Web Alert: U.S. pulls out of Iran nuclear deal
10 May 2018
On 8 May 2018 President Trump announced that the U.S. is terminating its participation in the Joint Comprehensive Plan of Action (JCPOA) otherwise known as the 'Iran nuclear deal', 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.