Besides the pace at which sanctions are relieved as part of a Joint Comprehensive Plan of Action (“JCPOA”) between the U.S., other major world powers, and Iran, those in the private sector considering a return to Iran need to apprehend the scope of sanctions relief under a nuclear deal. Contrary to some public expectations, not all of the sanctions imposed on Iran by the U.S., the Europeans, and global institutions will be relieved as part of a final deal and thus care must be taken to delimit newly-permissible areas of trade with and investment in Iran from those areas that remain subject to sanctions.

While the precise details of sanctions relief have not been revealed (nor has a JCPOA been agreed to as of the time of this writing), the April 2nd Joint Statement released by the P5+1 and Iran in Lausanne, Switzerland, does provide a clue as to the scope of sanctions relief under a potential nuclear deal. In regards to U.S. sanctions, the April 2nd Joint Statement states that “the U.S. will cease the application of all nuclear-related secondary economic and financial sanctions, simultaneously with the IAEA-verified implementation by Iran of its key nuclear commitments” as part of a potential JCPOA.

I’ve highlighted parts of the language of the Joint Statement because these are terms of art that might not be apparent to those unfamiliar with U.S. sanctions laws. Let’s take the use of the word “secondary” (“nuclear-related” will be dealt with in tomorrow’s post): this is a term of art in the sanctions world that has particular significance for U.S. persons and entities interested in entering the Iranian market following a nuclear deal.

Definitionally, a “secondary sanction” is a sanction that targets the activities of foreign parties vis-à-vis a sanctions target (i.e., Iran). In other parts of the world (besides the U.S.), this kind of sanction is also referred to as an “extraterritorial sanction” in light of the dispute over whether the sanctioning state has rightful jurisdiction over the activities and parties under threat of sanction. (While not such a ripe issue these days, this was not mere semantics, as the threat of U.S. secondary sanctions threatened to explode into a diplomatic crisis between the U.S. and some of its major trading partners, including Europe, Japan, Mexico, and Canada, more than a decade ago.)

Effectively, what the Joint Statement declares is that the U.S. will relieve all nuclear-related economic and financial sanctions that target the activities of foreign parties vis-à-vis Iran. The implication is that the nuclear-related primary sanctions that target the activities of U.S. persons and entities (i.e., those that more traditionally come under the purview of U.S. jurisdiction) will remain in place following a nuclear deal. This includes the comprehensive U.S. trade and investment embargo with Iran, which is codified at 31 C.F.R. Part 560 (the “Iranian Transactions and Sanctions Regulations”).

If this news bursts some bubbles, I’m not surprised. U.S. sanctions prohibitions will likely remain in place as to the activities of U.S. persons dealing with Iran or Iranian parties. The comprehensive U.S. trade and investment embargo with Iran that has been in place for at least two decades and counting and that has barred virtually all transactions between the U.S. and Iran looks to be here to stay even after the conclusion of a Joint Comprehensive Plan of Action. Where the rest of the world might be able to resume trade with and investment in Iran, sanctions-compliant U.S. parties will remain firmly on the sidelines.

This is not to say that there won’t be any surprises in the days ahead. This is an unusual time for the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”). I can’t think of another occasion in which the U.S. has relieved sanctions on a target as part of a virtual quid pro quo negotiation. Plus, with sanctions being relieved on the activities of foreign parties vis-à-vis Iran, the Obama Administration may see legitimate U.S. interests in permitting (and effectively promoting) certain U.S. commercial trade with Iran. Thus, we could see a broadened licensing scheme following a nuclear deal, which would allow U.S. persons and entities to engage in targeted activities with Iran or Iranian parties.

Indeed, some former U.S. Treasury officials have recommended as much in recent weeks. In a report issued by Elizabeth Rosenberg and Sara Vakhshouri at the Center for New American Security (“CNAS”), permitting certain energy-sector trade and investment with Iran is recommended as means to boost U.S. commercial competition with overseas energy firms. Rosenberg is the former Senior Advisor to David Cohen (who, until recently, was the Undersecretary for Terrorism and Financial Intelligence at the U.S. Treasury Department), so her recommendation is significant.

The U.S. could authorize certain targeted trade-related activities with Iran undertaken by U.S. persons like this – either as part of or following a nuclear deal. Other areas where we might see some changes to U.S. primary sanctions targeting Iran include 31 C.F.R. § 560.215, which effectively regards foreign entities as U.S. persons if U.S. persons “otherwise control the actions, policies, and personnel decisions” of the foreign entity for purposes of the ITSR, and the prohibition on reexports to Iran, including the de minimis rule (which regards foreign-made goods as subject to the U.S. trade embargo if they contain a certain amount of U.S.-origin product).

From a policy perspective, there’s certainly good reason to make some of these changes and better level the playing field when it comes to competing for Iran as a commercial market, but as far as the plain language of the April 2nd Joint Statement is concerned, Iran will remain off-limits to U.S. parties following a nuclear deal.

That might be a disappointment to some. Certainly, it puts U.S. firms at a serious disadvantage compared to foreign parties when it comes to capturing parts of the Iranian market. But, as we’re coming to learn, the scope of sanctions relief –as of now– will only extend so far under a nuclear deal.