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US to resume sanctions against Iran

The US will re-impose the economic sanctions against Iran that were lifted in 2016, in response to what it has described as "bad faith" by the Middle Eastern state.09 May 2018

The re-imposed sanctions are applicable to non-US businesses and persons that do business in Iran. US persons and companies never benefited from the sanctions relief. They will come back into force on either 6 August or 4 November depending on the type of business activity.

The delay is intended to give businesses and individuals currently doing business in Iran "a period of time to allow them to wind down operations in or business involving Iran", US president Donald Trump said in a statement.

Trump added that the withdrawal of the US from the joint comprehensive plan of action (JCPoA) agreed in July 2015 would "pressure the Iranian regime to alter its course of malign activities and ensure that Iranian bad acts are no longer rewarded".

The JCPoA, through which trade sanctions against Iran were lifted in return for limits on Iran's nuclear programme, applied to EU and UN sanctions as well as secondary sanctions imposed by the US. Leaders of the UK, France and Germany have issued a joint statement emphasising their continued commitment to the JCPoA while both China and the Russian Federation, which are also signatories, have condemned the US action.

However, the US has warned of "severe consequences" for foreign businesses and governments that disregard the re-imposed sanctions. The US Department of Commerce agreed a $1.19 billion settlement with Chinese technology company ZTE in March 2017, in relation to violations of sanctions involving Iran and North Korea between January 2010 and April 2016.

Regulatory law expert Tom Stocker of Pinsent Masons, the law firm behind Out-Law.com, said that those with interests in Iran would be awaiting any action by the EU, Russia and China and other developments and the potential shifting of the US position over the next few days and weeks before deciding how to proceed.

"In the meantime, it would be unwise to enter into any new contracts related to Iran business without first obtaining legal advice even if the contracts are considered capable of being concluded entirely by the end of the applicable wind-down period," he said. "In addition, businesses with existing contracts should take legal advice on the steps that can be taken contractually, whether under a force majeure provision, a sanctions clause or a termination clause, to protect their interests in the event that the US position does not change."

"While the EU does not have a silver bullet to protect EU businesses from the US secondary sanctions, the implementation of blocking legislation and a complaint to the WTO may serve to apply pressure on the US to extend the wind-down provisions pending a re-negotiation of the JCPoA with Iran which is ultimately the US end-game. On a practical level, there are steps that the Chinese can take to dilute the impact of the US action but, given the integrated nature of the financial markets and supply chains, a significant amount of trade with Iran will cease unless a political resolution is found," he said.

Those trading with Iran in gold and precious metals, certain natural resources, industrial software, Iranian rials or sovereign debt; operating in the automotive and aircraft sectors; or importing Iranian-origin carpets and foodstuffs into the US will have until 6 August to wind down currently lawful activity before sanctions are re-imposed, according to the announcement. Energy, petroleum, shipping and financial services sector sanctions will be re-imposed on 4 November 2018.