Sanctions to Remain in Place Until Iran Complies with Nuclear Deal

Feb. 22, 2021

During an interview on February 7, 2021, President Joe Biden indicated that the U.S. will not offer sanctions relief as a means of enticing Iran back to the negotiating table, responding with a simple “no” when asked if the U.S. would consider such a move. Shortly after the interview aired in the U.S., Iranian Supreme Leader Ali Khamenei responded by announcing that Iran will not scale back its atomic work until the U.S. removes all sanctions. On February 8, 2021 Biden Administration Press Secretary Jen Psaki further developed President Biden’s statement, explaining that if Iran comes into full compliance with its obligations under the Joint Comprehensive Plan of Action (“JCPOA”) the U.S. would in turn do the same.

The 2015 JCPOA largely lifted U.S. secondary sanctions which had restricted foreign countries from doing business with Iran, with Iran agreeing to limits on its nuclear program and frequent International Atomic Energy Agency (“IAEA”) inspections in return. The deal also allowed for large amounts of Iranian assets, generally frozen in foreign bank accounts, to be released. The initial term of the agreement, signed by China, France, Germany, Russia, the U.K., the U.S., and the E.U. is set to run through 2025. While the agreement technically remains in effect, on May 8, 2018 the Trump Administration unilaterally withdrew from the JCPOA, choosing to reimpose all sanctions previous lifted by the accord.

While all other signatories have remained in the Agreement, its ultimate effectiveness has been greatly reduced without U.S. involvement. What followed the U.S. withdrawal has been a series of continued escalations between the U.S. and Iran. A string of international incidents in the Persian Gulf preceded the downing of a U.S. surveillance drone over the Strait of Hormuz. A U.S. airstrike killed Iran’s top military commander, Qasem Soleimani, leading the Iranian regime to scale back compliance with the JCPOA. In January 2020 Iran publicly stated that it would no longer limit its uranium enrichment capacity or nuclear research. In October, the U.S. unilaterally reimposed U.N. sanctions on Tehran. In November, a top Iranian nuclear scientist was assassinated while within Iranian borders, an event that the Iranian regime has claimed was backed by the U.S. All of this comes as Iran announced last week they have begun producing uranium metal, an announcement that has since been confirmed by the IAEA, and a move that representatives from the U.K., France, and Germany have since stated has no credible civilian use.

As things stand the U.S. and Iran seem to be locked into an escalating stalemate. By most accounts, the reinstatement of secondary sanctions has largely achieved the U.S. goal of compelling the international community to cut business ties once again with Iran. The Iranian energy sector, which experienced a brief yet significant rebound during the JCPOA’s initial years, has since experienced an equally abrupt decline as international investment has dried up. Recent estimates state the reimposition of sanctions has cut off more than two million barrels a day of Iranian oil exports, while the Iranian shipping and financial sectors have experienced similar effects. This being said, whether the U.S. will reenter the JCPOA, a new agreement will be formed, or the situation will continue down its current path is unknown. Needless to say, U.S/Iranian relations present an ever-changing situation, one with major ramifications to international trade that extend well beyond the borders of either nation.

If you have any questions relating to Iran sanctions or the JCPOA please contact a trade attorney at Barnes, Richardson & Colburn LLP.