On July 14, the White House and the U.S. State Department announced that they had reached an agreement with their diplomatic partners and Iran to curtail
Iran’s further development of its nuclear program. In exchange for assurances that should limit Iran’s ability to develop a nuclear weapon, the U.S. and
its negotiating partners − the so-called P5+1 − will roll back some sanctions against Iran. But, while Western diplomats and journalists have focused most
of their attention since the announcement on describing the deal’s anticipated effects on curbing Iranian weapons development, it will take time to fully
understand how and to what extent the sanctions against Iran will be rolled back, and what that will mean to U.S. and non-U.S. businesses interested in the
At this point, our understanding of how Iranian sanctions relief will work is still developing. The
U.S. Department of Treasury’s Office of Foreign Asset Control (OFAC)
has announced that for the moment, the sanctions relief initially provided in the
2013 Joint Plan of Action will remain in effect until the new
agreement’s implementation. We also know that even after implementation, at least some U.S. sanctions will remain in place. In announcing the deal,
President Obama declared that
sanctions related to Iran’s support for terrorism, its ballistic missile program and its human rights violations would remain in force. So while the agreement will eventually require the termination of the United States’ nuclear-related secondary sanctions in a phased fashion over time as
it is confirmed Iran is meeting its nuclear commitments, substantial limitations on U.S. persons’ and companies’ dealings with Iran will remain in place.
There may be an important change in the limitations imposed on foreign businesses owned by U.S. persons. The agreement includes an annex
indicating that the United States would issue trading licenses to the foreign subsidiaries of U.S. corporations
to allow them “to engage in activities with Iran that are consistent with” the nuclear agreement. It will likely take time for the U.S. to explain how and
when these trading licenses will be granted, but it is conceivable that many U.S. companies will want to take advantage of this provision.
For those non-U.S. persons and companies who will be impacted by rollback of the U.S. secondary sanctions, as well as U.N. and EU sanctions relating to
Iran, there remains the specter of the rolled-back sanctions “snapping back” under the deal if Iran fails to uphold its end of the bargain. The White House’s primer on the deal notes that the U.N.’s sanctions against Iran will
“automatically” snap back into place for at least a decade if Iran breaches the agreement. The Administration further notes that both the United States and
EU “can snap sanctions back into place” if Iran breaches − language that suggests the United States and EU will be able to exercise at least some
discretion over whether their sanctions should be reintroduced.
The snap-back procedure
will reportedly involve review by an eight-member panel
consisting of Britain, China, France, Germany, Russia, the United States, the European Union and Iran. If, following a 65-day investigation and referral
period, the panel confirms by majority vote that Iran is violating the agreement, sanctions can then snap back into place. The majority voting procedure
precludes blocking by Iran or its allies on the panel. Given the relatively short window this 65-day snap-back procedure would offer, companies
considering dealings with Iran following sanctions rollback will need to carefully weigh the risk of snap-back when looking at longer-term business
activities in or with Iran, even though it may be
a promising market for their goods and services.
The domestic politics surrounding the deal contribute further uncertainty, though it is unlikely that Congress will be able to stop the deal’s
implementation. In April,
Congress and the White House reached a compromise providing a 60-day legislative review
of the President’s executive agreement with Iran. Following Tuesday’s announcement of the Iran deal, House Speaker John Boehner signaled that it could
encounter stiff resistance in Congress, declaring that he “won’t support any agreement that jeopardizes the safety of the American people and all who value
freedom and security.” The earlier legislative agreement, however, gives President Obama the authority to veto congressional attempts to scuttle the deal,
and he has publicly threatened to do so.
The Republican presidential candidates, meanwhile, have so far universally decried the agreement, which some
have pledged to rescind if elected. In other words, the only thing certain about the Iran deal remains that it comes with a healthy dose of uncertainty.