CONTENT PREVIEW
Country Risk

US to reimpose secondary sanctions affecting most sectors as it fully withdraws from Iranian nuclear agreement

10 May 2018
United States President Donald Trump holds a memorandum that reinstates sanctions on Iran after he announced his decision to withdraw from the 2015 Iran nuclear deal on 8 May 2018. Source: Chip Somodevilla/Getty Images

Key Points

  • The US sanctions will broadly prohibit non-US trade/investment/transactions involving Iran’s strategic financial, energy, petrochemical, and automotive sectors.
  • According to US Treasury guidelines, US and non-US companies engaged in prohibited transactions have 90 or 180 days (depending on the activity) to ‘wind down’ their operations with Iranian entities, or otherwise face US penalties after this period.
  • The risk of US-Iran interstate war would increase significantly if the JCPOA collapsed and if Iran withdrew from the JCPOA (in response to US withdrawal) and moved to resume its nuclear programme, particularly with the objective of narrowing its nuclear breakout window.

Event

On 8 May 2018, United States President Donald Trump announced that the US will no longer participate in the Iran nuclear agreement, formally known as the Joint Comprehensive Plan of Action (JCPOA), and will begin the process of reimposing all US sanctions previously lifted or waived as part of the JCPOA.

Trump’s announcement is consistent with previous IHS Markit assessments on the increased likelihood of reimposition of US sanctions targeting Iran’s strategic sectors. In his address, Trump called Iran a leading state sponsor of terror and cited the JCPOA’s unresolved ‘flaws’, namely its sunset provisions on restrictions on Iran’s centrifuges and enrichment, inspection mechanism, and silence on Iran’s ballistic missile programme, as well as Iran’s broader ‘malign’ regional activities, including its involvement in the Syrian and Yemen conflicts, as the basis for US withdrawal from the JCPOA. Trump’s announcement fulfills his ultimatum in January 2018, and follows months of US+E3 (France and Germany and the UK) negotiations to address these ‘flaws’.

According to guidelines published by the US Treasury on 8 May following Trump’s announcement, all US sanctions in place prior to the implementation of the JCPOA will be restored.

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