Extension of Limited Iran Sanctions Relief Includes Civilian Passenger Aircraft Parts

Extension of Iran Sanctions Relief

On July 19, 2014 the United States and its partners in the P5+1 (China, France, Germany, Russia, the United Kingdom, and the United States) and Iran renewed the Joint Plan of Action (JPOA) for four additional months.  The JPOA period has now been extended until November 24, 2014.

Originally agreed to on November 20, 2013, the JPOA halted progress on Iran’s nuclear program and rolled it back in key respects.  In return, the P5+1 committed to provide Iran with limited, targeted, and reversible sanctions relief for a six month period.  This six month period ran from January 20, 2014 to July 20, 2014.  Prior to the expiration of that original six month period, the parties agreed to extend the period by four months by mutual consent.

Some news sources have noted that there is a strong belief among the opposing parties that they are close to negotiating a long-term comprehensive solution to the Iran nuclear issue.  These reports are consistent with the mutually agreed upon extension, as there would be no need to extend the discussions if none of the parties actually believe a resolution is possible.  This is a promising prospect for many people, including U.S. and Iranian businesses who have missed out on key economic opportunities with one another due to sanctions imposed against Iran.

However, the sanctions relief offered in the extended JPOA period largely follows the sanctions relief offered during the original JPOA period.  As such, most of the sanctions relief is with respect to secondary sanctions.  So although most U.S. persons remain prohibited from transacting with Iran, foreign financial institutions and foreign businesses in third countries will not be subject to secondary sanctions, nor will they experience restrictions to their payable-through or correspondent accounts for facilitating certain transactions with Iran that are completed during the extended JPOA period.

The extended period also authorizes the repatriation to Iran of $2.8 billion of additional “Restricted Funds.”  This is in addition to the $4.2 billion that was authorized pursuant to the original JPOA.  However, any foreign financial institutions holding such funds must only act upon receiving written notification from the U.S. Government before transacting with such funds.  Without prior notification, the foreign financial institutions will be subject to secondary sanctions.

One key area that involves U.S. persons is the Amended Statement of Licensing Policy on Activities Related to the Safety of Iran’s Civil Aviation Industry.  As part of the JPOA, the Office of Foreign Assets Control (“OFAC”) has extended its favorable licensing policy regime through which U.S. persons can request specific license authorization from OFAC to engage in transactions to ensure the safe operation of Iranian commercial passenger aircraft.  This “amended” statement includes the extended period through November 24, 2014.  Otherwise it is the same statement of licensing policy that was issued back in January of this year.

The underlying purpose of this statement of licensing policy is to protect civilians on Iranian aircraft.  The U.S. has consistently held that it’s imposition of sanctions against Iran has never been motivated by a desire to harm the Iranian people.  In order to meaningfully pursue this purpose the policy includes transactions involving Iran Air (an entity listed on the SDN List), presumably because it is Iran’s largest civilian airline.  But it excludes all other Iranian airlines listed on the SDN List, including Iran’s second largest civilian airlines, Mahan Air.

Some of the Iranian commercial passenger airlines standing to benefit from this statement of licensing policy are:

  1. Iran Air;
  2. Ata Airlines;
  3. Caspian Airlines;
  4. Kish Air;
  5. Iran Aseman Air;
  6. Safiras Airlines;
  7. Taban Air; and
  8. Zagros Airlines.

Notable Iranian commercial passenger airlines excluded from this statement of licensing policy are:

  1. Mahan Air;
  2. Yas Air;
  3. Aban Air;
  4. UM Air; and
  5. Iran Air Tour Airlines.

According to OFAC’s statement of licensing policy the activities that may be licensed include, but are not limited to, the exportation and re-exportation of: services related to the inspection of commercial aircraft and parts in Iran or a third country; services related to the repair or servicing of commercial aircraft in Iran or a third country; and goods and technology, including spare parts, to Iran or a third country.

Applications should provide complete details of all transactions for which authorization is sought, including U.S. Department of Commerce Export Control Classification Numbers (“ECCNs”) for all U.S. origin goods and technology to be exported to Iran and information demonstrating that proposed transactions are for safety of flight.

Those looking to take action pursuant to the statement of licensing policy should think to act quickly, as the JPOA only covers transactions that are fully completed by the end of the extension period, November 24, 2014. This means that orders, deliveries and payments must all be completed prior to the deadline. The only exception to the deadline appears to be transactions related to insurance claims paid after the deadline for underlying transactions that were otherwise fully covered by the JPOA or specific license.

Disclaimer: Blog posts should not be relied upon as legal advice and are only provided for informational purposes.  Information contained in blog posts may also become outdated with the passage of time as laws change and U.S. foreign policy and national security objectives evolve.