History does not repeat itself but it often rhymes — Mark Twain (although there is disagreement if Twain uttered these exact words (see here)).

Just as businesses were growing or planning to grow into Iran, they had the proverbial rug pulled out from under them. Last week, on May 8, 2018, the administration announced its intention to withdraw from the Joint Comprehensive Plan of Action (JCPOA) and re-impose the Iran Sanctions Program.  (See Here).  The JCPOA was announced in 2015 among the United States, France, Britain, Russia, China, Germany and Iran.  In essence. The JCPOA removed various sanctions against Iran in exchange for curbs on Iran’s nuclear program.

After two transition or wind-down periods of 90 and 180 days, respectively, the United States will reimpose sanctions lifted when the JCPOA was implemented in 2015.  With one big exception — Boeing and civilian air businesses which stand to lose over $20 billion in business — the administration’s action does not impact U.S. business, except to the extent that U.S. companies were relying on General License H to conduct business with Iran through foreign subsidiaries.

OFAC’s announcement will have its biggest impact on foreign businesses that were subject to “secondary sanctions.”  U.S. businesses have still been subject to sanctions on Iran barring U.S. persons and companies from business dealings with Iran.

Under the secondary sanctions, foreign persons and companies will be prohibited from dealing with Iran’s government, officials, and several key economic sectors, including shipping, ports, shipbuilding, metals, oil and gas and financial services.

The European Union’s reaction to the re-imposition of Iran Sanctions is not clear yet.  It is possible that the EU may take steps to block the application of the U.S. Sanctions, creating risks for foreign companies that could face EU enforcement actions if they comply with the U.S. Sanctions Program.

The first phase of the U.S. Sanctions re-imposition will occur after a 90-day wind-down period or by August 6, 2018.  After that date, OFAC will re-impose sanctions on transactions and trade in currency, gold and precious metals, graphite, raw or semi-finished metals, such as aluminum and steel, coal, industrial software, Iranian sovereign debt and Iran’s automotive and aviation sector.

After a second wind-down period of 180 days or by November 4, 2018, OFAC will re-impose sanctions on Iran’s port operators, shipping and ship building sectors, oil-related transactions, dealings with the Iran Central Bank and other financial institutions, insurance services and energy.

OFAC plans to announce revocation of General License H, which authorized U.S. Companies to conduct business with Iran through foreign-based subsidiaries.  OFAC will replace General License H with a new license to authorize wind-down of any activities conducted pursuant to General License H.

As a further complication, OFAC intends to re-list 400 entities and individuals previously de-listed from the Specially Designated Nationals list (“SDN List”) pursuant to the JCPOA.

Companies that were planning to enter the Iran market will need to re-examine their plans – OFAC is likely to take a strict view of the re-imposed sanctions with some understanding of the need for a reasonable wind-down period.