U.S. pulls out of the JCPOA
On 8 May 2018 President Trump announced that the U.S. is terminating its participation in the Joint Comprehensive Plan of Action (JCPOA), between Iran and the five permanent members of the UN Security Council (i.e. China, France, Russia, the UK, U.S. Germany and the European Union).
The President has directed the U.S. Administration to immediately begin the process of re-imposing US nuclear-related secondary sanctions lifted under the JCPOA, which apply to non-US persons and entities (U.S. primary sanctions which apply to U.S. persons and entities were not lifted under the JCPOA and therefore continue to apply). The re-imposed sanctions target key sectors of Iran’s economy, such as its energy, petrochemical, and financial sectors, which is likely to have significant ramifications for maritime trade with Iran and the insurance of such trade.
Two separate winding down periods have been established, one for 90 days (i.e. up to 6 August 2018) and the other for 180 days (i.e. up to 4 November 2018) to enable non-US persons and entities to wind down transactions involving Iran which were entered into prior to 8 May 2018. The 90-day winding down period applies to the sale or supply to/from Iran of graphite, raw or semi-finished metals such as aluminium and steel, coal and software for integrating industrial processes. The 180-day winding down period applies to the purchase of petroleum or petroleum products from Iran and the provision of insurance/reinsurance. Further details are provided in FAQs issued by the US Office of Foreign Assets Control (OFAC) which can be found on the US Treasury Department website here.
The U.S. government has confirmed that it intends to revoke General Licence H (GLH), which authorised U.S. owned or controlled foreign entities to engage in certain transactions with Iran. The winding down of activities authorised under GLH must be completed by 4 November 2018. The U.S. government will also re-designate persons and entities as Specially Designated Nationals (SDN) by 5 November 2018 which were previously removed from the list under the terms of the JCPOA. US OFAC has indicated that penalties could be imposed if transactions are entered into after 8 May 2018 involving activities for which sanctions are to be re-imposed even if they are concluded within the applicable winding down periods. Further details are provided in a client alert produced by Freehill, Hogan & Mahar LLP here.
A full assessment of the likely impact of this decision by the U.S. Administration will only be possible following receipt of clarification of the position of the remaining JCPOA partners, who have recently reaffirmed their support for the JCPOA, together with further clarification from OFAC in relation to the management of the "wind-down" periods envisaged under the decision. The International Group will continue to monitor developments in this regard which will be reported to members.
Sanctions lifted under the JCPOA – 16 January 2016
On 14 July 14 2015, the P5+1, the European Union (EU) and Iran reached a Joint Comprehensive Plan of Action (JCPOA) which is commonly referred to as the ‘Iran deal’. On 16 January 2016 the International Atomic Energy Agency verified that Iran has implemented its key nuclear-related commitments under the JCPOA (known as “Implementation Day”) and as a result the UN, EU and US lifted their nuclear-related sanctions against Iran.
The sanctions which were lifted relate to the financial, banking, energy, petrochemical, shipping, shipbuilding, and automotive sectors; Iran’s port operators; Iran’s trade in gold and other precious metals; trade with Iran in graphite, raw or semi-finished metals such as aluminium, steel, coal and software for integrating industrial processes (but this is still subject to prior authorisation under the EU sanctions regime); and the provision of insurance, re-insurance and underwriting services in respect of these activities. However the supply of military goods to Iran or equipment that may be used for internal repression remain prohibited.
The JCPOA also resulted in the delisting of hundreds of Iranian individuals and entities previously designated by the EU and US as sanctioned entities.
Only US “secondary” sanctions have been lifted i.e. which apply to conduct outside of US jurisdiction that involves non-US persons. US primary sanctions which apply to US persons (or entities owned or controlled by US persons) remain in effect. This means that US banks are still prohibited from processing any US dollar transactions in respect of Iran. Members should be aware that many non-US banks are cautious about processing payments relating to Iran in any currency which means that it may be difficult for the club to assist members in terms of paying claims or providing security.
The JCPOA also contains a “snap-back” provision which permits the re-imposition of EU and US sanctions against Iran in the event that Iran reneges on its nuclear-related commitments under the JCPOA. Members should consider inserting sanctions clauses in their charterparties such as the BIMCO Sanctions Clause for Time Charterparties and the BIMCO Designated Entities Clause.
We remind members who are considering trading to Iran that they will need to exercise due diligence to ensure that the trade or operation is not subject to sanctions and that they do not trade with individuals or entities that are named on the US or EU sanctions lists as it is still prohibited to trade with them.
The US Treasury and the US Office of Foreign Assets Control (OFAC) has issued detailed Guidance and FAQs relating to the lifting of US secondary sanctions under the JCPOA:
Guidance Relating to the Lifting of Certain Sanctions Pursuant to the Joint Comprehensive Plan of Action on Implementation Day
Frequently Asked Questions Relating to the Lifting of Certain U.S. Sanctions under the Joint Comprehensive Plan of Action (JCPOA) on Implementation Day
The US sanctions list
The EU Consolidated sanctions list
Circulars issued by the club
14 April 2016, Standard Club circular - Iran Trading, P&I cover
22 March 2016, Standard Club circular - Iran trading P&I cover update
23 February 2016, Standard Club circular - Iran trading, P&I cover
20 January 2016, Standard Club Circular - Iran Sanctions lifting of certain sanctions under the JCPOA
25 July 2014, Standard Club Circular- Iran sanctions, extension of sanctions relief under the Joint Plan of Action
28 January 2014, Standard Club Circular- US-EU Iran sanctions – further update
17 January 2014, Standard Europe Circular, Iran sanctions update
9 July 2010, Standard Bermuda Circular: Sanctions Against Iran And Impact On Club Cover
Web alerts issued by the club
Update on President Trump's refusal to recertify the Iran deal
Iran Sanctions: “Implementation Day” announced which marks the lifting of EU and US sanctions under the JCPOA
Joint Plan of Action to ease sanctions against Iran, 29 November 2013
EU sanctions against Iran, 26 June 2013
US tightens Iran sanctions, 4 June 2013
The International Group publishes further guidance on Iran sanctions , 31 January 2013
US Iran Sanctions significantly expanded by the enactment of the Iran Freedom and Counter-Proliferation Act of 2012, 18 January 2013
The EU has issued fresh sanctions against Iran, 17 October 2012
New US sanction law tightens Iran prohibitions, 11 October 2012