What Impact Does the JCPOA Have on Daily Transactions Between Iran and the U.S.?

Following the announcement of the nuclear agreement between Iran and the P5+1 (the United States, Britain, France, Russia, China, and Germany) in July 2015, there has been much speculation about Iran's exit from a decade of sanctions. This agreement, known as the Joint Comprehensive Plan of Action (JCPOA), is documented in a lengthy and detailed text, the implementation of which could significantly alter Iran's economic relations with the world. However, it is still not entirely clear what impact these changes will have on the daily transactions of Iranians with the U.S. Many envision the nuclear agreement as a sign of the end of regulations enforced by the Office of Foreign Assets Control (OFAC) in the U.S. Treasury, which is far from the truth. To avoid unintentional violations of sanctions regulations, a complete understanding of the JCPOA details is essential. Will all of Iran's sanctions be lifted? Not at all. You probably know that most of the current unilateral U.S. sanctions against Iran were imposed in 1995 by Bill Clinton. These laws remain in effect today under the title of Iran Transactions and Sanctions Regulations (CFR 31 Section ITSR 560). These sanctions encompass many daily activities of 'U.S. persons,' which by legal definition includes citizens and permanent residents of the U.S. (regardless of where they reside, even in Iran), individuals physically present in the U.S. (such as those with work, study, or tourist visas), and U.S. companies and their subsidiaries abroad. The JCPOA is an agreement regarding Iran's nuclear program and thus has little to do with the ITSR. The ITSR sanctions were imposed due to what is termed Iran's support for terrorism and human rights violations. As a result, the vast majority of the ITSR remains in effect, with only minor changes being made. Thus, it can be said that the JCPOA does not signify the end of all U.S. grievances against Iran. So what changes does the JCPOA bring? Firstly, many EU sanctions against Iran will be lifted. Secondly, many U.S. sanctions against third countries that have relations with Iran will be lifted. Many Iranian entities will be removed from the Specially Designated Nationals (SDN) list, which is essentially OFAC's blacklist. For example, non-U.S. and non-Iranian companies (such as European and Asian firms) will no longer be penalized for investing in Iran's petrochemical industry or for selling large quantities of Iranian oil products. This will lead to an expansion of legal activities by non-U.S. and non-Iranian companies in Iran. Similarly, foreign companies that are subsidiaries of U.S. companies will also be able to resume trade with Iran to some extent. Will there be direct changes for 'U.S. persons'? Yes, but to a limited extent. Firstly, legal changes are limited to allowing the import of certain dry Iranian foods such as pistachios, as well as caviar and Persian rugs. OFAC is also expected to create a mechanism that allows U.S. companies to engage with certain sectors of Iran's civilian aviation industry. For instance, U.S. companies may obtain special licenses from OFAC to sell civilian aircraft to Iran. This range of changes applies to U.S. persons. Beyond the scope of legal changes, you may also witness the facilitation of transactions that were previously permitted. For example, the legal sending and receiving of cash to Iran and the legal sale of food, pharmaceuticals, and IT technology to Iran will be facilitated. These are items that are generally permitted under specific conditions. With the reduction in the number of Iranian banks on the SDN list and Iran's re-entry into the international SWIFT banking system, conducting financial transactions for currently permitted dealings will become much simpler. The sending of permitted items and their insurance will also be simpler within the legal framework. Do individuals still need licenses for personal transactions? Generally, yes. OFAC has eased many of its regulations in recent years by issuing 'general licenses,' meaning that certain specific transactions with Iran are permitted and do not require a license as long as they are conducted legally. However, many transactions will still require OFAC licenses. These transactions include the sale of real estate in Iran, the sale of other assets (including companies, stocks, etc.), opening or closing bank accounts in Iran, and many charitable activities. U.S. persons remain prohibited from investing (regardless of where the financial resources originate), employment, opening bank accounts, and purchasing property in Iran without a specific license from OFAC. Will OFAC be less strict about violations of sanctions? Likely not. Many believe that the JCPOA is a first step toward re-establishing relations between Iran and the U.S. We must wait and see if this happens. However, what is clear is that the Obama administration fought very hard to pass this agreement in Congress. Many opponents of the JCPOA believed that the agreement was too favorable to the Iranian government. Given the numerous negative opinions against this agreement, public belief is that the U.S. government is determined to prove that it is not soft on Iran and will firmly enforce existing sanctions. Thus, it is quite likely that OFAC and the U.S. Department of Justice (which enforces the criminal aspects of sanction laws) will intensify their activities. Therefore, the JCPOA should not be seen as a sign of easing existing U.S. economic sanctions against Iran. The JCPOA is an important step for Iran's economy. The JCPOA is a significant step toward Iran's economic reintegration into the world, but there is still a long way to go before all sanctions are lifted, especially for U.S. persons. Particularly since the laws have not yet fully changed and the lifting of sanctions will occur over time. However, even after the laws change, their implementation must be prioritized for companies and individuals dealing with Iran. Satisfaction with the nuclear agreement should not overshadow individuals' understanding of existing sanctions against Iran. This means that individuals should always consult with those who have knowledge and expertise in this area to avoid violating these very complex laws and regulations.