November 11, 2016

Under the Trump Presidency

In the wee hours of November 9, 2016, Donald Trump became the US president-elect. Thus, next January 20 Mr. Trump will become the 45th US President, cloaked with full executive power to impose, waive, or terminate US sanctions under existing authorities from Congress.

Sanctions are tools to achieve national security and foreign policy goals, which, by and large, are determined by the president. The sitting president. If a new president wishes to pursue different national security and foreign policy goals, or to take different approaches to achieve them, he or she is largely free to do so.

Thus, next January 20 President Trump will have the ability to substantially change the US sanctions landscape, most notably vis-a-vis Iran. Given the absence of a foreign policy track record, it is difficult to predict the extent to which a President Trump might deviate from the course taken by President Obama. It is notable, however, that during his long run for the presidency Mr. Trump loudly decried the Joint Comprehensive Plan of Action (JCPOA). It is also notable that, as a life-long businessman, Mr. Trump has shown himself to be a pragmatist.

For those already doing business in Iran in reliance upon sanctions relief in the JCPOA, and those considering doing so, the disconcerting reality is that US sanctions relief under the JCPOA could change quickly when a Trump Administration takes office. In fact, they could change on its very first day.

Relevant Contours of US-Iran Sanctions

On January 16, 2016, the "E3/EU+3", including the US, implemented the JCPOA, pursuant to which the US and others agreed to substantially ease nuclear-related sanctions concerning Iran. In exchange, Iran agreed to take steps designed to ensure that its nuclear program remains peaceful.

While the JCPOA provided little sanctions relief for US citizens and companies (US Persons), it provided substantial relief from US sanctions that target non-US Persons. Among other things, under the JCPOA the Obama Administration:

  • waived or terminated the vast majority of US/Iran-related sanctions targeting non-US Persons, including those that applied to dealing with Iran’s energy, shipping, financial, shipbuilding and automotive sectors, Iran's port operators, providers of related insurance, Iran's trade in gold and other precious metals, and trade with Iran in graphite and raw or semi-finished metals, such as aluminum, steel and coal;
  • de-listed hundreds of Iranian entities on the US list of Specially Designated Nationals (SDNs);
  • issued a general license authorizing foreign subsidiaries of US companies to engage in most Iran-related transactions; and
  • established a favorable licensing policy regime for authorizing the provision of US civilian aircraft and related parts and services to Iran;
  • issued a license to permit importation into the US of Iranian carpets and foodstuffs.

None of the foregoing steps taken by the Obama Administration – or other related steps taken in the intervening months – required congressional approval. Embedded in relevant congressional laws are provisions authorizing the president to conditionally waive sanctions imposed thereunder, and presidents are generally free to terminate, waive, or issue licenses concerning sanctions imposed by presidential executive orders or executive branch agencies, such as the Office of Foreign Assets Control (OFAC).

US-Iran Sanctions under the Trump Administration

There are no legal teeth to the JCPOA. In essence, it provides that the consequence of a party's failure to abide by its terms is that the other party becomes free to disregard its terms.

Thus, if the Trump Administration takes the view that the JCPOA is not in the best interests of the US policy goals, it will be free to reverse some or all of the sanctions relief provided by the Obama Administration. A President Trump may or may not feel the need to follow up his campaign rhetoric with a hard line on Iran. Perhaps once under the weight of presidential responsibility, a President Trump will come to believe that sticking to the terms of the JCPOA is the best way forward, in part because of the inevitable adverse fallout from allies who themselves committed to the JCPOA and whose citizens are now benefiting from trade with Iran.

Indeed, perhaps a pragmatic President Trump will decide that further relief should be granted so that US companies can benefit from more trade with Iran.