Norton Rose Fulbright: Iran Nuclear Deal To Take Effect January 20, 2014

Norton Rose Fulbright: Iran Nuclear Deal To Take Effect January 20, 2014

Deal provides Iran limited relief from sanctions

By  Stephen M. McNabb, Stefan Reisinger and Gwen S. Green

On January 20, 2014, the Joint Plan of Action reached between Iran and the five permanent members of the UN Security Council (United States, United Kingdom, France, Russia, and China) plus Germany (the "P5+1") goes into effect for a six-month interim period that expires on July 19, 2014. The agreement, reached November 24, 2013, provides for the gradual easing of certain trade and economic sanctions against Iran in exchange for the curtailment of Iran's nuclear activities. The agreement is the first step in ongoing negotiations to dismantle Iran's nuclear enrichment program and nuclear stockpile. The Joint Plan of Action goes into effect as members of Congress push for additional US sanctions on Iran.

While not all of the details have been publicly disclosed, the P5+1 have agreed to provide Iran the following limited, temporary, targeted and reversible sanctions relief in exchange for Iran undertaking specific and verifiable steps to limit its nuclear enrichment program:  

  • a temporary moratorium on new sanctions on Iran by the United States, United Nations and European Union "to the extent permissible" within their political systems (acknowledging the possibility that Congress may, on its own, ignore the agreement and impose additional sanctions on its own)
  • the suspension of the following current sanctions as well as "Associated Services" (including insurance, transportation and finance necessary to carry out the transaction) potentially providing Iran approximately $1.5 billion in additional revenue:expedited licensing for safety-related repairs and inspections inside Iran for certain Iranian airlines
    • US and EU sanctions on the shipment of gold and precious metals to Iran
    • US and EU sanctions on Iran's petrochemical exports
    • US sanctions on Iran's automotive sector
  • allow purchases of Iranian oil to remain at their currently significantly reduced levels (levels that are 60% less than two years ago) rather than requiring further reductions;  $4.2 billion from these sales will be allowed to be transferred to Iran in periodic installments over the next six months if, and as, Iran fulfills its commitments
  • waive requirements for further reductions in oil imports from Iran from those countries currently importing oil from Iran under waiver (i.e. China, India, South Korea, Taiwan and Turkey)
  • allow $400 million in governmental tuition assistance to be transferred from restricted Iranian funds directly to colleges and universities in third countries to defray the tuition costs of Iranian students studying abroad

In exchange, Iran has agreed to: (i) dilute its stockpile of uranium enriched to 20% to no more than 5% or convert to a form not suitable for further enrichment; (ii) halt all uranium enrichment above 5% and dismantle the technical equipment that makes higher-level uranium enrichment possible; (iii) halt the construction of new centrifuges and enrichment facilities; and (iv) halt essential work on its heavy-water reactor under development at Arak. In addition, Iran is expected to provide daily access to inspectors from the International Atomic Energy Agency ("IAEA"), to monitor Iran's centrifuge assembly and storage facilities, uranium mills and the Arak reactor, as well as other nuclear facilities.

While the agreement provides for limited sanctions relief, the overwhelming majority of current U.S. economic sanctions on Iran will remain in place during the interim six-month period.  If Iran should not fulfill its commitment under the agreement, the P5+1 warned it would revoke the limited sanction relief and impose more severe sanctions against Iran's key economic sectors.  The US Congress is also presently considering two separate but similar bills (the Nuclear Iran Prevention Act [H.R. 850] and the Nuclear Weapons Free Iran Act of 2013) that, if passed, could also serve to derail the agreement.

Companies should continue to monitor these developments and adjust their compliance programs appropriately as events warrant. 

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