Iran, Global Powers Agree to Parametersfor Long-Term Nuclear Deal

Covington: "Potential for Significant Sanctions Relief in Second Half of 2015" - As currently envisioned, the JCPOA would impose significant limitations on Iran’s uranium enrichment and plutonium production capabilities and subject Iran’s nuclear facilities to extensive inspections by the International Atomic Energy Agency (“IAEA”). In exchange, the United States and EU would―after the IAEA has verified that Iran has fulfilled its key nuclear commitments―suspend their “nuclear-related” sanctions against Iran, though U.S. officials emphasized that such sanctions would “snap back” into place if Iran fails to meet its commitments. Additionally, as Iran completes certain key actions, the UN Security Council would replace all of its prior resolutions imposing sanctions relating to Iran’s nuclear program ith a single, more limited resolution. #IranTalks
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Iran, Global Powers Agree to Parameters 
for Long-Term Nuclear Deal 
 
Potential for Significant Sanctions Relief in Second Half of 2015 
April 3, 2015 
International Trade Controls 
On April 2, 2015, the United States, the United Kingdom, France, Russia, China, Germany, the 
European Union (â€œEUâ€), and Iran announced that they had reached consensus on the 
â€œparametersâ€ of a long-term deal under which Iran would significantly curtail its nuclear program 
in exchange for potentially significant sanctions relief from the United States, EU, and United 
Nations (â€œUNâ€).  The parameters announced yesterday have no effect in and of themselves, as 
was confirmed in guidance issued on April 3, 2015, by the U.S. Treasury Departmentâ€™s Office of 
Foreign Assets Control (â€œOFACâ€).  Rather, the parameters will serve as the basis for a Joint 
Comprehensive Plan of Action (â€œJCPOAâ€) that the parties will seek to conclude by June 30.  As 
the U.S. State Department noted when announcing the parameters:  â€œImportant implementation 
details are still subject to negotiation, and nothing is agreed until everything is agreed.â€ 
As currently envisioned, the JCPOA would impose significant limitations on Iranâ€™s uranium 
enrichment and plutonium production capabilities and subject Iranâ€™s nuclear facilities to 
extensive inspections by the International Atomic Energy Agency (â€œIAEAâ€).  In exchange, the 
United States and EU wouldâ€•after the IAEA has verified that Iran has fulfilled its key nuclear 
commitmentsâ€•suspend their â€œnuclear-relatedâ€ sanctions against Iran, though U.S. officials 
emphasized that such sanctions would â€œsnap backâ€ into place if Iran fails to meet its 
commitments.  Additionally, as Iran completes certain key actions, the UN Security Council 
would replace all of its prior resolutions imposing sanctions relating to Iranâ€™s nuclear program 
with a single, more limited resolution. 
With respect to potential sanctions relief, the framework announced yesterday leaves important 
questions unanswered.  Most notably, neither the United States nor the EU has specified 
exactly which sanctions they consider to be â€œnuclear-related,â€ although from the U.S. 
perspective, â€œnuclear-relatedâ€ measures are likely to include many of the more recent 
â€œsecondaryâ€ or â€œretaliatoryâ€ sanctions that target non-U.S. companies that engage in certain 
types of business with Iran.  Importantly, it does not appear that the envisioned sanctions relief 
will ease the primary sanctions that the United States has long imposed against Iran, which 
prohibit U.S. persons and their owned or controlled non-U.S. affiliates from engaging in virtually 
any dealings with Iran unless licensed by OFAC.    
However, the potential relief announced yesterday could encompass a very substantial portion 
of the current EU-Iran sanctions framework, most of which was enacted in connection with the 
European Councilâ€™s policy of seeking to incentivize Iran to cooperate with the UN and other 
international stakeholders in reforming its nuclear program.  
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As a result, it is possible that the JCPOA framework could effectively leave European and U.S. 
companies in a similar position vis-Ã -vis Iran as prevailed prior to 2010â€•with U.S. companies 
(and, as a result of statutory changes in 2012, their owned or controlled non-U.S. affiliates) 
broadly prohibited from engaging in business with Iran, and European companies generally 
permitted to do so. 
