What Does the New U.S.-Iran MOU Mean for U.S. Sanctions on Iran?
The “Islamabad Memorandum of Understanding between the United States of America and the Islamic Republic of Iran” outlines a preliminary framework for ending the current conflict and establishing a 60-day negotiation period, beginning June 19, 2026 and extendable by mutual consent. Although the MOU expressly contemplates several forms of potential U.S. sanctions relief—including going so far as terminating all types of sanctions against Iran, whether primary or secondary—the MOU itself does not change existing U.S. sanctions obligations. Unless and until the U.S. government implements the contemplated relief through legal authorities such as Executive Orders, statutory waivers, licenses, regulatory amendments, or designation changes, companies should continue to operate under the existing sanctions framework administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”).
Nevertheless, the MOU provides important insight into the types of sanctions relief that may ultimately be pursued during negotiations. Of its fourteen paragraphs, paragraphs 6, 7, 9, 10, and 11 appear to contemplate some form of U.S. sanctions relief. This article examines each of those provisions and assesses the legal authorities and regulatory actions that would likely be required to implement them. OFAC has already issued General License X as a result of ongoing negotiations under the MOU, authorizing certain transactions related to petroleum products. Accordingly, GL X is also considered for purposes of this assessment.
To that end, it is important to first consider the legal framework of the U.S. sanctions regime on Iran (at least at a high-level, and feel free to skip if you already know it).
Overview of U.S. Sanctions Targeting Iran
Broadly speaking, U.S. sanctions on Iran consist of two categories: primary sanctions, which generally prohibit U.S.-connected transactions involving Iran, and secondary sanctions, which permit the United States to impose sanctions on certain non-U.S. persons for specified Iran-related conduct.
The Iranian government, its Central Bank, the Islamic Revolutionary Guards Corps (“IRGC”), and their entities, instrumentalities, and affiliates, are subject to sanctions under a variety of legal authorities that comprise not just OFAC’s Iran Sanctions program, but other programs such as Counter Terrorism Sanctions and Non-Proliferation Sanctions.
The Iran Sanctions program is comprised of a complex framework of statutes, Executive orders, and implementing regulations—many of which are distinct from one another—that have enabled the U.S. government to impose a variety of sanctions, including full blocking sanctions with identification on the Specially Designated Nationals and Blocked Persons (“SDN”) List, on Iranian actors. In short, those legal authorities include:
- The Iranian Transactions and Sanctions Regulations (“ITSR”), which imposes a comprehensive embargo on the entire country and full blocking sanctions on the Iranian government, the Central Bank of Iran, and essentially all Iranian financial institutions.
- Various statutes and Executive orders that enable the imposition of sanctions on specified categories of conduct or persons against Iran-related actors. For example, E.O. 13553 authorizes the imposition of full blocking sanctions (i.e., identification on the SDN List and constructive blockings through OFAC’s 50 Percent Rule) on persons determined by the U.S. government to be involved in the commission of serious human rights abuses in Iran, while E.O. 13846 authorizes the imposition of full blocking sanctions on a variety of specified categories, including material support to the National Iranian Oil Company or the Central Bank of Iran.
The separate and distinct Counter Terrorism Sanctions and Non-Proliferation Sanctions programs—through their respective statutes, Executive orders, and implementing regulations—have been used to impose full blocking sanctions on numerous actors in Iran for engaging in terrorism related conduct and/or conduct related to the proliferation of weapons of mass destruction. Many key actors in Iran’s economy are not just subject to full blocking sanctions under the legal authorities that comprise OFAC’s Iran Sanctions program, but also under these other distinct sanctions programs. For example, the Central Bank is designated on OFAC’s SDN List pursuant to multiple sanctions authorities, including the Iranian Financial Sanctions Regulations (“IFSR”), and the Global Terrorism Sanctions Regulations (“GTSR”). The IRGC is also designated under multiple authorities, including as a Foreign Terrorist Organization (“FTO”), which has other legal ramifications outside of sanctions.
