Partial lifting of EU-Iran Sanctions

The Joint Comprehensive Plan of Action (the “JCPOA”) on Iran’s nuclear program and sanctions relief passed a major milestone on October 18, 2015, the 90th day after the UN Security Council’s adoption of a resolution endorsing the agreement. Nonetheless, even assuming the JCPOA is implemented as planned, sanctions will not be fully removed for many years. Those affected by EU sanctions will want to note the following key points about expected changes to EU sanctions:

01 | The lifting of EU sanctions will be a complex, phased process

October 18 was the “Adoption Day” under the JCPOA. On that date, the EU adopted Council Regulation (EU) 2015/1861(the Regulation) for implementation of sanction relief. Under the Regulation, all EU nuclear-related economic and financial restrictive measures will terminate upon the issue of the International Atomic Energy Agency (“IAEA”) report verifying Iran’s compliance with the JCPOA. That date, known as the “Implementation Day,” could occur as soon as December 15, 2015 or at latest during the first half of 2016.

02 | Sanctions compliance is as important – and perhaps more important – than it ever was

Companies considering entering into business ventures with Iran should proceed with caution, given that certain preparatory work could be considered to be in violation of current regulations. Care will also be required to protect investments against the risk that sanctions may suddenly be re-imposed as a result of significant non-compliance by Iran under the JCPOA “snap back” mechanism.

03 | Some sanctions will remain in place after the Implementation Day

Although most EU sanctions will be lifted on Implementation Day, other EU sanctions will not be lifted until “Transition Day.” Transition Day will occur on October 18, 2023 (8 years after Adoption Day) or the date when IAEA submits a report that all nuclear material in Iran remains in peaceful activities.

EU sanctions adopted in relation to violations of human rights in 2011 will continue to be in effect and are unrelated to the sanction relief programme. These include asset freezes and visa bans on certain individuals and a ban on exports to Iran of equipment that could be used for internal repression and of equipment for monitoring telecommunications.

Set out below is a brief description in the changes to the sanction regime that will go into effect after the Implementation Day.

04 | Financial sector

Funds transfers between the EU and Iran will be allowed without authorisation or prior notification. EU banks will be able to establish offices and joint ventures in Iran and to acquire ownership interests in Iranian financial institutions. Insurance and reinsurance to Iran and its government will also be permitted.

05 | Oil, gas and petrochemical sectors

EU persons will be allowed to import Iranian crude oil and petroleum products, natural gas or petrochemical products and engage in related financing. They will also be allowed to sell equipment or technology and provide technical assistance, including training, to the Iranian oil, gas and petrochemical industries. They will also be able to grant financial loans or credit to, acquire participations in, and create joint ventures with, Iranian persons engaged in the oil, gas and petrochemical sectors.

06 | Shipping, shipbuilding and transport sectors

EU persons will be allowed to engage in the sale of naval equipment and technology for ship building, maintenance or refit, to Iran or Iranian persons; the design or construction of cargo vessels and oil tankers for Iran or for Iranian persons; the provision of vessels for the transport or storage of oil and petrochemical products to Iranian persons; and the provision of flagging and classification services, to Iranian oil tankers and cargo vessels. Cargo flights operated by Iranian carriers or originating from Iran will once again have access to EU airports, and EU Member States will stop inspecting, seizing and disposing of cargoes to and from Iran with regard to items which are no longer prohibited. Finally, the provision of bunkering or ship supply services, or any other servicing of vessels, to Iranian-owned or Iranian-contracted vessels not carrying prohibited items will be allowed, as will the provision of fuel, engineering and maintenance services to Iranian cargo aircraft not carrying prohibited items.

07 | Software

EU persons will be allowed to sell software for integrating industrial processes to Iranian persons. Transfer of software directly associated with nuclear goods and technology will remain subject to heightened control.

08 | Gold and other metals

EU persons will be allowed to engage in the sale of gold, other precious metals and diamonds, and to provide related brokering, financing and security services, to, from or for the Iranian Government or the Central Bank of Iran; as well as to sell graphite and raw or semi-finished metals, such as aluminium and steel to Iranian persons, in connection with activities consistent with the JCPOA.

09 | Asset freeze and visa ban

The asset freeze and visa bans applicable to some – but not all -- Iranian persons will be lifted, enabling EU persons to do business with many Iranian businesses that are subject to sanctions.

10 | Lead time

The lead time required for EU businesses to prepare for any business ventures in Iran following the lifting of EU sanctions will vary significantly from sector to sector. EU businesses may want to begin preparing well before the Implementation Day, but they should only do so in full consultation with their sanctions counsel to ensure that there is no inadvertent violation of EU or other sanctions.