Core sanctions prevent U.S. trade with Iran

VIENNA – As Congress was debating the merits of the Iran nuclear deal last week, the U.S. political world was whipping itself into a frenzy. Not so much the rest of the world – it was busy restoring relations with Tehran, selling it weapons, and inking contracts with Iranian firms.

Republicans tried last week to push through a resolution of disapproval of the nuclear deal and a second vote, also expected to fail, is scheduled for today.

But U.S. companies will be sidelined no matter how the U.S. political tussle plays out because core sanctions imposed by Washington will remain even after the nuclear-related sanctions are lifted.

These secondary sanctions are linked to U.S. charges of Iranian human rights violations, terrorism and other allegations of wrongdoing. They have the effect of banning doing business with Iran, with few exceptions, such as supplying parts for Iran’s civilian aviation sector.

“Non-U.S. companies are not, in general, subject to the U.S. sanctions,” said William McGlone, a lawyer specializing in sanctions law. “As long as a non-U.S company is not involved in using persons or operations in the United States, then, in general, those companies could proceed with their transactions.”

There is a lot to miss out on for U.S. firms in Iran. The country of 80 million people generates a $400 billion economy, boasts the world’s fourth-largest oil reserves, the second-biggest stores of natural gas, and has well-established manufacturing and agricultural industries.

While Iranian Supreme Leader Ayatollah Ali Khamenei says America remains the “Great Satan” and has ruled out agreements beyond the nuclear deal, his government has wasted no time wooing the rest of the world.

At a business forum staged by Iran in Vienna a little more than a week after the July 14 nuclear deal was reached, Amir Hossein Zamania, an Iranian deputy oil minister, said his country hoped for foreign partnerships for oil and gas projects worth $185 billion.

Iranian officials also pitched the mining and financial sectors and Iran’s automotive industry to participants from Austria, Germany, Spain, Italy and elsewhere – more than 3,000 participants each paying a registration fee of more than $2,000.

No sanctions have yet been lifted and all can be re-imposed if Iran fails to live up to its commitments. That means many multinationals are unlikely to commit to big investments in the immediate future. But in contrast to the United States, sanctions lifting by the European Union will free up most financial and business bans imposed on Iran for companies based in the 28-nation EU. Many of them already are in the starting blocks, along with their countries’ governments.

Switzerland dispatched a business delegation to Iran at the end of April, three months before the deal was finalized. French Foreign Minister Laurent Fabius met top Iranian officials in Tehran on July 29, including President Hassan Rouhani. He asked Rouhani to visit Paris in November and said a French economic delegation is slated to visit Iran soon. Italy’s foreign and economic development ministers last month signed an agreement in Tehran to facilitate commercial relations.

Britain reopened its embassy in Tehran last month. Spain is due to send a trade delegation to Iran early in the week headed by its foreign minister, while German Foreign Minister Frank-Walter Steinmeier plans in October to follow up on a July trip to Tehran by Economy Minister Sigmar Gabriel.

Russia, which already has the inside track in supplying Iran with nuclear technology, is also resurrecting its lucrative arms trade. In Moscow last month, Iranian Vice President Sorena Sattari said Tehran is in “active talks” with Russia to buy at least two types of military jets.

But U.S. firms will remain on the outside for some time to come. “There is very strong political bipartisan support to maintain the core embargo on Iran,” said McGlone, the lawyer. “So (sanctions relief) benefits for U.S. companies are limited.”