There have been so many questions waiting to be answered since the U.S. announced that they would be withdrawing from the Joint Comprehensive Plan of Action (“JCPOA”)–the deal reached between Iran and a number of countries concerning the former’s much disputed nuclear program. For example, who would be put back on the U.S. Department of the Treasury’s Office of Foreign Assets Control’s (“OFAC”) Specially Designated Nationals and Blocked Persons List (“SDN List”)? Would the U.S. grant waivers to certain parties to insulate them from the effects of re-imposed secondary sanctions? Would the re-imposed sanctions be identical to those existing before the JCPOA or would they be expanded, modified, or amended? Well some answers finally came to light earlier this month when a New Iran Executive Order (“E.O.”)–E.O. 13846–was issued.

The E.O. 13846 is a big one, coming in at about 11 pages, and covers a lot of ground–i.e., the majority of the sanctions authorities being reimposed. On one hand, the dense nature of the E.O. can be daunting and certainly doesn’t make for an easy and enjoyable read–although, this is sanctions, so who am I trying to kid. The silver lining, however, is that these authorities are now all in one executive order, which cut down on some of the frustrations practitioners have traditionally experienced when flipping through and considering the myriad of Iran sanctions scattered across different authorities. There still be some of that, of course, but this E.O. is a bit more user-friendly insofar as it houses a bulk of the reimposed sanctions all in one place. From my reading of the E.O., and the related Frequently Asked Questions OFAC published, here are some of the thoughts I had:

1. No General License H, but Still General Licenses: While OFAC General License H–the authorization that allowed for U.S. owned or controlled foreign entities to engage in transactions with Iran–will cease to exist in its entirety on November 5, 2018, that does not mean that those entities are completely barred from transacting with Iran. To the extent that U.S. persons are not prohibited from engaging in certain transactions, usually because of an exemption or general authorization, then foreign entities owned or controlled by U.S. persons would likewise be allowed to engage in those transactions. It is important to keep in mind how a U.S.-owned or controlled entity is defined: 1) a foreign entity the equity of which is owned 50% or more by U.S. persons; 2) foreign entities in which U.S. persons holds a majority of the seats of the board of directors; and/or 3) foreign entities in which a U.S. person controls the actions, policies, and personnel decisions of the entity.

2. Are Sanctions Against Iranian Persons Really Necessary?: Section 1(a)(iii) of E.O. 13846 allows the Secretary of Treasury (i.e., OFAC) to designate any person who provides assistance or support to “Iranian Persons” or persons designated under E.O. 13599 (other than Iranian depository institutions designated solely pursuant to that authority) who appear on OFAC’s SDN List. “Iranian Persons” are defined as citizens or nationals of Iran, entities organized under the laws of Iran, or entities otherwise subject to the jurisdiction of Iran. The latter is intended to capture foreign entities operating in Iran, or Iranian owned or controlled foreign entities. The question I have to ask, however, is why is that necessary? Almost all designation (not identification) sanctions authorities allow for the the designation of a party who is providing material assistance and support to a sanctions party–i.e., someone on the OFAC SDN List.

I do understand that this authority could be aimed at making sanctionable the conduct of those providing material support and assistance to the Government of Iran-related parties identified pursuant to E.O. 13599 (other than Iranian depository institutions); however, why do we need an additional authority to designate parties material assisting SDNs, but that capture the conduct due to the SDNs being an Iranian national or entity? This could lead to some absurd results. For example, in theory, if a foreign bank provides financial assistance to an SDN in Belize, and that SDN has been designated for corruption in Belize under the Global Magnitsky Sanctions Program (E.O. 13818), but SDN also happens to have been born in Iran but moved to Belize when he was three (3) years old then there would be a basis to designate the foreign bank under the E.O. 13486. Would that ever happen? Probably not, but that’s not the point. The point is that it seems we are sanctioning things that we already sanction just so we can say that we sanctioned more things?

3. No Humanitarian Impact?: Dovetailing off of the above point, despite the fact that there is now an authority for assisting or supporting any Iranian person on the OFAC SDN List, OFAC’s FAQs make clear that the U.S. Government will take steps to avoid any undue impacts to the people of Iran to humanitarian items, telecommunications, and basic services. This seems a bit misleading. While it is true that the sanction carve out trade in certain humanitarian goods, and OFAC maintains general licenses and licensing policies for telecommunications and other services, it’s hard to obtain such goods or services from abroad, when sanctions have scared away the entire global financial system from the country. Further, with respect to telecommunications, even during the pendency of the JCPOA, U.S. owned and controlled foreign entities who were dealing in U.S.-origin goods and services with respect to improving Iran’s civilian telecommunications networks were being denied authorizations. Moreover, with the exception divestment and certain legal services license, I haven’t seen OFAC license much of anything over the last 18 months or so. The licensing policy seems to be far more strict under this administration than it was under the prior–across the board, not just for Iran. So while guidance in the form of FAQs and statements are appreciated, it would be nice to see some concrete ways–i.e., via licensing–that the U.S. is ensuring that such undue impact are mitigated.

With the issuance of E.O. 13846, we’re now entering a brave old world. Most of what the E.O. does is reimpose the sanctions suspended during the JCPOA, but with a few twists and turns that will leave sanctions practitioners scratching their head. While a lot of this will require practitioners to knock the rust off as we get reacquainted with telling clients that they can’t engage in, or are at risk for engaging in certain Iran-related transactions, there’s just enough new aspects to the Iran sanctions program offered by this E.O. to keep it interesting. Well, at least, as interesting as OFAC compliance can be.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@falawpc.com