Limitations on the Iranian Nuclear Program 
The parameters for a long-term nuclear deal envision a JCPOA under which Iran would agree to 
limitations on its uranium enrichment and plutonium production capabilities for a significant 
period of time, as well as to IAEA inspections intended to ensure that any covert efforts by Iran 
to impermissibly advance its nuclear program or develop a nuclear weapon could be detected 
quickly. 
Uranium Enrichment and Plutonium Production 
With respect to uranium enrichment and plutonium production, the parameters envision that Iran 
would, among other steps: 
ï‚¾ Reduce its number of installed centrifuges by two-thirds (from approximately 19,000 to 
approximately 6,100) for 10 years, retaining only first-generation centrifuges; excess 
centrifuges will be placed in IAEA-monitored storage; 
ï‚¾ Only enrich uranium up to 3.67% (suitable only for civil uses) for at least 15 years; 
ï‚¾ Reduce its current stockpile of approximately 10,000 kilograms of low-enriched uranium 
to 300 kilograms of uranium enriched to 3.67% for 15 years; 
ï‚¾ Not construct any new facilities for uranium enrichment purposes for 15 years;  
ï‚¾ Conduct uranium enrichment exclusively at its Natanz facility for 10 years, using only 
first-generation centrifuges; 
ï‚¾ Engage in only limited research and development of advanced centrifuges according to 
a schedule and parameters agreed among the parties; 
ï‚¾ Convert its Fordow uranium enrichment facility into a research center and not conduct 
research and development associated with uranium enrichment at that facility for 15 
years; 
ï‚¾ Redesign and rebuild its heavy water nuclear reactor at Arak such that it will not produce 
weapons-grade plutonium; 
ï‚¾ Destroy or remove from Iran the original core of the Arak reactor, which was suitable for 
the production of weapons-grade plutonium; 
ï‚¾ Ship all spent nuclear fuel from the Arak reactor out of the country for the reactorâ€™s 
lifetime;  
ï‚¾ Not reprocess spent nuclear fuel (from which plutonium is derived) for an indefinite 
period of time; and 
ï‚¾ Restrict its enrichment capacity and research and development for 10 years to ensure a 
so-called â€œbreak-outâ€ time periodâ€•the time necessary for Iran to develop a nuclear 
weaponâ€•of at least one year and, thereafter, abide by an enrichment and enrichment 
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research and development plan submitted to the IAEA, as well as to the United States, 
United Kingdom, France, Russia, China, and Germany.  
Inspections 
To ensure that the international community can verify that Iran has met its commitments, the 
parameters envision that Iran would agree to wide-ranging IAEA inspections and transparency 
measures, including: 
ï‚¾ Granting the IAEA regular access to all of its nuclear facilities, including access to 
uranium mines and continuous surveillance of uranium mills for 25 years; 
ï‚¾ Granting the IAEA access to investigate any â€œsuspicious sitesâ€ or allegations of covert 
nuclear facilities;  
ï‚¾ Allowing for continuous surveillance of Iranâ€™s centrifuge rotors and bellows production 
and storage facilities for 20 years;  
ï‚¾ Consenting to the establishment of a dedicated procurement channel for Iranâ€™s nuclear 
program to monitor and approve the transfer to Iran of certain nuclear-related and dual-
use materials and technology; and 
ï‚¾ 
Implementing an agreed set of measures to address the IAEAâ€™s concerns about the 
possible military dimensions of Iranâ€™s nuclear program. 
Potential U.S., EU, and UN Sanctions Relief 
In exchange for the limitations and transparency measures described above, a JCPOA, if 
concluded, would provide Iran with potentially significant relief from U.S., EU, and UN sanctions.  
However, only limited details on the scope and timing of such sanctions relief have been 
provided thus far. 
United States and EU 
According to a document issued by the U.S. State Department, U.S. and EU â€œnuclear-relatedâ€ 
sanctions targeting Iran would be â€œsuspended after the IAEA has verified that Iran has taken all 
of its key nuclear-related steps,â€ but these sanctions would â€œsnap back into placeâ€ if Iran fails at 
any time to fulfill its commitments.  The parameters also make clear that U.S. sanctions against 
Iran relating to terrorism, human rights abuses, and ballistic missiles will remain in place under a 
JCPOA.  In its April 3, 2015 guidance, however, OFAC noted that the parameters â€œprovide a 
path for sanctions on Iran to be suspended and eventually terminated.â€  The OFAC guidance, 
unlike the parameters announced yesterday, is not, on its face, limited to â€œnuclear-relatedâ€ 
sanctions, thus raising the possibility that future sanctions relief stemming from a JCPOA 
potentially could extend to other types of sanctions targeting Iran. 
