On Saturday, January 16, 2016, the International Atomic Energy Agency (“IAEA”) certified that Iran had fulfilled its commitments under the Joint Comprehensive Plan of Action (“JCPOA”). As such, the long awaited Implementation Day has arrived.
The sanctions relief measures set out in the JCPOA pave the way for business to resume with Iranian entities. However, it is still important for those contemplating business with Iran to review the OFAC’s guidance documents to ensure that there is no breach of US sanctions. Those contemplating doing business with Iranian entities and/or in Iran must be aware that the US has only lifted what they call “secondary sanctions” which relate to non-US entities. The US “primary sanctions” remain in place and this effectively prohibits most US based companies or US controlled foreign entities from doing business with Iranian entities and/or in Iran. There is no timetable in place for these primary sanctions to be lifted so, although Implementation Day is good news for non-US entities looking to resume business with Iran, there are still problems if that business involves US controlled entities, finance or the use of the US banking system.
The upshot of all this is that non-US entities are poised to resume business with Iran. In particular those operating within the EU and non-US entities with related operations or a presence in the US will be looking at opportunities to financially support trade with Iran, to insure Iranian entities, to import and transport Iranian oil, petroleum products, gas and petrochemical products and to support to burgeoning Iranian oil, gas and petrochemical industries. We are also set to welcome back Iranian shipping companies such as IRISL, NITC and others. These companies are already exploring new shipbuilding contracts and new business opportunities with the international shipping community.
Those looking to recommence trade with Iran should also watch out for “snap back”. The snap back provision means that US and EU sanctions could be re-imposed relatively quickly in the event of any non-compliance by Iran with the JCPOA. There are promises of an appropriate transition in the event of the re-imposition of sanctions and it has been said that contracts made in the new sanctions free environment will be permitted to continue. However, there is a lack of clarity as to what will happen in the event of a snap back. It is said that companies will be allowed to wind down their operations in the event of a snap back but there is no guidance as to the terms of any such wind down. The only indication is that any wind down procedure would be set out in future legislation providing for the reintroduction of sanctions. Many companies will be reluctant to invest substantial sums in Iran in the face of such an inherent risk.
BDM is advising many ship owners, charterers, trading companies and those who finance and insure them on the issues involved with trading with Iran and Iranian entities. Please do contact us if you need any assistance. We can offer advice on a fixed fee basis for most of the common questions that arise on the scope and impact of the JCPOA and the effect of Implementation Day.