The US withdrawal from the Iran nuclear deal

- Implications for Norwegian businesses. Last week President Trump announced the US withdrawal from the Joint Comprehensive Plan of Action (the "JCPOA"), commonly referred to as the "Iran nuclear deal". The withdrawal involves a re-imposition, following a wind-down period, of US nuclear-related sanctions that were lifted pursuant to the JCPOA. The US Office for Foreign Assets Control ("OFAC") has stated that it expects that all the US nuclear-related sanctions that were lifted under the JCPOA will be re-imposed and in full effect following 4 November 2018.

The JCPOA was entered into between the US, China, Russia, the UK, Germany, France and the EU's High Representative for Foreign Affairs and Security Policy, with the aim of ensuring that Iran's nuclear program is utilized exclusively for peaceful purposes, consistent with international non-proliferation norms. In turn, the agreement produced the comprehensive lifting of UN, EU and US sanctions related to Iran's nuclear program. Hence, a key question is whether the US withdrawal means a return to the former sanctions regime.

As a starting point, the implications of the US withdrawal for Norwegian investors depend on the future of the JCPOA, i.e. whether or not the agreement will survive without US participation. This would ultimately hinge on the political will and ability of the remaining participants to keep the agreement in place. The European participants have all issued statements expressing that they are determined to preserve the agreement, and the Norwegian Ministry of Foreign Affairs have confirmed its alignment with the EU on this point.1 Nevertheless, until an agreement is reached, it remains uncertain whether the JCPOA will survive, and – if it survives – whether the terms will be amended.

Furthermore, even if the JCPOA remains in place and the other participants do not re-impose sanctions, Norwegian businesses may still be affected by the re-imposed US sanctions. While the EU and Norway lifted the significant bulk of their sanctions pursuant to the JCPOA, the US almost exclusively lifted sanctions that were directed towards non-US persons, so-called "secondary sanctions". This type of sanctions essentially entails that Norwegian companies may be targeted by US sanctions if they engage in particular activities involving Iran. In other words, US persons and entities have been and will remain broadly prohibited from engaging in business involving Iran. Hence, the majority of US sanctions being re-imposed would be secondary sanctions aimed at non-US entities and persons, including e.g. secondary sanctions related to the financial and banking, shipping and shipbuilding, and petroleum sectors respectively.

OFAC has also announced its intention to revoke the general license which authorized US-owned and –controlled entities to engage in certain activities involving Iran. This would mean that any US-owned and controlled Norwegian companies will be broadly prohibited from engaging in any transaction involving Iran.

The US will allow for a 90-day and a 180-day wind-down period – depending on the type of activities – for activities involving Iran that were consistent with the US sanctions relief provided for under the JCPOA. Further details on the wind-down steps are inter alia provided in the following FAQ published by the US authorities:

https://www.treasury.gov/resource-center/sanctions/Programs/Documents/jcpoa_winddown_faqs.pdf.

According to media reports, the EU leaders have stated that they will use these next three to six months to seek exemptions for European companies. There have also been discussions on whether the EU will consider introducing counter measures to the US sanctions, in the form of so-called "blocking legislation", if the US does not agree to an exemption. Such "blocking legislation" may inter alia entail that EU companies are prohibited from complying with US sanctions under certain circumstances.

However, whether the EU will succeed in negotiating an exemption, and whether new blocking legislation will be introduced, are still anyone's guess. Norwegian companies and persons involved in Iran-related business are therefore advised to carefully assess how they will be affected by the re-imposed US sanctions, and to take necessary precautions.

Please note that this newsletter is for information purposes only, and may not be relied upon or construed as a legal advice. In the event of any questions regarding sanctions, please contact one of the authors of this newsletter.

Practice areas

Lawyers

Olav Kolstad
Nils Ludvig Dahl
Thomas Behné Ramsnes

Published

18. May 2018