Secondary Sanctions Remain
The JCPOA appears to contain language that could be read to allow the U.S. to continue imposing secondary sanctions against foreign entities doing business with Iranian people or organizations sanctioned for non-nuclear malign activity. Administration officials have repeatedly said and testified that they intend to continue to enforce such secondary sanctions.
It is less clear whether Iranian officials agree with this interpretation of the JCPOA. Those most closely connected with the negotiations have generally straddled when discussing this aspect of the agreement. But other important regime figures have declared that the JCPOA does, indeed, lift almost all sanctions. A U.S. effort to impose significant secondary sanctions would likely generate considerable torque within the Iranian regime even if the Supreme Leader and the president accept the U.S. stated interpretation.
These pages consider what a secondary sanctions regime might look like under this interpretation. The real shape of the sanctions regime will not be clear until the U.S. Treasury Department releases its updated guidelines for dealing with Iran in the coming weeks.
Secondary Sanctions Continued Effects
The six attachments of JCPOA Annex II list entities from which nuclear-related sanctions will be lifted by the U.S. and the E.U. at various stages of the process. Of those, 28 organizations are clearly sanctioned under non-nuclear restrictions programs, while a number of others were sanctioned for non-nuclear malign activity under the authority of dual-purpose restrictions programs.
The 28 clearly-sanctioned entities would create significant restraints on the ability of Western firms to engage in the Iranian economy if secondary sanctions were aggressively applied to them. They include Bonyad Taavon Sepah, which is the IRGC's "charitable foundation" that controls a broad portfolio of ostensibly private companies in Iran.
The sanctions on the IRGC itself should directly affect a significant number of front companies and companies and individuals closely associated with that organization.
Two banks (Mehr Bank and Bank Saderat) are sanctioned for non-nuclear activities, which could complicate Western use of the Iranian banking system.
And the Iranian state oil company, the National Iranian Oil Company (NIOC), is itself sanctioned for its relationship with the IRGC. Implementation of secondary sanctions against NIOC could seriously hamper Western investment in Iran's petroleum infrastructure and supply chain.
US Statements on Sanctions
August 5, 2015: Adam Szubin, Acting Undersecretary of Treasury for Terrorism and Financial Intelligence, testimony before the Senate Banking Committee.
"As we phase in nuclear-related sanctions relief, we will maintain and enforce significant sanctions that fall outside the scope of this deal, including our primary U.S. trade embargo." "Iranian banks will not be able to clear U.S. dollars through New York, hold correspondent account relationships with U.S. financial institutions, or enter into financing arrangements with U.S. banks. Nor will Iran be able to import controlled U.S.-origin technology or goods, from anywhere in the world."
"Nor are we relieving sanctions on Iran’s Revolutionary Guard Corps, its Quds Force, any of their subsidiaries or senior officials. The U.S. designation of Quds Force commander Qassem Suleimani will not be removed, nor will he be removed from EU lists related to terrorism and Syria sanctions.
"Sanctions will also remain in place on key Iranian defense entities, including Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL), Defense Industries Organization, Aerospace Industries Organization and other key missile entities, including Shahid Hemat Industrial Group (SHIG) and Shahid Bagheri Industrial Group (SBIG). We will also retain sanctions on Iranian firms such as the Tiva Sanat Group, which has worked to develop a weapons-capable fast boat to be used by the IRGC-Navy, and Iran Aircraft Manufacturing Industrial Company (HESA), which manufactures unmanned aerial vehicles used by the IRGC, as well as third country firms that have assisted Iran’s missile and defense programs. Under the JCPOA, more than 225 Iran-linked persons will remain designated and subject to our sanctions, including major Iranian companies and military and defense entities and firms.
"It is worth emphasizing that our sanctions authorities will continue to affect foreign financial institutions that transact with these more than 200 Iranian persons on our Specially Designated Nationals List, as well as persons who provide material or other types of support to Iranian SDNs. These measures provide additional deterrence internationally. For example, a foreign bank that conducts or facilitates a significant financial transaction with Iran’s Mahan Air, the IRGC-controlled construction firm Khatam al Anbiya, or Bank Saderat will risk losing its access to the U.S. financial system, and this is not affected by the nuclear deal."
July 23, 2015: Jacob Lew, Secretary of the Treasury, testimony before the Senate Foreign Relations Committee:
"The United States will also maintain powerful sanctions targeting Iran’s support for terrorist groups such as Hizballah and its sponsors in Iran’s Islamic Revolutionary Guard Corps–Quds Force; its destabilizing support to the Houthis in Yemen; its backing of Assad’s brutal regime; its missile program; and its human rights abuses at home. Just this week, Treasury sanctioned several Hizballah leaders, building on designations last month that targeted the group’s front companies and facilitators. We will not be providing any sanctions relief to any of these lines of activity and will not be delisting from sanctions the IRGC, the Quds Force, or any of their subsidiaries or senior officials."
Iranian Statements on Sanctions
August 10, 2015: Abbas Aragchi, Deputy Foreign Minister for International and Legal Affairs.
“The economic and financial sanctions will be removed on Implementation Day and the arms embargo and missile restrictions will be removed in a reasonable period of time, as the Supreme Leader intended…one technical problem exists because the commitments have different time requirements; if we implement our commitments quickly, it will last two or three months, but the removal of their sanctions will at maximum require two weeks.” (IRIB)
August 2, 2015: President Hassan Rouhani:
"[A]fter the agreement is implemented, the economic sanctions will be immediately removed meaning financial, banking, insurance, transportation, petrochemical sanctions; all economic sanctions will be removed…."
July 30, 2015: Abbas Aragchi, Deputy Foreign Minister for International and Legal Affairs.
When asked about the debate of “canceling” [taleqh] vs. “suspending” [laghv] sanctions under the JCPOA, Araghchi stated: “The topic of canceling in the JCPOA agreement has been an economic and financial debate; on the basis of agreement…these sanctions will be removed [bardashteh shavad] jointly on the day of the implementation of the agreement. In discussing other sanctions, the Supreme Leader said that the rest of the sanctions are [to be] lifted within a reasonable interval, which has been achieved in this agreement.” (IRIB)
July 20, 2015: Abbas Aragchi, Deputy Foreign Minister for International and Legal Affairs.
...the July 20 UN resolution defined a "road map" to remove all sanctions. Araghchi added that the "sanctions regime" is no longer recognized, while expressing his belief that there should not be any restrictions on the military and nuclear industry, which he described as serving "dual-purpose goods." Mashregh News.
July 14, 2015: President Hassan Rouhani.
"All economic and UN Security Council sanctions will be canceled on the first day of the implementation of the agreement."