On January 12, 2018, US President Donald Trump announced that he would extend nuclear sanctions waivers on Iran in time for a Friday deadline, but warned European signatories of the landmark 2015 accord, that he would not extend it again unless they took a harder line against Tehran's weapons development, and no change is made to the 2015 Iran nuclear deal in the agreement with Iran as to its nuclear development within 120 days.
Background:
On July 14, 2015, US, UK, China, France, Russia, Germany, European Union, and Iran signed the Joint Comprehensive Plan of Action (“JCPOA”), and agreed to have the JCPOA implemented and made effective as of January 16, 2016.
The European Union has waived most of the sanctions on Iran under the JCPOA. As for the US, it has maintained primary sanctions that prohibit transactions between its economic entities and Iran, while temporarily waiving secondary sanctions that limit transactions between economic entities other than US nationals (“non-US nationals”) and Iran.
Against this backdrop, Korean companies were able to resume most of their transactions with Iran.
However, such eased sanctions against Iran changed with the Trump administration. Even before he was elected, President Trump had stressed the shortcomings of the JCPOA, and had warned that as President, he would withdraw from the agreement. Further, on October 13, 2017, he told the US Congress that Iran was not complying with the JCPOA.
Although the US Congress decided to extend the nuclear sanctions waivers under the JCPOA in January 2018, President Trump stated that he would withdraw the eased sanctions if the JCPOA is not extended within 120 days from the extension of the sanctions waivers (the “Snapback”).
Significance & Potential Impact to Businesses:
President Trump’s extended sanctions waivers are only temporary, and for the extension to continue to be effective, the US President (or the authorized signatory, e.g., Secretary of State) must renew the waivers before the extended period expires. As President Trump reportedly delivered a de-certification in October 2017, whether the waivers of sanctions against Iran would continue to be renewed was made even harder to expect. According to experts, US’ decision to extend the sanctions waivers in January 2018 was made based on the premise that the JCPOA would be revised to the satisfaction of the US government.
The sanctions against Iran and the waivers under the JCPOA are based on multiple legal grounds, and the Snapback may be applied selectively. The Snapback of the US government will be decided through complicated diplomatic and legal deliberations, considering Iran and other parties to the JCPOA.
At this time, it is too early to ascertain the scope and resulting impact of the Snapback. However, if your business is directly or indirectly trading with Iran or your company has any relevant plans, it will be important to continue to monitor whether the Snapback will apply to the sanctions on Iran.