The ITSR prohibits U.S. persons from engaging in virtually any transactions or dealings with Iran or anyone in Iran, whether directly or indirectly, unless authorized by OFAC. In addition, where a person (individual, entity, or the government of Iran itself) is subject to full blocking sanctions under any one of the variety of sanctions authorities administered by OFAC, U.S. persons are also prohibited from engaging in virtually any transactions or dealings, whether directly or indirectly, with such sanctioned parties, unless authorized.
Where a non-U.S. person intends on engaging with Iran or any such sanctioned parties, they are also prohibited from doing so where a U.S. person is involved, whether directly or indirectly (e.g., intermediary U.S. financial institution clearing U.S. dollar payments). This broad range of legal authorities prohibiting conduct where a U.S.-nexus is present, which can be met with civil enforcement or criminal prosecution for violating U.S. laws, are commonly referred to as “primary sanctions.”
Where there isn’t necessarily a U.S.-nexus present in a transaction with a party subject to full blocking sanctions under any of the foregoing legal authorities, many such authorities enable the U.S. government to impose sanctions—ranging full blocking sanctions to the loss of correspondent banking ability for foreign financial institutions—where the actor satisfies relevant designation criteria. For example, providing material support or acting on behalf of a person already designated on the SDN List. This concept is commonly referred to as “secondary sanctions,” where engaging in the conduct isn’t prohibited and subject to civil enforcement or criminal prosecution, but the U.S. government can choose to impose legally available sanctions measures.
MOU Assessment
In consideration of the high-level overview of U.S. sanctions above, for what each of paragraphs 6, 7, 9, 10, and 11 of the MOU actually state, here we’ll assess:
- What sanctions relief the respective paragraph appears to contemplate; and
- What legal actions would be required.
PARAGRAPH 6
“The United States of America undertakes with regional partners to develop a definitive, mutually agreed plan with at least USD 300 billion for the reconstruction and economic development of the Islamic Republic of Iran. The mechanism for the implementation of this plan will be finalized as part of final deal within 60 days. All required licenses, waivers, and permissions needed for the relevant financial transactions will be granted by the United States of America.“
What’s the Potential Relief?
The MOU does not specify the source of the proposed funding for the reconstruction of Iran, with President Trump reportedly denying that the U.S. would be paying into the fund and stating that Gulf allies could do so if they wanted to. Nevertheless, the U.S. is agreeing to lead in the development of a mutually agreed plan with its regional partners—unclear who that may include—to make available $300 billion USD for the reconstruction and economic development of Iran as part of the final deal
What Legal Actions Would Be Required?
If any “regional partners” are set to use their own funds as part of a final deal, the facilitating entities and individuals of the respective country(s)—e.g., financial institutions and government officials and agencies—will seek clear legal protection from applicable primary and secondary sanctions authorities.
Primary sanctions will be of concern where a U.S. nexus is present in the facilitating parties transactions related to the fund. To address such concerns, OFAC will likely need to issue broad general licenses (self-executing authorizations) with a corresponding scope to authorize said transactions that involve a defined category of such persons and any U.S. persons and, where necessary, specific licenses to such persons to authorize any other transactions not already covered by a general license.
Regardless of the presence of a U.S.-nexus, secondary sanctions risks will be present for the facilitating parties’ financial transactions, which is why Paragraph 6 specifically contemplates “waivers” and “permissions.” For example, the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”) and the Iran Freedom and Counter-Proliferation Act of 2012 (“IFCA”), require the imposition of certain sanctions on foreign financial institutions that engage in specified Iran-related activities (e.g., a range of activities where the IRGC or Central Bank of Iran are involved). However, both statutes provide waiver authorities that may permit the President to temporarily suspend the application of those sanctions upon satisfaction of applicable statutory requirements. Therefore, the facilitating parties will seek to validate any such waiver determinations made by President Trump.
Many so-called “secondary sanctions” authorities—particularly Executive orders that enable the imposition of sanctions without implementing an underlying statutory authority—do not have a formal waiver provisions. To address such secondary sanctions risks concerns of facilitating parties, the U.S. government may need to provide formal guidance, interpretive assurances, comfort letters, or similar communications designed to reduce perceived sanctions risk. Finally, if contrary to President Trump’s assertions, the U.S. does pay into the fund for the reconstruction of Iran, U.S. facilitating parties will require license authorization from OFAC to do so, either in the form of general or specific licenses to adequately cover the underlying financial transactions.
PARAGRAPH 7
“The United States of America undertakes to terminate all types of sanctions against the Islamic Republic of Iran, including the United Nations Security Council resolutions, i.e. IAEA Board of Governors resolutions, and all unilateral US sanctions, primary and secondary, in an agreed upon schedule as part of the final deal. The Islamic Republic of Iran and the United States of America acknowledge the critical importance of the sanctions termination issue above mentioned and express their intentions to immediately address these issues in the negotiations in order to achieve mutual agreement on them.“
What’s the Potential Relief?
This paragraph appears to contemplate the most significant concession on the part of the United States. Indeed, it expressly refers to terminating all types of sanctions against Iran, including the complex framework of primary and secondary sanctions. However, how far the U.S. will go in “undertaking” this endeavor as a part of a final deal is left to be seen, but the last sentence of Paragraph 7 suggests Iran considers it a material part of any final deal in exchange for providing concessions on the nuclear issue that the U.S. cares most about.
A final deal could go so far as lifting some or all of the comprehensive embargo on Iran that currently prohibits U.S. persons from engaging in virtually any transactions with Iran, primarily through OFAC’s ITSR. In the former Iran Nuclear Deal—the Joint Comprehensive Plan of Action (“JCPOA”) of the Obama Administration—there was only very little relief issued under the ITSR, which is the most sizeable of the primary sanctions against Iran. For example, relief at the time included former General License H, which authorized U.S. owned or controlled foreign entities to engage in a broad range of business dealings with Iran, which is otherwise prohibited under the ITSR. Notwithstanding these limited general licenses, the ITSR was essentially untouched under the JCPOA.
Termination would also include the removal of persons currently designated on OFAC administered sanctions lists, including the SDN List. Designations of Iranian individuals and entities, as well as parties outside of Iran for their Iran-related conduct or relationships, have been made over the past several decades pursuant to a variety of statutes and Executive orders that not only comprise OFAC’s Iran Sanctions Program, but other sanctions programs as well, including the Counter Terrorism Sanctions and Non-Proliferation Sanctions programs. Therefore, the extent of such delistings will be contingent on how the Trump Administration’s negotiators will interpret the critical phrase “all types of sanctions against the Islamic Republic of Iran” withoutpushback from the Islamic Republic side, as they could for example disagree whether designations made under the broader terrorism-related legal authorities are considered sanctions against the Islamic Republic of Iran.
Any such intended terminations of sanctions will also be impacted by the legal framework of U.S. sanctions laws.
The U.S. government won’t be able to independently terminate several U.N. sanctions that have been imposed through resolutions by the U.N. Security Council, regardless of whether they were driven at the time by the U.S. The U.S. can introduce draft resolutions seeking to terminate or modify existing resolutions imposing sanctions against Iran, but the entire Security Council will need to vote on them. The United Nations Participation Act (“UNPA”) enables U.S. Presidents to implement or remove such multilateral sanctions domestically at their discretion. Therefore, although the U.S. may cease implementing them domestically, it will not impact other U.N. member states domestic implementation.
