind-down periods, i.e. August 6, 2018, or November 4, 2018. Non-U.S., non-Iranian persons are advised to use these periods to wind-down their activities involving Iran that will become sanctionable at the conclusion of the relevant period.

 

If a non-U.S., non-Iranian person is owed payment after the conclusion of the applicable wind-down period for goods or services fully provided/delivered to an Iranian counterparty prior to the applicable wind-down period (August 6, 2018, or November 4, 2018), pursuant to a written agreement entered into prior to May 8, 2018, and such activities were within U.S. sanction authorizations in effect at the time of delivery or provision, the U.S. government would allow the non-U.S., non-Iranian person to receive such payment. Similarly, the U.S. government would also allow for loans or credits extended to an Iranian counterparty to be repaid to non-U.S., non-Iranian persons under the same conditions. Any such payments must nonetheless be consistent with U.S. sanctions, including that payments must not involve U.S. persons or the U.S. financial system unless the transactions are exempt or authorized by OFAC. 

Consistent with the above conditions, OFAC will also allow U.S. persons and U.S.-owned or -controlled foreign entities until August 6, 2018, or November 4, 2018, as applicable, to wind down operations in or business involving Iran conducted pursuant to an OFAC authorization, and to receive payments according to the terms of the written agreement entered into prior to May 8, 2018, for goods or services fully provided or delivered pursuant to an OFAC authorization. Soon, OFAC will replace General License H, General License I, and other general licenses relating to the trade of Iranian-origin rugs and foodstuff with more narrowly scoped authorizations that would allow U.S. persons and, as appropriate, US-owned or -controlled foreign entities, to engage in all transactions ordinarily incident and necessary to wind down activities previously authorized pursuant to those general licenses and to receive payments according to the written agreement entered into prior to May 8, 2018, for goods or services fully provided/delivered pursuant to an OFAC authorization.

New Business

New business pursuant the JCPOA sanctions relief will not be authorized during the wind-down periods. OFAC advises that when considering a potential enforcement or sanction action with respect to activities engaged after the conclusion of the wind-down periods, it will evaluate efforts and steps taken to wind down activities and will assess whether any new business was entered into involving Iran during the applicable wind-down period. In addition, the provision or delivery of additional goods and services and/or the extension of additional loans or credits to an Iranian person or entity after the wind-down period, even pursuant to written agreements entered into before May 8, 2018, may result in the imposition of US sanction unless exempt or authorized by OFAC.

SDN Re-Listing

No later than November 5, 2018, OFAC expects to move persons identified as meeting the definition of the terms “Government of Iran” or “Iranian financial institution” from the List of Persons Blocked Solely Pursuant to E.O. 13599 (“E.O. 13599 List”) to the SDN List. OFAC will not add these persons and entities to the SDN List on May 8, 2018 so as to allow for the orderly wind down of activities by non-U.S., non-Iranian persons that had been untaken prior to the NSPM issuance. The Government of Iran and Iranian financial institutions remain as persons whose property and interests in property are blocked pursuant to E.O. 13599 and the ITSR, and U.S. persons continue to be broadly prohibited from engaging in transactions with the Government of Iran and Iranian financial institutions. Starting November 5, 2018, activities with most persons moved from the E.O. 13599 List to the SDN List will be subject to secondary sanctions.

 

Exemption Request

PARIS: France, Britain, Germany and the EU on Wednesday sent the United States a joint official request for their companies to be exempt from punitive measures resulting from fresh U.S. sanctions on Iran.

"As allies, we expect that the United States will refrain from taking action to harm Europe's security interests," said the letter to U.S. Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo.

French Economy Minister Bruno Le Maire said the three countries and the EU were asking the U.S. "to exempt European businesses doing legitimate trade in Iran from all extraterritorial American sanctions".

"Those businesses must be able to pursue their activities," he wrote on Twitter.

