Iran: Parameters of Nuclear Deal Announced; No Immediate Sanctions Relief Expected

On April 2, 2015, the “P5+1” countries (the United States, United Kingdom, France, Germany, China and Russia) and Iran announced that they have agreed on the parameters of a deal to limit Iran’s nuclear program in exchange for the lifting of certain sanctions on Iran. The elements will form the basis of a Joint Comprehensive Plan of Action (“JCPOA”) to be negotiated by June 30. Importantly, sanctions currently applicable to Iran remain unchanged, while sanctions which had been suspended as negotiations progressed remain suspended. 

As discussed in our prior update (available here), the parties agreed in November 2014 to extend the temporary suspension of certain sanctions against Iran until June 30, 2015 to facilitate ongoing negotiations toward a comprehensive deal. Negotiators had set a deadline of March 31 to reach an initial political accord, with the goal of reaching a final, comprehensive agreement by the end of June. The April 2 announcement does not alter the goal of agreeing to the JCPOA by June 30. 

Many unanswered questions remain, including regarding when and to what extent sanctions against Iran will be eased. EU High Representative Federica Mogherini and Iranian Foreign Minister Javad Zarif released a Joint Statement on April 2 outlining the sanctions that may be eased upon verification of Iranian compliance with the forthcoming JCPOA, including: 

• The EU will terminate the implementation of all nuclear-related economic and financial sanctions; 
• The US will cease the application of all nuclear-related secondary economic and financial sanctions; and 
• A new UN Security Council Resolution will endorse the JCPOA, terminate all previous nuclear-related resolutions and incorporate certain restrictive measures for a mutually agreed period of time. 

The US Department of State released a statement setting forth the parameters of the interim deal, which explicitly states that Iran will only receive US sanctions relief if it verifiably abides by its commitments regarding its nuclear program. Specifically, the US statement stipulates: 

• US and EU sanctions regarding Iran’s nuclear program will be “suspended” only after the International Atomic Energy Agency (IAEA) verifies that Iran has taken all of the key nuclear-related steps that will be detailed in the eventual JPCOA; 
• The overall architecture of the suspended US sanctions will remain in place to enable sanctions to “snap back” quickly in the event that Iran fails to abide by its commitments; and 
• US sanctions related to Iranian terrorism, human rights abuses, and ballistic missiles will not be lifted. 

Iran already has claimed that the US statement misrepresents certain of the parameters agreed to in the preliminary deal. In particular, Iran is insisting that that all US and EU economic sanctions on Iran would be lifted immediately. Other members of the P5+1, in particular Russia and China, likely will resist the reimposition of sanctions against Iran once they are lifted, and thus doubts have been raised as to the likelihood that comprehensive sanctions would ever “snap back.” 

The final JCPOA must be finalized by June 30, and the negotiations may collapse in the intervening period. Opposition to the agreement is expected from many sides, including from Iranian hardliners, the Israeli government, other government in the Middle East, and the US Congress. 

The potential involvement of the US Congress could complicate the prospects of reaching a final agreement. The US Senate is expected to vote on a bill later this month that would require Congressional approval of the eventual JCPOA (S. 265, the Iran Nuclear Agreement Review Act of 2015). The bill would prohibit President Obama from lifting any US sanctions against Iran for 60 days after the President transmits the JCPOA to Congress for its approval, and would permit Congress to quickly reimpose any sanctions against Iran that had been lifted pursuant to any nuclear agreement. The President has threatened to veto the bill if it is passed. At the same time, the White House has launched a global outreach program to build support for yesterday’s interim agreement and the negotiations to follow. 

The situation regarding the Iranian nuclear program and related sanctions against Iran continues to evolve, and Dechert will remain active in providing alerts. Dechert also can assist in assessing current and prospective sanctions risks involving Iran and other targeted countries or entities, as well as with obtaining government authorizations where appropriate.