We predicted the inevitable US retreat from the JCPOA in Oct 2015 – and the dire consequences for commercial interests due to US sanctions. Iran’s frustrations have built up after JCPOA left Iran in a far worse position than before – abject EU.
The EU has been complicit in this. Real-time economic isolation for Iran was confirmed with Obama’s Section 311 on Iran in 2011 – cutting Iran off from US dollar, US market access.
The full briefing is re-printed in “CROSS-BORDER SANCTIONS & AML” – ‘Geo-Financial Risk, US$ Dominance, Extra-Territoriality”, Iain Stewart, Oct 2019, (pp 36 – 49)
JCPOA – Understanding US Extra-territorial enforcement is key
Published to clients, October 2015, by Iain Stewart
“…Do not underestimate strength of US Sanctions and enforcement on Iran-linked sanctions…
After the euphoric commentary in the media since the JCPOA was announced in July, and with the JCPOA finally, somewhat grudgingly, passed by US Congress in mid-September, it is worth assessing its true impact. Despite the seeming historic nature of the Agreement, there are serious sanctions policy issues at stake. The timing of the JCPOA’s key deadlines so close to the outcome of the 2016 US Presidential election, with widespread presidential candidate disapproval to the Agreement, adds a major political dimension. It is crucial that firms wishing to do business in Iran understand that the thrust of US Iran-linked extra-territorial sanctions remain unchanged for all practical purposes, and the risks for non-US firms, and particularly financial institutions, remain very real indeed. Enforcement from the US will not let up post-JCPOA.
Nor should one ignore FATF’s warnings about the prevalence of terrorist- funding activities in Iran issued in June 2015(19), as its measures will remain in force regardless of the JCPOA, as pointed out by Matt Levitt of the Washington Institute.(20)
It is also worth noting the views of US sanctions experts, key political players in the US and Iran before determining how the JCPOA might play out, with a US Presidential election due in November 2016 and a Republican candidate the likely winner, based on post-war historical precedence. EU anti- terrorist sanctions measures remain a concern as well, although the strength of EU enforcement policy pales into comparison with that of the US. Particularly as US policy-makers, sanctions and nuclear proliferation and intelligence experts worry that the US may have given away far too much with the JCPOA.
The US must not underestimate the need to clarify the full force of Extra-territorial measures
In terms of legal concepts of supremacy and hierarchy, it is a major undertaking to get some market participants and legal practitioners to believe that the exercise of extra-territorial powers by one sovereign state against another’s commercial entities is valid. To US practitioners, this may seem extremely hard to believe, but it should not be underestimated the level to which the EU, for example, has had to compete with with individual notions of sovereignty, or Westphalian tendencies in applying supremacy of EU Directives, with the current immigrant crisis but one example, with Eastern European Member States, with built-in sovereignty protections an integral part of their Constitutions, extremely reluctant to be dictated to.(21)
Extra-territoriality a major challenge for Sovereignty/Constitutional Supremacy School of Thought…
It should not be considered a fait accompli from the US side that, despite major US sanctions enforcement against non-US firms, the full force of legislative extra- territorial powers are universally acknowledged, or indeed fully recognised. Historical, cultural notions of Constitutional Supremacy and Sovereignty cannot be underestimated, particularly in states recently formed, such as ex-Communist or post-colonial states. Much work needs to be done to clarify the real-time implications of major breaches of US sanctions, however obvious this may seem to US legal practitioners and policy-makers.
(19) FATF Public Statement – 26 June 2015 http://www.fatf-gafi.org/publications/high-riskandnonc ooperativejurisdictions/documents/public-statement-june-2015.html
(20) ‘Beyond the vote’: Implications for the Sanctions Regime on Iran, Washington Institute For Near East Policy (16 September 2015) http://www.washingtoninstitute.org/policy-analysis/view/ beyond-the-vote-implications-of-the-iran-nuclear-agreement
(21) Jan Zielonka, ‘Symposium: Responses to Joschka Fischer – Next Enlargement and the Finality of European Integration, The Jean Monnet Center for International and Regional Economic Law & Justice (2000) http://www.jeanmonnetprogram.org/archive/papers/00/00f0801-02.html