April 9, 2015

Update: Iran Sanctions Negotiations

After a week of lengthy negotiations in Lausanne, Switzerland between the P5+1 and Iran over Iran’s nuclear issues, the parties have finally concluded the key parameters of a Joint Comprehensive Plan of Action (JCPOA) on 2nd April 2015. It has been announced in a joint statement issued by the EU High Representative and the Iranian Foreign Minister that ‘this is a crucial decision laying the agreed basis for the final text of the JCPOA.’

The parties will resume negotiations in coming days at political and technical levels with the aim to finalise and agree to a comprehensive solution by 30th June 2015.

The joint statement envisages that Iran will agree to implement certain agreed restrictive measures such as a reduction in the uranium enrichment levels and stockpiles, having one enrichment production facility at Natanz only, a reduction in the number of active centrifuges, redesigning the heavy water research reactor in Arak, and converting Fordow to a non-enrichment site for a number of years (10 to 15 years). In return, the parties have announced in the joint statement that ‘the EU will terminate the implementation of all nuclear-related economic and financial sanctions and the US will cease the application of all nuclear-related secondary economic and financial sanctions, simultaneously with the IAEA-verified implementation by Iran of its key nuclear commitments.’ Furthermore, the joint statement refers to a new UN Security Council Resolution to endorse the JCPOA and to ‘terminate all previous nuclear-related’ Security Council Resolutions which are currently in place.

However, some contradictory views have already been expressed by the Iranian and US administrations. While the joint statement refers to the terms ‘terminate’ and ‘cease’ for lifting of the EU’s and the US’s sanctions respectively, the US officials speak of ‘suspension’ of sanctions. Also, Iran relies on the understanding that, under the terms of the joint statement, the sanctions will be terminated or ceased ‘simultaneously’ with the ‘implementation by Iran of its key nuclear commitments’. The US, on the other hand, has indicated that sanctions will be removed gradually. The US has further indicated that ‘nothing is agreed until everything is agreed’. It is expected that the parties will have to cover a number of differences in their understanding of the provisions of the joint statement and it is suspected that they will have difficult rounds of negotiations in the coming months leading to 30 June 2015.

As far as the sanctions are concerned, there has not been any change in the UN, EU or US sanction regimes beyond what has been agreed (and suspended) under the Joint Plan of Action (JPOA) concluded on 24 November 2013. In fact, the US Department of Treasury’s Office of Foreign Assets Control (OFAC) has reinstated in its most recent guidance that ‘until a JCPOA is concluded, other than the sanctions relief provided under the JPOA, all US sanctions remain in place and will continue to be vigorously enforced.’ Moreover, the EU re-imposed sanctions on an Iranian bank and 32 Iranian shipping companies only a few days after the parties agreed in Switzerland to implement the JCPOA soon. The EU’s decision to put the entities back in the list of sanctions (using new legal grounds) was made following the judgement of the General Court of the European Union in January 2015 by which the latter annulled the earlier EU Council’s decision of naming those entities as designated under the EU sanction regime.

It therefore seems that there will be some months until any changes in the sanctions (UN, EU and US) materialise. Until then the current sanctions will still be in place. Our clients are advised to exercise the usual cautionary measures, to continue implementing their own internal compliance and to exercise due diligence so to make sure that they are not in breach of any existing sanction rules or the existing sanction framework.

Dr. Shahab Mokhtari

Pacifics Intermediaries & Consultants

Tel: +44 (0) 20 73750002


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