The language in the document issued by the U.S. State Department also differs slightly, but 
notably, from the joint statement issued by EU High Representative Federica Mogherini and 
Iranian Foreign Minister Javad Zarif, which envisions that the EU will â€œterminate the 
implementation of all nuclear-related economic and financial sanctions and the U.S. will cease 
the application of all nuclear-related secondary economic and financial sanctions, 
simultaneously with the IAEA-verified implementation by Iran of its key nuclear commitments.â€   
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The EU-Iran joint statement also is silent on the prospect of sanctions â€œsnapping backâ€ into 
place in the event that Iran fails to fulfill its commitments, and does not mention terrorism, 
human rights, or ballistic missile-related sanctions.  These discrepancies highlight that the 
modalities for sanctions relief will need to be addressed in greater detail as the parties work 
towards a JCPOA by June 30. 
U.S. â€œNuclear-Relatedâ€ Sanctions 
From the U.S. perspective, the most important question is which sanctions qualify as â€œnuclear-
relatedâ€ and which are related to terrorism, human rights abuses, and ballistic missiles.  The 
Joint Statement of the EU High Representative and Iranian Foreign Minister is telling in this 
regard, since it refers specificallyâ€•and onlyâ€•to the U.S. ceasing the application of its nuclear-
related â€œsecondaryâ€ sanctions.    
â€œSecondaryâ€ sanctions is the term that is used to refer to those sanctions that the United States 
imposes against non-U.S. persons that engage in certain activities involving Iran.  These 
secondary sanctionsâ€•which have been significantly ratcheted up since 2010 in statutes such 
as the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, the Iran 
Threat Reduction and Syria Human Rights Act of 2012, and the Iran Freedom and Counter-
Proliferation Act of 2012â€•have primarily targeted Iranâ€™s energy, shipping, and financial sectors, 
and have made it very difficult for Iran to sell its oil and to repatriate the proceeds from any such 
sales.  If the United States ceases to implement these secondary sanctions measures, then 
non-U.S. persons that are not owned or controlled by U.S. persons would not risk losing their 
access to U.S. markets if they engage in activities currently targeted by such sanctions, 
including potentially: 
ï‚¾ Purchasing or acquiring petroleum, petroleum products, or petrochemical products from 
Iran;  
ï‚¾ Making investments that contribute to Iranâ€™s domestic production of refined petroleum or 
petrochemical products; 
ï‚¾ Supplying, selling, or transferring to or from Iran significant goods or services used in 
connection with the Iranian energy, shipping, shipbuilding, and automotive sectors; 
ï‚¾ Supplying or selling to Iran precious metals or certain other materials, such as 
aluminum, steel, and coal; and 
ï‚¾ Providing underwriting services or insurance for various Iran-related activities. 
With respect to secondary sanctions targeting the financial sector, a JCPOA would be expected 
to ease those secondary sanctions that specifically target non-U.S. financial institutions that 
engage in certain Iran-related activities tied to nuclear proliferation, such as knowingly 
conducting or facilitating significant financial transactions with the Central Bank of Iran or on 
behalf of an Iranian person or entity identified on the List of Specially Designated Nationals and 
Blocked Persons (â€œSDN Listâ€) as a result of its involvement in Iranâ€™s proliferation activities and 
not Iranâ€™s terrorism activities.  
However, not all secondary sanctions may be viewed as â€œnuclear-related.â€  For instance, the 
secondary sanctions targeting non-U.S. persons that make investments exceeding certain 
monetary thresholds that directly and significantly contribute to the enhancement of Iranâ€™s ability 
to develop its petroleum resources date to the Iran Sanctions Act of 1996, and may be 
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5 
considered to be related principally to concerns regarding Iranâ€™s support for terrorism.  As a 
result, these measures may not be among the sanctions eased under a JCPOA. 
