President Donald Trump on Tuesday announced the U.S. withdrawal from the Joint Comprehensive Plan of Action (JCPOA), also known as the Iran nuclear deal.
The Trump administration expects all nuclear-related sanctions that had been lifted upon the deal’s 2015 signature to be reimposed after a final “wind-down period” for existing contracts expires Nov. 4, according to FAQs released Tuesday after an official White House announcement.
Treasury and the State Department will take necessary steps to establish “a 90-day and a 180-day wind-down period” for activities involving Iran that “were consistent with U.S. sanctions relief provided for under the JCPOA.”
Shipping insurers will be among those at risk by the forthcoming sanctions, attorneys Doug Jacobson and David Brummond of Jacobson Burton Kelley said in interviews Tuesday.
Insurers of hull and machinery risk on vessels, particularly petroleum tankers that go to and from Iran, will be impacted by the U.S. withdrawal from the deal, as the JCPOA implementation day of Jan. 16, 2016, put in place an ongoing waiver of Iran-related secondary sanctions, said Brummond, a former attorney for Treasury’s Office of Foreign Assets Control (OFAC). That waiver will be lifted Nov. 5.
Separate from vessel insurers, insurers of cargo on ships that travel to and/or from Iran also will be affected, Brummond said.
Even as the EU, Russia, and China apparently will remain in the deal, U.S. secondary sanctions could affect insurers not based in the U.S., a significant number of firms, he said.
“Any vessel … owned by an Iranian entity like IRISL [Islamic Republic of Iran Shipping Lines] or the NITC [National Iranian Tanker Company], and any vessels that carry cargo to or from Iran, would be affected. So it would be the insurance on those vessels that would be the possible violation,” Brummond said. “If you undertake a significant transaction with the Iranian shipping industry … it’s not automatic, but you could be determined to be subject to sanctions.”
Any shipping contracts for cargo on IRISL vessels, for example, must be insured, and European companies aren’t going to provide insurance that could put them in violation of U.S. sanctions, Jacobson said.
“Non-U.S., non-Iranian persons are advised to use these time periods to wind down their activities with or involving Iran that will become sanctionable at the end of the applicable wind-down period,” the FAQs say.
Treasury clarified that in events where non-U.S., non-Iranian people are owed payment after the conclusion of 90- and 180-day wind-down periods, as applicable, for goods or services provided to an “Iranian counterparty” before the end of the wind-down periods, pursuant to a written contract or agreement entered into before May 8, the U.S. government generally would allow those persons to receive payment for those goods or services according to the terms of the underlying agreement.
Sanctions to be reimposed Nov. 5 include sanctions on Iran’s port operators and on the shipping and shipbuilding sectors, including IRISL, South Shipping Line Iran “or their affiliates,” as well as sanctions on “petroleum-related transactions” with NITC, the National Iranian Oil Company and the Naftiran Intertrade Company, including the purchase of petrochemical and petroleum products from Iran, the FAQs say.
Movement of goods like crude oil between Iran and non-U.S. countries could potentially be implicated by U.S. secondary sanctions to be re-imposed, Jacobson said.
Reimposed sanctions also will apply to “the provision of underwriting services, insurance, or reinsurance,” and Iran’s energy sector, the FAQs say.
The U.S. government will reimpose, “as appropriate,” sanctions that applied to people removed from the List of Specially Designated Nationals and Blocked Persons and/or other sanctions lists maintained by the U.S. government on Jan. 16, 2016, including individuals who had been sanctioned pursuant to the Iran Sanctions Act of 1996 (ISA), Treasury said.
Among the business deals likely to be stymied is an existing contract by Boeing to sell 30 Boeing 737 MAX airplanes valued at $3 billion to Iran Aseman Airlines, which Boeing announced in April 2017.
“Following today’s announcement, we will consult with the U.S. government on next steps,” a Boeing spokesperson said. “As we have throughout this process, we’ll continue to follow the U.S. government’s lead.”
Deliveries of the aircraft had been slated to begin in 2022.
Boeing doesn’t have any Iranian airlines in its delivery backlog, which has not changed, the spokesperson said.
The spokesperson emphasized that Boeing hasn’t made any aircraft deliveries to Iran.
Maersk Line and Hapag-Lloyd spokespeople indicated that their companies are monitoring developments around the U.S. withdrawal from the Iran nuclear deal, but also signaled a relatively limited presence by their companies in that nation.
