December 5, 2013
On November 24, 2013, the P5+1 successfully concluded negotiations with Iran on a Joint Plan of Action (hereinafter “the interim agreement”) to limit Iran’s nuclear activities and suspend certain United States and European Union sanctions on the country. Both sides are now working towards a comprehensive agreement that would further limit Iran’s nuclear activities and significantly unwind U.S. and European Union sanctions. While the interim agreement—when implemented—will permit some previously prohibited transactions, the vast majority of sanctions on Iran will remain in place. Businesses should remain abundantly cautious about doing business in Iran or with Iranian persons.
When Are Previously Prohibited Transactions Permitted?
The interim agreement’s sanctions relief provisions did not go into effect when the agreement was reached on November 24, 2013. Both parties must take preliminary steps to implement the interim agreement. The United States Department of the Treasury, Office of Foreign Assets Control (“OFAC”) will provide notification—likely within a few weeks—when the sanctions relief provisions are in effect and companies can do limited business with Iran or with Iranian persons. Until that time, companies should not conduct transactions specified in the interim agreement as permitted, as those transactions still violate U.S. and European Union sanctions.
Which Previously Prohibited Transactions Are Permitted?
In exchange for a number of Iranian steps to curtail its uranium enrichment activities, limit its development of the Arak reactor, and allow for international inspections, the United States and the European Union agreed to take a number of sanctions-relaxing measures, including:
When the United States and European Union implement these relaxation measures, the above transactions will be permitted. However, businesses should pay close attention to two important caveats. First, U.S. persons are still prohibited from doing business in Iran or with Iranian persons. The above measures are meant to permit non-U.S. persons to transact with Iran or Iranian persons. Without a license, U.S. persons should continue to avoid conducting business with Iran or Iranian persons.
Second, these suspensions are limited and reversible. If a comprehensive deal is not reached, or if the interim agreement is not renewed, the United States and the European Union have stated that they will re-impose these sanctions. It is unclear whether this re-imposition will be automatic. Further, the United States and the European Union would be very likely to penalize any sanctions violations after the re-imposition, including if the transactions are pursuant to contracts entered into during the six month relaxation period. Businesses should be cautious and not assume that contracts entered into during the suspension period will provide a shield from liability for transactions that violate sanctions if the United States and European Union re-impose sanctions.
Which Previously Prohibited Transactions Remain Prohibited?
The interim agreement provides limited sanctions relief for nuclear-related sanctions. The broader Iranian sanctions regime remains firmly in place, including:
Businesses should note that the sanctions relief narrowly applies only to certain nuclear-related sanctions. All other sanctions, including those related to Iran’s support for terrorism and its human rights abuses, are still in full force.
Will OFAC’s Relax Its Aggressive Enforcement Approach?
OFAC officials have made it clear that the agency will not relax its aggressive enforcement posture. OFAC will likely continue to aggressively penalize sanctions violators, and may even increase its enforcement actions to show that the relief provided by the interim agreement does not signify a greater relaxation of the sanctions regime on Iran. Businesses should assume that OFAC scrutiny may increase in the coming months.
How Long Do the Provisions of the Interim Agreement Last?
The interim agreement would provide sanctions relief for six months and would be renewable by mutual consent of the parties. The six month clock would begin when the sanctions relief takes effect, not on November 24, 2013 (when the parties agreed to the Joint Plan of Action). Businesses should not assume that the sanctions relief will extend beyond the six month period (there is no “grandfathering” provision in the agreement) and should plan accordingly.
 The P5+1 includes the five permanent members of the United Nations Security Council (the United States, United Kingdom, France, China, and Russia, i.e. the “P5”) plus Germany. This group is also sometimes referred to as the E3+3.
 Joint Plan of Action (Nov. 24, 2013),
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Judith A. Lee – Washington, D.C. (+1 202-887-3591, firstname.lastname@example.org)
Patrick Doris – London (+44 (0)207 071 4276, email@example.com)
Marcellus A. McRae – Los Angeles (+1 213-229-7675, firstname.lastname@example.org)
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