Importantly, it is unlikely that a JCPOA would ease any of the â€œprimaryâ€ U.S. sanctions codified 
in the Iranian Transactions and Sanctions Regulations (â€œITSRâ€), which prohibit U.S. persons and 
their owned or controlled non-U.S. affiliates from engaging in virtually all unlicensed dealings 
with or relating to Iran.  Many of the ITSR sanctions date to executive orders issued in 1995 and 
1997, and were adopted in response to Iranâ€™s terrorism activities. 
Presidential vs. Congressional Action 
Members of the U.S. Congress have threatened to seek to block any agreement that they 
believe does not go far enough in dismantling Iranâ€™s nuclear program.  It therefore will be 
important to understand which sanctions measures President Obama can terminate, suspend, 
or waive on his own, without congressional action, and what, if any, predicate steps or 
determinations he must make in order to do so.  For example, in some cases, such as with 
measures imposed by executive orders that have never been codified by statute, the President 
has the unilateral authority to terminate sanctions.  In other cases, the President may have 
discretion to terminate sanctions imposed by statute, but only once he has determined that 
certain conditions have been met.  In still other cases, absent congressional action, the 
Presidentâ€™s authority may be limited to waiving temporarily certain sanctions imposed by statute, 
or issuing broad general licenses that effectively suspend elements of the sanctions. 
Importantly, the secondary sanctions measures that have been adopted by Congress generally 
authorize the President to waive the imposition of these sanctions under various circumstances, 
including when the President determines that such a waiver is essential to the national security 
interests of the United States.  Accordingly, Congress would likely need to pass new legislation 
by a veto-proof majority to prevent President Obama from easing the application of secondary 
sanctions. 
The dynamic between the U.S. executive and legislative branches will be an important one to 
follow in the weeks ahead, particularly given that the Chairman of the Senate Foreign Relations 
Committeeâ€•Senator Bob Corker (R-TN)â€•has re-affirmed his intent to press forward on April 14 
with legislation to provide for congressional oversight of any nuclear deal with Iran. 
EU â€œNuclear-Relatedâ€ Sanctions 
The prospect of easing â€œnuclear-relatedâ€ sanctions would have a more significant impact under 
the EU sanctions framework than in the United States.  The EU currently maintains two 
separate sanctions regimes in relation to Iran.  One, which was implemented in 2011, imposes 
asset-freezing measures against certain designated parties whom the European Council has 
deemed to be responsible for â€œserious human rights violationsâ€ in Iran.  (The list of designated 
parties under those measures currently includes 86 individuals and one entity.)  The EU-Iran 
â€œhuman rightsâ€ sanctions also impose limited export controls focusing on certain physical 
security and telecommunications monitoring equipment.1   
                                               
 
1 See Council Decision 2011/235/CFSP (April 2011); Council Regulation No. 359/2011 (April 2011) (as 
amended).   
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These â€œhuman rightsâ€ sanctions are unlikely to be included within the term â€œnuclear-relatedâ€ 
sanctions under the JCPOA parameters announced yesterday, but they are of limited practical 
importance for most EU companies.  A broader, and more commercially significant, EU-Iran 
sanctions framework is reflected in European Council Decision No. 2010/435/CFSP (July 2010) 
and Council Regulation No. 267/2012 (March 2012).  Those measures were first issued in 2007, 
and were expanded in 2010 and 2012 in consultation with the United States and other 
international stakeholders.  They are designed to implement UN Security Council resolutions 
pertaining to Iranâ€™s nuclear program, and also to impose â€œaccompanying measuresâ€ at the EU 
level â€œwith a view to supporting the resolution of all outstanding concerns regarding Iranâ€™s 
development of sensitive technologies in support of its nuclear and missile programmes, 
through negotiation.â€2  They currently include a range of unilateral sanctions against Iran, such 
as: 
ï‚¾ Broad asset-freezing measures against the Central Bank of Iran, the Iranian 
Revolutionary Guard Corps, Iranâ€™s state-owned banks and energy companies, and other 
parties;  
ï‚¾ Export controls and services-related restrictions associated with, among other areas, (1) 
dual-use goods, software and technology; (2) nuclear production facility equipment; (3) 
military equipment; and (4) certain oil and gas exploration and production equipment;  
ï‚¾ Trade restrictions focusing on Iranian-origin crude oil, petroleum and petrochemical 
products, and natural gas;  
ï‚¾ Licensing and notification requirements associated with transfers of funds to and from 
Iranian parties; and 
ï‚¾ A range of additional finance and investment-related controls.  
