Iran Sanctions Are Here—Breaking Down What This Means For Business Mr Mahmoud Baki Fadlallah, Wynn H. Segall, Nnedinma C. Ifudu Nweke, Chiara Klaui, Johann Strauss and Andrew R. Schlossberg

Key Points

As of November 5, 2018, the United States concluded the second of two wind-down periods for re-imposition of U.S. sanctions on Iran following the May 8, 2018, announcement that the United States would cease participation in the JCPOA. Effective November 5, 2018, all U.S. sanctions on Iran that were lifted or waived as part of the Iran nuclear deal were re-imposed. In addition to re-imposing sanctions, OFAC designated more than 700 individuals, entities, vessels and aircraft on the SDN list, which represents a significant increase over the approximately 400 parties designated before the implementation of the JCPOA. The United States grantedSREs to eight countries—China, Greece, India, Italy, Japan, South Korea, Taiwan and Turkey—which exempt financial institutions in these countries from U.S. sanctions for facilitating significant financial transactions related to the purchase of oil from Iran. On May 8, 2018, President Donald Trump announced that he was withdrawing the United States from the Iran nuclear deal—a decision that provided for the re-imposition of U.S. sanctions on Iran that were lifted or waived as part of the deal. In conjunction with the announcement, the Trump administration established 90- and 180-day wind-down periods for re-imposition of different categories of U.S. sanctions measures. The first set of sanctions, including measures affecting Iran's financial, automotive, precious metals and certain other sectors, went into effect following the conclusion of the first wind-down period on August 6, 2018. The second wind-down period ended at 11:59 p.m. Eastern Standard Time on November 4, 2018.

Beginning November 5, 2018, the United States re-imposed extraterritorial sanctions on Iran, including hard-hitting sanctions affecting Iran's energy, shipping and banking sectors, among others, that broadly target non-U.S. companies' business activities involving Iran across important sectors of the Iranian economy. The re-imposed sanctions also add hundreds of designated Iranian companies, vessels, financial institutions and individuals to the U.S. Department of the Treasury, Office of Foreign Assets Control's (OFAC) list of Specially Designated Nationals and Blocked Persons (SDN List). These sanctions measures are complex and present unique challenges to businesses that operate in sectors that intersect with Iran or Iranian companies. This alert provides a brief review of the sanctions that were re-imposed on November 5, other significant announcements made on the same day regarding U.S. sanctions policy toward Iran and some of the immediate implications that these developments have for businesses moving forward.

Background on U.S. Withdrawal from the JCPOA

President Trump announced on May 8, 2018, via a National Security Presidential Memorandum (NSPM) that the United States would cease its participation in the Joint Comprehensive Plan of Action (JCPOA). The JCPOA, commonly referred to as the "Iran nuclear deal," was an international agreement implemented in January 2016 between the P5+1 (the five permanent members of the U.N. Security Council—China, France, Russia, the United States and Russia—plus Germany) and Iran. The agreement brought sanctions relief to Iran in exchange for Iran's compliance with certain nuclear-related commitments.

The Iran nuclear deal was heavily criticized by President Trump during his presidential campaign and after his election. As detailed in our previous alerts, during his first year in office, President Trump sought to "fix" what he considered key flaws in the deal, specifically the deal's failure to counter non-nuclear activities by the Iranian government, including Iran's ballistic missile program, support for terrorist groups, malicious cyber activities and human rights violations. Unable to garner sufficient support from European allies to amend the deal, President Trump announced on May 8, 2018, that he would cease U.S. participation in the JCPOA and re-impose U.S. sanctions that were lifted or waived by the United States. For additional information on the political background leading to this announcement, see our May 2018 alert available here.

TheNSPM stated that sanctions on Iran would be re-imposed "as expeditiously as possible and in no case later than 180 days from the date of theNSPM."1 Concurrent with this announcement, OFAC issued guidance announcing the reimposition of sanctions following either a 90- or 180-day wind-down period depending on the activities subject to sanctions.2 The guidance also detailed measures that the U.S. government would take to re-designate parties on the SDN List" and withdrawal of favorable licensing policies for U.S. persons and U.S.-owned or -controlled companies.

August 6, 2018, marked the conclusion of the first wind-down period, resulting in the re-imposition of a number of different sanctions on Iran, including sanctions targeting the automotive sector, trade in gold and precious metals, and transactions in Iranian rial. At that time, the President also issued Executive Order (EO) 13846, which reinstated the legal authorities providing a basis for U.S. sanctions on Iran that were waived as part of the JCPOA. This executive order also broadened the scope of sanctions, and OFAC issued new frequently asked questions (FAQs) that provided additional guidance for businesses on how to comply with the re-imposed sanctions. For additional information on the sanctions that were re-imposed on August 6, 2018, and corresponding OFAC guidance, please see our August 2018 alert available here.

Additional Sanctions Re-Imposed on November 5, 2018

Effective November 5, 2018, the U.S. government re-imposed the final set of sanctions that were lifted or waived under the JCPOA. The re-imposed sanctions include secondary sanctions targeting transactions by non-U.S. persons with regard to certain sanctionable activities involving Iran. Accordingly, non-U.S. companies now face sanctions exposure if they engage in transactions involving:

the Iranian energy, shipping and shipbuilding sectors, and designated persons that the U.S. government determines to be part of...