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US withdrawal from the Iran Deal: What happens now?

On May 8, 2018, US President Donald Trump announced that the United States will withdraw from the Joint Comprehensive Plan of Action (JCPOA), commonly referred to as the “Iran Deal.” In conjunction with the announcement, President Trump issued a National Security Policy Memorandum (NSPM) directing his Administration to “take all appropriate steps to cease the participation of the United States in the JCPOA” and “immediately begin taking steps to re-impose all United States sanctions lifted or waived in connection with the JCPOA . . . as expeditiously as possible, and in no case later than 180 days from [May 8].” The US Treasury Department’s Office of Foreign Assets Control (OFAC) simultaneously issued a set of responses to Frequently Asked Questions that provides additional details on the timeline and steps that are expected to be taken through November 5, 2018.1

In the near term, the announced steps effectively keep in place most Iran-related US sanctions authorizations and waivers, in one form or another, until wind-down periods conclude on August 6 and November 4, depending on the activity involved. The exact details of these steps and whether the United States will impose new sanctions on Iran are still unclear.

The reaction from US allies in Europe who are also party to the JCPOA, however, has been unequivocal. The EU Commission President himself has stated that the United States’ announced withdrawal is a rejection of multilateral cooperation, and EU leaders have announced that the EU will seek exemptions and carve-outs for EU companies.

What do the wind-down periods cover and which activities are impacted?

Following the shorter wind-down period of 90 days that ends on August 6, 2018, the United States is slated to re-impose sanctions on Iran’s automotive sector and many of the previously lifted finance and non-petroleum extractives sanctions. This includes the re-imposition of US sanctions on (i) Iran-related trade in gold, precious metals, graphite, and certain other metals; (ii) the sale of US dollar banknotes to the Government of Iran; (iii) Iranian rials; and (iv) Iranian sovereign debt.

Additionally, at the 90-day mark, the United States is set to revoke certain general and specific authorizations that could have significant repercussions on Iran’s airline industry, as well as its carpet and agricultural sectors.

Following the longer wind-down period of 180 days that ends on November 4, 2018, the United States plans to re-impose the balance of US sanctions that had been in place prior to the JCPOA. After that date, “OFAC expects that all the US nuclear-related sanctions that had been lifted under the JCPOA will be re-imposed and in full effect.” The US sanctions on Iran that are set to be re-imposed after November 4 include sanctions on (i) Iran’s energy sector; (ii) Iran’s petroleum sector; (iii) Iran’s port, shipping, and shipbuilding sectors; (iv) the Central Bank of Iran and other Iranian financial institutions; and (v) underwriting, insurance, and reinsurance.

How will the wind-down periods impact existing and new Iran-related activities?

OFAC has stated that it will replace four general authorizations “as soon as administratively feasible” with more narrowly-scoped authorizations that limit activities to those “ordinarily incident and necessary to wind down activities that were previously authorized.” These four general authorizations cover certain activities by US-owned or controlled foreign entities (General License H), certain contingent contracts (General License I), and Iranian-origin carpets and foodstuffs.

With respect to non-US person activities, the OFAC FAQs state that the previously lifted US secondary sanctions have not yet gone back into effect. However, that is expected to change as Iranian entities such as the National Iranian Oil Company (NIOC) that were removed from OFAC’s List of Specially Designated Nationals and Blocked Persons (SDN List) pursuant to the JCPOA are set to be are re-listed by November 5, 2018. Yesterday’s announcements do not include specific additional limitations on activities – even new activities – by non-US persons during the wind-down period. OFAC has stated, nevertheless, that when considering an enforcement action related to potential sanctions violations that occur after each wind-down period ends, OFAC will “evaluate efforts and steps taken to wind down activities and will assess whether any new business was entered into involving Iran during the wind-down period.” Non-US persons are therefore not currently explicitly prohibited from starting new Iran-related activities during the wind-down periods, but OFAC’s statement indicates that it would likely view such new activities unfavorably.

What happens to Iran-related activities after the wind-down periods?

