United States: The Iran Deal: One Year On

Last Updated: April 20 2017
Article by Patrick Murphy

It has been a year since the Joint Comprehensive Plan of Action (JCPOA) was implemented and already the world looks very different to the one in which the deal was agreed. We look back at progress made, tribulations suffered and what businesses need to think about now in order to take advantage of future opportunities.

Undeniable progress has been made

There have been some definitive positives for Iran in the last year. Key achievements include:

  • The IMF has forecast the Iranian economy will grow at an impressive rate of 6.6%
  • Total became the first foreign oil major to sign a deal with Iran for a USD 2 billion South Pars 11 gas field development
  • Oil cargoes exported from Iran rose to 563 in 2016, up from 66 in 2012
  • In February 2017 Iran's oil exports touched 3 million barrels per day for the first time since the 1979 revolution
  • Iran has signed with Airbus and Boeing to purchase up to 180 passenger aircraft to support its ailing civil aviation sector
  • The value of planned but un-awarded non-hydrocarbon projects in Iran is USD 65.7 billion

On the political side, Iran's reformist president, Hassan Rouhani, who negotiated the JCPOA, has indicated that he will run in the Presidential election later this year.

Yet frustration remains at the lack of investment

The overriding feeling in Iran is one of frustration. Whilst a few foreign investors have looked to gain first mover advantage, the volume of foreign investors has simply not materialised in the numbers hoped for. Even Total is reported to have delayed the final decision on its investment until after summer 2017, whilst it waits to see whether US sanction waivers are renewed.

One cause of the relatively slow influx of investors has been reluctance within most tier one financial institutions to support any business with Iran. US financial institutions were, of course, still prohibited from facilitating business with Iran under the US primary sanctions that remained in force. But foreign financial institutions (FFIs) were, in theory, able to clear (non-US dollar) funds, lend money and support investment and business with Iran. The failure to do so, outside of a few small regional European and Asian banks,has been a persistent dampener on trade and investment. The Obama administration was well aware of this limitation. Secretary of State John Kerry was at pains last year to assure top European banks that they had nothing to fear from pursuing "legitimate business" with Iran. Prime Minister David Cameron publicly rebuked a British bank for refusing to process payments connected with Iranian business.

But the difficulties persisted, hampered by concern amongst FFIs about the attitude of US regulators, and US banks themselves. Indeed, in many instances US clearing banks have sought to restrict their correspondent counterparts from engaging in Iran related business, fearing the consequences of clearing US dollar sums for correspondents who might be undertaking significant volumes of Iran related business.

Adding to the cautious mood were the two major political events looming on the horizon: the US and Iranian elections. The first of those has of course produced a further complication.

President Trump's attitude towards Iran

Trump's description of the JCPOA during his presidential campaign as "a lopsided disgrace" and his pledge "to dismantle the disastrous deal with Iran" has not helped alleviate the concerns of investors. Whilst his language has cooled somewhat since his election, he still describes it as the "worst deal I've ever seen".

Yet, if President Trump is judged on his actions, then his position appears to be closer to that of his predecessor. The only new sanctions imposed by the US on Iran since President Trump's inauguration was following Iran's ballistic missile tests. Here the US imposed sanctions in the form of new designations of Specially Designated Nationals (SDNs).

The effect of these sanctions has been limited. Indeed, President Trump's designation of just 13 individuals and 12 (relatively small) entities as SDNs was much closer in character to the designations made by the Obama administration. Thus far, therefore, President Trump'sactions on Iran appear to be fairly limited.

How likely is it that President Trump will rip up the Iran deal?

It would be difficult for the US to completely revoke the sanctions relief it has provided under the JCPOA. For one thing, the JCPOA is not a simple bilateral agreement between the US and Iran - Britain, France and Germany (as well as Russia and China) are also parties to it. The EU provides its own sanctions relief as part of the deal.

It is unlikely that the EU will follow any unilateral repudiation of the deal by the US. This would mean that the EU and the US would, for the first time in respect of sanctions against Iran, be taking diverging positions. This could lead to a situation where US targeted investments by European firms in Iran are legal as a matter of EU law. This harks back to previous transatlantic trade disputes including the Helms-Burton Cuba sanctions in 1996 or the Polish pipeline sanctions in the 1980s.

If the US is intent on imposing new sanctions against Iran, it is instead more likely to do so in respect of non-nuclear issues. This could include Iran's ballistic missile program, support for terrorist organisations, or even its activities in Yemen, Syria and elsewhere in the Middle East.

How can businesses plan for and mitigate the effect of any possible new sanctions?

The key to mitigating any effects of new sanctions is identify and quantify the potential risks involved. A firm investing significant capital sums into Iran in the form of FDI is likely to face greater risks than a trading firm selling directly into Iran or appointing distributors or agents in Iran.

The latter's risk is ultimately a credit risk: in the event of a re-imposition of sanctions which either designates a trading partner, forcing the foreign business to cease dealing with them, or shuts down an existing payment route, the risk is ultimately the credit exposure at the time of the sanctions.

Presuming that satisfactory terms, in the form of a force majeure style "snapback" clause, can be agreed at the outset allowing the foreign company to cease dealing in those circumstances that can be managed by prudent credit control.

However, a significant capital investment in, say, a joint venture for an infrastructure project presents greater difficulties. Even if a "snapback" clause can be negotiated at the outset, allowing the foreign partner to immediately cease dealing with an Iranian partner in the event of a designation, significant capital will be tied up in Iran without any means to lawfully repatriate it or receive dividend income. Thought should therefore be given at the outset to issues such as to how to allow the foreign partner to re-engage at a later date if/when sanctions are eased again and for the payment of any accrued dividends.

What steps do businesses need to take when looking to enter Iran?

The due diligence alone on counterparts can take considerable time and is worth proceeding with as early as possible. It is important you identify not only whether a counterparty is a SDN, but also whether it is owned or controlled by SDNs.

Market entry strategy needs to be given careful thought as well, so as to identify the appropriate investment vehicle to use. Is it better for you to invest through an onshore vehicle (in most circumstances foreign investors can own 100% of an Iranian company) or through one of Iran's 13 Special Economic Zones and 7 freezones which offer tax and employment benefits? Or will you need a joint venture partner because of local licensing requirements? Might a branch office suffice instead? Is there a bilateral investment treaty or double taxation treaty that can be taken advantage of in structuring the investment and, if so, will a "FIPPA" licence be required from the OIETAI in Iran?

Sellers of products will need to consider which distributorship options to use and navigate their way through the registration requirements for distribution agreements. Thought should also be given to local employment regulations and intellectual property protection.

Whilst the reaction amongst businesses to the Iran deal has been muted, there has been significant levels of investment in, and business done with, Iran. That cautious approach is likely to continue whilst businesses wait to see what the Trump presidency means for the future of the Iran deal. That is not to say that there are no steps that can and should be taken now by businesses serious about investing in Iran in the future.

This article is an excerpt from our trade and commodities newsletter, In-Short. To view the full newsletter please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions