OFAC Yet to Issue Guidance on Expanded Iran Sanctions Despite Broad Scope

The Treasury’s Office of Foreign Assets Control has done little to define the broad scope of the Iranian executive order issued earlier this month that expanded sanctions authority for the Treasury and State departments, according to trade lawyers. The order (see 2001100050) -- which authorized both primary and secondary sanctions against Iran’s construction, mining, manufacturing and textiles sectors -- did not define the scope of the Iranian sectors that may be subject to sanctions, and OFAC has yet to release guidance. OFAC did, however, issue a frequently asked question that provided a 90-day wind-down period (see 2001160011).

But stakeholders are still unclear about the scope of U.S. sanctions on Iran’s construction, mining, manufacturing and textiles sectors. “Some of us were hoping that when OFAC issued its FAQs that it might further define those terms,” Kerry Contini, a trade lawyer with Baker McKenzie, said during a Jan. 16 webinar hosted by the law firm. Contini said the wind-down period is “obviously a welcome development,” but OFAC has “not further defined the scope of these extremely broad terms.” Baker McKenzie trade lawyer Laura Klick called the sectors “quite broad. It’s not very clear as to what the scope of those industries that are targeted might cover.”

Contini said there is precedent for OFAC issuing FAQs to clarify broad executive orders authorizing new sanctions authorities, such as when the U.S. issued guidance after targeting Iran’s automotive sector following its withdrawal from the Joint Comprehensive Plan of Action in 2018. If no FAQs are released, Contini said, companies may have to monitor U.S. enforcement actions, which can help companies get a sense of who U.S. authorities are targeting for violations. So far, Contini said, U.S. actions related to Iran sanctions have not targeted major allies. The U.S. sanctioned Chinese subsidiaries of COSCO Shipping Corporation in September for transferring Iranian oil (see 1911270029).

“What we have not seen yet is enforcement that really focuses on western European companies, for example,” Contini said. “It would be really interesting to see if that line gets crossed at some point. That would be a major escalation.”

Before announcing the expanded Iranian sanctions, Trump threatened sanctions on Iraq (see 2001060048) after the country voted to expel U.S. troops. If those sanctions are imposed, they would likely be limited to primary sanctions, possibly against Iraq’s central banks, Contini said. Because Iraq and the U.S. remain allies, a highly escalatory step such as secondary sanctions is unlikely, Contini said. “Secondary sanctions are extremely aggressive,” she said. “I would be shocked if the first step the U.S. took would be to include any kind of secondary sanctions.”

Despite Trump’s threat, the U.S. is unlikely to impose any type of sanctions against Iraq, said Johann Strauss, a trade lawyer with Akin Gump. “This is pretty far-fetched,” he said during a Jan. 16 Akin Gump webinar. The U.S. could, however, enact sanctions under the Countering America’s Adversaries Through Sanctions Act if Iraq follows through on a purchase of a Russian S-400 missile system, Strauss said. Iraq is considering the purchase if the U.S. withdraws troops from the area, according to the Wall Street Journal.

“This is something we’re going to watch out for,” Strauss said. “But I think on the whole, a lot of these concerns about whether the U.S. would impose sanctions on Iraq is just bluster from the administration.”