According to yesterday’s announcements, by November 5, 2018, the entirety of US nuclear-related sanctions on Iran will be re-imposed. This includes (i) moving certain Iranian entities back onto OFAC’s SDN List and other US sanctions-related lists, (ii) the expansion of extraterritorial, or “secondary,” sanctions that authorize penalties against non-US persons who facilitate certain significant transactions with, or otherwise provide material support to, Iranian SDNs, (iii) the termination of specific licenses under JCPOA-related licensing policies (e.g., for activities related to commercial passenger aircraft), (iv) the termination of JCPOA-related general authorizations, and (v) resuming efforts to reduce Iran’s crude oil sales.

For non-US person activities, OFAC has stated that non-US, non-Iranian persons may continue to receive payments from an Iranian counterparty for goods or services fully delivered or provided – or for loans or credit extended – prior to the end of the relevant wind-down period pursuant to a contract or agreement entered into before May 8, 2018. OFAC also suggests that it will continue “working with US or third-country companies to minimize the impact of sanctions on the legitimate activities of those parties undertaken prior to the imposition of sanctions.”

Due to US government officials’ stated opposition to ongoing Iran-related activities, companies engaging in Iran-related business during and after the wind-down periods should exercise care, which could include enhanced due diligence and taking steps to ensure that such activities do not implicate US secondary sanctions.

What steps will Europe and Iran take in response to US withdrawal?

The EU’s High Representative for Foreign Affairs and Security Policy and the leaders of France, Germany and the UK – all of whom are also parties to the JCPOA – expressed their regret that the United States has decided to pull out of the JCPOA. They have confirmed that, as long as Iran continues to implement its nuclear-related commitments, the EU will remain committed to the continued full and effective implementation of the JCPOA. European leaders have also stated that the JCPOA is crucial for regional and European security. The EU said it expects the rest of the international community to “continue to do its part to guarantee that [the JCPOA] continues to be fully implemented, for the sake of our own collective security.”

EU officials have stated that the EU is determined to act in accordance with its security interests and to protect its economic investments and the interests of European companies; leaders in EU member states have generally concurred. France’s Finance Minister also said that the EU will seek carve-outs and grand-fathering measures for pre-existing relationships. French President Emmanuel Macron simultaneously announced continued efforts to negotiate a broader nuclear agreement with Iran, with a focus on keeping restrictions on Iran’s nuclear activities after 2025, ballistic missile activities, and military role in the Middle East. The UK government stated that it “continues to fully support expanding our trade relationship with Iran and encourages UK businesses to take advantage of the commercial opportunities that arise,” while cautioning that “[h]ow UK companies act in response to US sanctions is a commercial and legal decision for that company.” Finally, the German foreign ministry has said that there are no viable alternatives to the control mechanisms in the JCPOA and that a collapse may lead to a series of escalating reactions, which would not benefit any party. In a joint statement, the EU urged Iran to show restraint in response to the US decision.

The Iranian president, Hassan Rouhani, announced that Iran would remain committed to the JCPOA and that “from now on, this is an agreement between Iran and five countries. We have to wait and see how others react. If we come to the conclusion that with cooperation with the five countries we can keep what we wanted despite Israeli and American efforts, the JCPOA can survive.” President Rouhani also stated that he had instructed Iran’s atomic energy agency to prepare to restart uranium enrichment in case the JCPOA completely collapses.


For US and non-US companies that have been conducting, or were considering, Iran-related business under the JCPOA’s sanctions relief, the announced withdrawal of the United States from the Iran deal will likely result in disruption. Now would be a good time for such companies to take stock of their contractual exit provisions and termination rights in light of the impending re-imposition of US sanctions on Iran. The continuation of most authorizations during the wind-down periods, however, may provide at least a temporary reprieve while preparing for a return to greater US restrictions on activities related to Iran.

Our Global Sanctions and Trade team will continue to monitor sanctions on Iran and will provide additional updates on any significant further developments.
Please contact any member of our Global Sanctions and Trade team if you have any questions or would like to discuss any of these points.

1 The OFAC FAQs are available at: