In a January 10th Executive Order, President Trump expanded sanctions on Iran after a ballistic missile attack on two American military bases in Iraq. Executive Order 13902 expands secondary sanctions on Iran to include “significant” or “material” support transactions between non-U.S. persons and Iran’s construction, mining, manufacturing, and textiles sectors as potentially sanctionable transactions. Executive Order 13902 also authorizes the U.S. Secretary of the Treasury to extend these secondary sanctions to additional sectors of Iran’s economy in its discretion after consulting with the U.S. Secretary of State. The Executive Order also gives the U.S. Secretary of the Treasury the authority to impose correspondent and payable-through account sanctions on non-U.S. financial institutions that facilitate significant financial transactions for the sectors of Iran’s economy and any persons or entities that are sanctioned under Executive Order 13902.
OFAC has since published a new FAQ No. 816 which establishes a 90-day period for persons to wind down existing transactions with sanctions exposure under Executive Order 13902. This wind-down period expires on April 9, 2020 and OFAC has advised that “entering into new business that would be sanctionable under [Executive Order 13902] on or after January 10, 2020 will not be considered wind-down activity and could be sanctioned even during the wind-down period.”Also on January 10, the Office of Foreign Assets Control (OFAC) used authority provided under existing Executive Order 13871 and designated six government officials, twenty entities and one vessel connected to Iran’s iron, steel, aluminum and copper sectors as Specially Designated Nationals (SDNs). Notably, persons engaged in sanctionable transactions with these SDNs do not receive the benefit of Executive Order 13902’s wind-down period because OFAC did not sanction these SDNs under Executive Order 13902.
Following the expansion of U.S. sanctions on Iran, European Union (EU) member states including the United Kingdom, Germany, and France triggered the dispute mechanism of the Joint Comprehensive Plan of Action (JCPOA), as the Iran Nuclear Deal is officially titled, in response to Iran’s apparent disregard for the terms of the agreement, such as enriching uranium and installing centrifuges beyond the allowed limit. While the EU member states are trying to save the JCPOA, triggering of the dispute mechanism might ultimately lead to the reimplementation of United Nations (UN) sanctions on Iran if Iran does not comply.
Hush Blackwell’s Export Controls & Sanctions team continues to monitor the developing Iran situation closely and will provide additional information as OFAC makes it available. Please contact Cortney Morgan or Grant Leach should you have any questions or concerns regarding Iranian sanctions.