The reference in the JCPOA parameters to â€œnuclear-relatedâ€ controls could cover the entirety of 
the above measures, though it is plausible that some features could be retainedâ€•for example, 
certain aspects of the regulations focus on military trade controls, and it is unlikely that the EU 
will move to significantly relax such restrictions with respect to Iran.  If the sanctions noted 
above were to be lifted, the EU would, essentially, be left with a very narrow set of trade 
restrictions against Iran under the human rights measuresâ€•and a substantially narrower regime 
than would remain in place in the United States under the U.S. sanctions discussed above for 
terrorism, human rights, and ballistic missile activities.  Thus, the JCPOA framework could 
effectively leave European and U.S. companies in a similar position vis-Ã -vis Iran as prevailed 
prior to 2010â€•with U.S. companies (and, as a result of 2012 legislation, their owned or 
controlled non-U.S. affiliates) broadly prohibited from engaging in business with Iran, and 
European companies generally permitted to do so, free from significant EU sanctions or risks 
under U.S. â€œsecondaryâ€ sanctions.  
Assuming the EU acts to ease its sanctions regulations, it is unclear what mechanisms would be 
implemented to â€œsnapâ€ them back into place as per the JCPOA parameters.  Presumably, the 
European Council would need to meet and agree, by consensus vote among the 28 Member 
States, to re-impose sanctions measures should Iran fail to abide by its commitments.   
                                               
 
2 See Council Decision 2010/413/CFSP, at preface (5).   
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United Nations 
The parameters announced yesterday also envision that all past UN Security Council 
resolutions relating to Iranâ€™s nuclear program will be lifted â€œsimultaneous with the completion, by 
Iran, of nuclear-related actions addressing all key concerns,â€ which the parameters define as 
enrichment, the Fordow facility and Arak heavy water reactor discussed above, concerns 
regarding the possible military dimensions of Iranâ€™s program, and transparency.  In place of the 
legacy resolutions, the UN Security Council would adopt a new resolution endorsing the 
JCPOA, establishing the procurement channel for Iranâ€™s nuclear program noted above, and 
retaining restrictions on conventional arms and ballistic missiles, as well as related cargo 
inspections and asset freezes. 
In considering the impact of the potential easing of UN sanctions, companies should be mindful 
that UN sanctions restrictions are only enforced to the extent that they are incorporated into the 
domestic laws of Member States.  Accordingly, even if certain UN sanctions relating to Iranâ€™s 
nuclear program are eased, companies will need to understand how such easing may or may 
not impact the domestic laws of the jurisdictions to which they are subject. 
Next Steps 
The parameters announced yesterday mark a significant step towards a long-term deal that 
would limit Iranâ€™s nuclear program and provide sanctions relief.  Over the next three months, the 
parties to the negotiations will work to fill in the details and resolve issues left open under the 
parameters, with the goal of concluding a JCPOA by June 30.  If a JCPOA is concluded, we will 
be able to identify with greater certainty the specific limitations to which Iranâ€™s nuclear program 
will be subject, the specific sanctions measures that will be eased, and the timing and 
circumstances under which such easing will occur.   
We will continue to follow these ongoing negotiations with Iran closely, and will provide 
additional updates as new information becomes available.  We are well-positioned to assist 
clients in understanding how these developments may affect their operations and business 
opportunities.   
If you have any questions concerning the material discussed in this client alert, please contact 
the following members of our International Trade Controls practice group: 
Peter Flanagan 
+1 202 662 5163 
pflanagan@cov.com 
Corinne Goldstein 
+1 202 662 5534 
cgoldstein@cov.com 
Peter Lichtenbaum 
+1 202 662 5557 
plichtenbaum@cov.com 
David Lorello 
+44 20 7067 2012 
dlorello@cov.com 
Lisa Peets 
+44 20 7067 2031 
lpeets@cov.com 
Kimberly Strosnider 
+1 202 662 5816 
kstrosnider@cov.com 
David Addis 
+1 202 662 5182 
daddis@cov.com 
Alan Larson 
+1 202 662 5756 
alarson@cov.com 
Josh Williams 
+1 202 662 5618 
jnwilliams@cov.com 
 
This information is not intended as legal advice. Readers should seek specific legal advice before acting with regard to the subjects 
mentioned herein.  
 
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