Maersk serves customers on the Iranian market via slot purchase agreements from Jebel Ali, United Arab Emirates, to Bandar Abbas and Bushehr, and the company maintains a staff of 12 people spread across offices in Tehran, Bandar Abbas, and Bushehr, a Maersk spokesperson said.
“We will monitor the developments to assess any impact on our activities and keep our customers directly informed in case of any changes,” the spokesperson said.
Hapag-Lloyd runs two feeder services to Iran with chartered ships, both of which connect Iran with Europe and Asia, but not the U.S., a spokesperson for that company said.
“For the moment we don’t expect a major impact on these services due to the current political developments,” the spokesperson said.
Each of the services uses 1,000-TEU ships to connect the Port of Bandar Abbas with Hapag-Lloyd’s transit hub at the Port of Jebel Ali, with one service calling the Port of Bandar Abbas twice weekly, and the other running once weekly, the spokesperson said.
The snapped-back sanctions won’t affect U.S. agricultural exports to Iran for humanitarian purposes, but will ban U.S. imports of pistachios from Iran, which have been permitted since January 2016, Jacobson said.
Brummond noted that, while the Iran nuclear-related and secondary sanctions will be put back into place, final decisions about whether to single out and take action regarding any company determined to have undertaken sanctionable activities rests with the U.S. government.
So it’s not automatic that companies continuing proscribed activities after the end of the wind-down periods will be designated for sanctionable activity, he said, pointing out that the U.S. government, once it detects activity that it deems violative of U.S. sanctions, has about a dozen options it can employ to respond to the observed actions.
“You’ve got to have resources to follow through” on sanctions, Brummond said. “And you’ve got to have priorities because not everything is going to be at the same level of what you want to use. ... I know of no real imposition of secondary sanctions of a significant consequence of insurers that I’m aware of.”
In addition to sanctions to be reimposed on Nov. 5, including on port and shipping operations, another tranche of sanctions will be reimposed on Aug. 7, after a 90-day wind-down period.
Those sanctions apply to the direct or indirect sale, supply or transfer to or from Iran of graphite, raw or semi-finished metals such as aluminum and steel, coal and software for integrating industrial processes; sanctions on Iran’s trade in gold or precious metals, and sanctions on Iran’s automotive sector, according to the Treasury FAQs.
Also on Aug. 7, the U.S. government will revoke the JCPOA-related authorizations under U.S. primary sanctions allowing imports into the United States of Iranian-origin carpets and foodstuffs, as well as certain related financial transactions pursuant to general licenses under the Iranian Transactions and Sanctions Regulations and activities undertaken under specific licenses issued in connection with OFAC’s January 2016 “Statement of Licensing Policy for Activities Related to the Export or Re-export to Iran of Commercial Passenger Aircraft and Related Parts and Services.”
Announcing the U.S. withdrawal at the White House on Tuesday, Trump said the JCPOA gave Iran’s “regime of great terror” several billions of dollars and said the deal imposed “very weak limits” on Iran’s nuclear activity, in exchange for lifting “crippling” economic sanctions on Iran.
“At the heart of the Iran deal was a giant fiction that a murderous regime desired only a peaceful nuclear energy program,” Trump said.
Expressing dismay at the announced U.S. withdrawal from the JCPOA in a Tuesday statement, United Kingdom Prime Minister Theresa May, German Chancellor Angela Merkel and French President Emmanuel Macron urged the United States to “ensure that the structures of the JCPOA can remain intact” and to avoid action “which obstructs its full implementation by all other parties to the deal.”
“We encourage Iran to show restraint in response to the decision by the U.S.; Iran must continue to meet its own obligations under the deal, cooperating fully and in a timely manner with IAEA [International Atomic Energy Agency] inspection requirements,” the statement says. “The IAEA must be able to continue to carry out its long-term verification and monitoring programme without restriction or hindrance. In turn, Iran should continue to receive the sanctions relief it is entitled to whilst it remains in compliance with the terms of the deal.”
U.N. Secretary-General Antonio Guterres in a statement said he is “deeply concerned” by Trump’s withdrawal and the forthcoming reinstatement of U.S. sanctions.
“I call on other JCPOA participants to abide fully by their respective commitments under the JCPOA and on all other member states to support this agreement,” Guterres said.
But Trump said allowing the deal to continue would have brought a nuclear arms race to the Middle East. “After the sanctions were lifted, the dictatorship used its new funds to build nuclear-capable missiles, support terrorism and cause havoc throughout the Middle East and beyond.”