Sprung Link Text
Yesterday’s election has significant implications for international sanctions, particularly with respect to Iran, Cuba, and Russia. Although we do not want to be unduly alarmist, President-elect Trump’s statements on the campaign trail, should they be carried through to policy in his Administration, certainly suggest a U-turn in US policy. With respect to Iran and Cuba, the possibility of such a change in direction will need to be taken into account by persons and companies who have begun to enter into commercial arrangements with those countries in the expectation that the recent easing of sanctions would continue. With respect to Russia, we do not advise that any company make any assumptions as to the shape of future sanctions. Although any potential shifts in US policy would not officially occur before President-elect Trump takes office, it is likely that some of the potential changes will be telegraphed before the Inauguration in January 2017.
Last year, the US, together with the EU and other countries, entered into the Joint Comprehensive Plan of Action (“JCPOA”) with Iran that entailed, among other things, that the US would lift the so-called “secondary sanctions” intended to chill non-US companies from doing business with Iranian banks and sanctions on certain sectors, such as oil and gas. The US did so on Implementation Day in January of this year, while also removing a number of Iranian entities from the SDN list. In addition, although the primary sanctions prohibiting US persons from doing business with Iran largely remained in place, the US announced a favorable licensing policy with respect to certain industries, notably civilian aircraft.
The JCPOA, however, contained a provision allowing any party to unilaterally “snap back” sanctions if it determines that Iran has violated the terms of the agreement. Although there is no public information indicating that to be the case, the JCPOA is only an executive agreement, and Mr. Trump has stated that one of his first tasks as president will be to withdraw from the agreement and reimpose the full panoply of sanctions on Iran. The election results also make it that much more likely that the Congress will renew and even broaden the scope of the Iran Sanctions Act before the end of the year.
For US persons, with the exception perhaps of Boeing, which recently received a license to sell aircraft to Iranian airlines, and of pistachio and carpet importers, this will not have a huge impact given that the primary sanctions were never lifted. For European and other non-US companies, however, who have cautiously reopened commercial ties with Iran, it raises the risk considerably. Although presumably the EU will not immediately follow the US lead (unless Iran abrogates the entire agreement and openly restarts its nuclear weapons development program), those companies who are in the financial and oil and gas sectors face the historical choice of pursuing Iranian business or risk being sanctioned under the secondary sanctions.
Over the past several years, the Obama Administration has steadily loosened the Cuba sanctions and last year moved to normalize relations with Cuba, including removing it from the State Sponsors of Terrorism list. Earlier in the campaign Mr. Trump stated that he supported this approach although he “would have negotiated a better deal.” However, in the days immediately before the election, Mr. Trump announced that he was opposed to the policy and would reverse President Obama’s executive orders on Cuba.
If President-elect Trump carries through on this late-election position, then current and anticipated commercial deals involving airline routes, cruise lines, resort development, and tourism may all have to be revisited.
Following the annexation of Crimea by Russia two years ago, the US, the EU and other countries imposed a series of sanctions on Russia targeting individuals, entities, and industry sectors. During the campaign Mr. Trump suggested that he would consider whether to continue these sanctions or to recognize the fait accompli of Russia’s occupation.
Again, translating campaign statement into policy is an iffy thing. We doubt anyone at this time can know what will happen in this area, and prudent companies will continue to proceed as if the current sanctions regime will continue.
* * *
This is, of course, an area of law and policy that is heavily tied to the foreign policy of the United States, which in turn is ultimately dictated by the President. It is now, and is likely to remain in the near future, in flux and thus the implications for new and existing business are difficult to predict.