The plea comes as European leaders scramble to save the hard-fought deal signed between Iran and world powers in 2015 under which Tehran agreed to limits on its nuclear capacities in exchange for relief from crippling economic sanctions.

U.S. President Donald Trump announced he was abandoning the deal last month - which will mean new sanctions on the Islamic republic and punitive measures for those who trade with it.

Analysts say European firms which have rushed to invest in Iran after the lifting of sanctions over the past three years have the most to lose from the renewed sanctions.

Several major companies including France's Total and the Netherlands' Maersk have already said it will be impossible to stay in Iran once the sanctions are fully reimposed over the next six months, unless they receive explicit exemptions from Washington.

French automaker PSA said Monday that it would pull out of two joint ventures to sell its cars in Iran to avoid the risk of punishing fines.

Lebanon - Lebanon is collateral damage in Washington’s economic war against Tehran and U.S. sanctions on Iran will have negative repercussions on Beirut, an ex-State Department official said Wednesday.

“I don’t see any way to avoid this outcome and that’s one of the reasons we were quite careful about how we thought about these sanctions because we wanted to avoid damage to non-targeted parties,” Jarrett Blanc told The Daily Star.

He was referring to the upcoming sanctions targeting Iran’s financial and banking sectors.

“There’s no way to ensure the sanctions affect Hezbollah only and not the rest of the country,” he said.

Following U.S. President Donald Trump’s decision in May to withdraw from the international nuclear deal with Iran and reimpose an embargo on Iran’s energy and financial sectors, Lebanese citizens await what’s next.

But Blanc, a senior fellow in the geoeconomics and strategy program at the Carnegie Endowment for International Peace, is skeptical about the extent of the negative impact Hezbollah will suffer.

He says it will certainly be inconvenient for the group, but that “it’s not credible to say that after all these years ... some sanction silver bullet will fundamentally effect its ability to operate.” He added: “We’ve been doing this for too long to believe that that’s just around the corner.”

One of the lead coordinators in the JCPOA – an acronym for the Iran nuclear deal – under President Barack Obama, Blanc said the U.S. has lost an opportunity to put the nuclear deal “behind us” and address bigger issues of Iranian policy in the region, like its support for Hezbollah.

Meanwhile, he said that Iran critics were dishonest when it comes to describing the financial relationship between Iran and its regional proxies like Hezbollah. Tehran benefited from the JCPOA principally for domestic economic purposes.

Blanc said this didn’t flow into funding Hezbollah. “The reason for that is, relative to Iran’s economy, Hezbollah is cheap,” Blanc said.

He claimed that Iran doesn’t need a lot of economic growth “in order to pay bills for Hezbollah and [Syrian President] Bashar Assad.”

According to Blanc, Iran was paying these bills consistently even during the period of the most aggressive sanctions.

“I have to imagine that this will continue to be the case even as sanctions come back into place.”

Asked what would hurt Hezbollah, Blanc said: “We all have some sense of what doesn’t work, and there’s no magical policy that will undo all the damage done [since the U.S. invaded Iraq].”

“You should not believe that you can beat Hezbollah at the bank,” he stated, stopping short of saying this was a main reason not to go after the group.

As for the impact on Lebanon’s banking sector, Blanc doesn’t see the need for panic. The Central Bank has a “justifiably pretty good reputation and I’m not pessimistic that they’ll be able to figure out a way to manage this situation,” he said. But, Blanc added, the sanctions will cause some complications and “presumably there will be a cost associated.”

Whether the new sanctions will help the U.S. convince its allies to recognize both wings of Hezbollah as a terrorist organization is becoming increasingly unlikely. “I don’t think the Europeans were ever going to do that, but it becomes much less likely when the JCPOA becomes less effective,” Blanc said.

Blanc was the State Department coordinator for Iran nuclear implementation at the U.S. Department of State under President Barack Obama, responsible for the implementation of the JCPOA on Iran’s nuclear program, including Iran and U.S. commitments on sanctions.