Sanctions Relief and Continuing Sanctions
Important Changes to This Assessment
August 13, 2015
The interpretation of the JCPOA originally presented on these pages suggested that non-nuclear sanctions and secondary sanctions would no longer apply to entities listed in the attachments of Annex II of the JCPOA. Further close examination of the text based in part on the testimony of Administration officials before Congress has caused a revision of this assessment. The pages now reflect the current assessment of a possible reading of the agreement that is most generous to the U.S. and the West.
How the Agreement Appears To End Secondary Sanctions on Key Entities
American and European obligations regarding sanctions relief are set out in Annex II of the agreement. Section B, paragraph 4 of that Annex specifies:
The United States commits to cease the application of, and to seek such legislative action as may be appropriate to terminate, or modify to effectuate the termination of, all nuclear-related sanctions6 as specified in Sections 4.1-4.9 below, and to terminate Executive Orders 13574, 13590, 13622 and 13645, and Sections 5-7 and 15 of Executive Order 13628, in accordance with Annex V.7
Footnote 6: "The sanctions that the United States will cease to apply, and subsequently terminate, or modify to effectuate the termination of, pursuant to its commitment under Section 4 are those directed towards non-U.S. persons."
Section 4.1.1: "Sanctions on transactions with individuals and entities set out in Attachment 3 to this Annex, including: the Central Bank of Iran (CBI) and other specified Iranian financial institutions"
Attachment 3 lists the individuals and entities from whom sanctions will be lifted under this section. Certain entities are starred, indicating that they are "Iranian financial institutions and individuals and entities identified as GOI [Government of Iran] by the Office of Foreign Assets Control (OFAC). U.S. persons and foreign entities owned or controlled by a U.S. person will continue to be prohibited from transactions with these individuals and entities, pursuant to the Iranian Transactions and Sanctions Regulations."
How the JCPOA Appears To Preserve Secondary Sanctions
Section A, Paragraph 3 describes the effects of the lifting of E.U. sanctions and includes the following footnote:
Unless specifically provided otherwise, the sanctions lifting described in this Section does not apply to transactions that involve persons still subject to restrictive measures and is without prejudice to sanctions that may apply under legal provisions other than those referred to in Section 1. Nothing in this JCPOA reflects a change in Iran's position on EU sanctions.
Section B, Paragraph 7, does the same for U.S. sanctions, with a parallel footnote:
Unless specifically provided otherwise, the sanctions lifting described in this Section does not apply to transactions that involve persons on the SDN List and is without prejudice to sanctions that may apply under legal provisions other than those cited in Section 4. Nothing in this JCPOA reflects a change in Iran's position on U.S. sanctions.
Section 4.8.1 of Annex II includes the U.S. commitment to the
Removal of individuals and entities set out in Attachments 3 and 4 to this Annex from the Specially Designated Nationals and Blocked
Persons List (SDN List), the Foreign Sanctions Evaders List, and/or the Non-SDN Iran Sanctions Act List (Removal of designations and/or
sanctions imposed under ISA Section 5(a), IFCA Section 1244(d)(1) and TRA Section 212; and removals pursuant to the International
Emergency Economic Powers Act of certain persons listed pursuant to E.O. 13382, E.O. 13608, E.O. 13622, and E.O. 13645).
The timing of sanctions relief is laid out in Annex V, where Section 17.3 specifies that on Implementation Day the U.S. will:
Remove individuals and entities set forth in Attachment 3 to Annex II from the Specially Designated Nationals and Blocked Persons List (SDN List), the Foreign Sanctions Evaders List (FSE List), and/or the Non-SDN Iran Sanctions Act List as set forth in Section 4.8.1 of Annex II
The language of Section 4.8.1 appears to preserve the rights of the U.S. to keep "certain persons" on the SDN list. Section 17.3 can be read to preserve that right through the phrase "as set forth in Section 4.8.1..." although the lead and obvious clause is "Remove individuals and entities set forth in Attachment 3...from the Specially Designated Nations" list.
The tortuous nature of the language ostensibly preserving the U.S. right to maintain sanctions even against individuals listed in the agreement is not accidental. It was clearly designed to make the persistence of sanctions difficult to find or prove. Yet the U.S. Administration specifically and publicly restated that right, citing the agreement, on several occasions. Whom, then, was this language supposed to fool?
Cause for Continuing Concern--National Iranian Oil Company
The language above seems to give the U.S. and the E.U. the right to retain current non-nuclear sanctions and impose additional non-nuclear sanctions in the future. It is less clear that the Iranian leadership reads the agreement in this way, although it may. But a footnote carving out what appears to be an exception for the National Iranian Oil Company is concerning, insofar as it highlights the ability of the Administration simply to remove non-nuclear designations from any entity it so chooses on any basis or none at all: "Removal of NIOC from the SDN List, as provided for in Section 4.8.1, will include resolution of related designations and determinations."
NIOC is designated under the IRGC tag on the SDN List. In principle, according to the rest of the JCPOA, that tag should remain and NIOC should continue to be listed. Certainly its affiliation with the IRGC has not changed. The IRGC tag, moreover, imposes secondary sanctions on NIOC and all of its subsidiaries--namely, the bulk of the Iranian oil industry. If the U.S. does not remove NIOC from the SDN list, including removing the IRGC tag, then primary and secondary sanctions against the Iranian petrochemical industry would remain largely in place, vitiating the sanctions relief the Iranian leadership is promising its people. If NIOC is removed from the list, however, the precedent will have been set for de-listing entities sanctioned under non-nuclear sanctions regimes without any change in the basis for their listing under those regimes.
Other Entities of Concern from which US Nuclear Sanctions Will Be Removed
The US Treasury Department sanctioned Bank Melli in 2007 for its support to the Iranian nuclear program, but also for supporting its ballistic missile program and facilitating Qods Force and IRGC financial transactions.
Bank Sepah/Bank Sepah International
Bank Sepah is the financial institution of the Islamic Revolutionary Guard Corps (Sepah-e Pasdaran-e Enghelab-e Islami in Farsi).
Treasury sanctioned Bank Sepah in 2007 because of the large role it was playing in Iran's missile program:
From Treasury's January 2007 press release announcing the designation:
"SBIG, an affiliate of Iran's AIO, is also involved in Iran's missile program. Among the weapons SBIG produces is the Fateh-110 missile, with a range of 200 kilometers, and the Fajr rocket systems, a series of North Korean-designed rockets produced under license by SBIG with ranges of between 40 and 100 kilometers. Both systems are capable of being armed with at least chemical warheads."
Shahid Hemmat Industrial Group (SHIG)
SHIG is one of the core components of Iran's ballistic missile program, responsible for the Shahab-3 and Ghadr ballistic missiles.
PCI was sanctioned for its involvement in producing solid fuel for Iran's ballistic missile program.