While a significant portion of U.S. sanctions against Iran are entirely unilateral in nature—i.e., regardless of whether other countries align through their own domestic sanctions laws—some of the underlying legal authorities will require Congressional involvement in various degrees for their dismantling. This largely depends on the underlying statutory authority for the sanctions in question. Most of the comprehensive embargo on Iran through the ITSR stem from the President’s authority under the International Emergency Economic Powers Act (“IEEPA”). which are arguably the easiest for him to remove as they don’t require Congressional approval or involvement. While certain secondary sanctions authorities that have been relied upon to designate Iran-related parties on the SDN List also solely stem from IEEPA (e.g., OFAC’s Non-Proliferation Sanctions program), a majority of them are also based on statutory sanctions that involve Congress for their termination (e.g., IFCA and CISADA).
What Legal Actions Would Be Required?
For primary sanctions relief—to enable the involvement of U.S. persons in otherwise prohibited transactions with Iran, its government, and/or specified SDNs—the Trump Administration may take the same limited approach is has thus far with Venezuela by issuing relevant general license authorizations as part of a final deal. This will enable the Administration to quickly snap back such sanctions in the event the Islamic Republic fails to meet its end of the bargain on any specific agreements, by simply ending the licenses. However, this approach would only pay lip service to the contemplated termination of sanctions under the MOU.
General licenses can effectively authorize large categories of otherwise prohibited conduct. However, licensing relief differs fundamentally from the termination of sanctions because the underlying legal authorities remain in place and may be reinstated immediately through the revocation of the licenses. Therefore, if the Islamic Republic demands more in the sense of permanently terminating sanctions, and the U.S. concedes, then the Trump Administration may take an approach similar to Syria. In the context of Syria, broad licensing relief was initially provided through OFAC and was subsequently followed by Executive Branch actions dismantling significant portions of the underlying sanctions framework.
However, the underlying legal framework of U.S. sanctions against the Islamic Republic of Iran are much more complex than either Venezuela or Syria, which were primarily based on IEEPA. Sanctions against Syria did also include the Caesar Syria Civilian Protection Act, the latter of which was repealed after president Trump signed necessary legislation with bipartisan support to repeal it. As already discussed, sanctions against Iran include numerous statutes other than IEEPA, and such statutes comprise many of the secondary sanctions authorities that have been relied upon in designating Iran-related actors on the SDN List.
While a substantial part of the comprehensive embargo under the ITSR, and certain Executive orders that have been used to designate Iran-related SDNs are solely dependent on IEEPA—enabling the President to terminate such sanctions on his own—many other legal authorities for sanctions against Iran are based at least in part on statutory sanctions that require Congressional involvement for their termination. These other statutes generally enable the President to issue temporary waivers that would need to be constantly renewed, some requiring certifications or findings to Congress (primarily why doing so is vital to U.S. national security interests), such as IFCA, CISADA, and the Iran Sanctions Act of 1996 (“ISA”). They don’t authorize the President to single handedly terminate the legal authorities themselves, and although he could arguably delist anyone sanctioned under them, there would be a lot of legal and political friction in doing so.
Another challenge for the President in delivering comprehensive sanctions relief may lie in the terrorism-related sanctions authorities. Iran has been designated a State Sponsor of Terrorism (“SST”) since 1984 pursuant to a number of compendia of legal authorities, while the IRGC remains designated as a Foreign Terrorist Organization (“FTO”) under the Immigration and Nationality Act, in addition to its many other basis for designation on the SDN List. This distinction is particularly significant because many of Iran’s most economically important actors maintain relationships with the IRGC.
The SST and FTO designations do not merely support sanctions-related prohibitions and risks, but also trigger other legal consequences under U.S. law, including terrorism-related civil liability, judgment-enforcement, and criminal statutes. Unlike many of the Iran-related sanctions statutes that delegate broad waiver authority to the President upon a broader national security finding communicated to Congress, these terrorism-related designations cannot be fully-waived away. Their rescission generally requires compliance with separate statutory frameworks that impose specific certification of factual findings and congressional notification requirements. See e.g., 22 U.S.C. § 2371(c) for SST rescission and 8 U.S.C. § 1189(a)(6) for FTO.
Finally, another potential roadblock for sanctions relief at the sole-discretion of President Trump is the Iran Nuclear Agreement Review Act of 2015 (“INARA”), which requires congressional review of certain Iran nuclear agreements and restricts the exercise of specified sanctions-relief authorities during the review period. As a result, even where existing sanctions-related legal authorities provide the President with substantial licensing, waiver, or recission authority, Congress could invoke INARA to create procedural and political obstacles for the President’s ambitions under the MOU.
In sum, the President has immense authority in providing the contemplated primary and secondary sanctions relief under Paragraph 7 of the MOU, by means of a combination of licenses, waivers, and even full revocation of the underlying legal authorities. However, anything close to comprehensive termination will likely require substantial reliance on statutory waiver authorities, congressional review mechanisms, and, in some cases, legislative action.
PARAGRAPH 9
“Pending the final deal, the United States of America and the Islamic Republic of Iran agree to maintain the status quo. The Islamic Republic of Iran will maintain the current status quo of its nuclear program and the United States of America will not impose any new sanctions and will not deploy additional forces in the region.“
What’s the Potential Relief?
The Trump Administration’s “maximum pressure” campaign against Iran has involved the aggressive deployment of sanctions, marked by a near-constant cadence of new designations targeting Iranian government actors, financial institutions, entities, vessels, and procurement networks. The sanctions relief contemplated here is for the United States to refrain from imposing new sanctions until negotiations under the MOU conclude, whether or not they result in a final deal.
The commitment not to impose new sanctions appears broader than merely refraining from new SDN designations and could also be interpreted as precluding the issuance of new sanctions authorities directed at Iran during the negotiation period.
What Legal Actions Would Be Required?
Even if the conduct of any individual or entity satisfies the relevant designation criteria of any statutes or Executive orders that comprise OFAC’s Iran and other relevant sanctions programs—e.g., material support to the IRGC under E.O. 13224, as amended—until a final deal is reached and/or the MOU negotiations end, no such designations are to be made. However, this does not necessarily mean that the Departments of Treasury and State will suspend investigations of potential sanctions targets during the negotiation period. Rather, Paragraph 9 appears directed at the imposition of new sanctions, not the underlying investigative or evidentiary work that may support future sanctions actions.
PARAGRAPH 10
“The United States of America undertakes that immediately upon the signing of this MoU and until the termination of sanctions, US Department of Treasury will issue waivers for the export of Iranian crude oil, petroleum products, and derivatives, and all associated services, including banking transactions, insurances, transportation, etc.“
What’s the Potential Relief?
OFAC has already taken steps toward implementing the relief contemplated by Paragraph 10 for existing Iran oil sanctions through the issuance of General License X. GL X authorizes certain categories of transactions that would otherwise be prohibited under numerous sanctions authorities where a U.S.-nexus is involved, that are ordinarily incident and necessary to the production, sale, delivery, or offloading of crude oil, petrochemical products, or petroleum products of Iranian origin, including where blocked vessels are involved, through August 21, 2026.
GL X provides its own interpretation as to transactions that would be considered “…ordinarily incident and necessary to…” It also further clarifies that:
- The authorized transactions include the importation into the United States of crude oil, petrochemical products, and petroleum products of Iranian origin, where such importation is ordinarily incident and necessary to the sale, delivery, or offloading of such commodities.
- Any payment of funds owed to Iran, the Government of Iran, or any relevant blocked person for the purchased of such commodities of Iranian origin may also be made in U.S. dollar-denominated funds.
What Legal Actions Would Be Required?
By itself, GL solves primary sanctions issues contemplated by Paragraph 10 for Iran oil sanctions, but it should not be confused with the elimination of secondary sanctions risk. Although GL X provides authorization for the specified scope of transactions that would otherwise be prohibited where a U.S.-nexus is involved, the Trump Administration will need to do more to provide sufficient comfort for foreign parties seeking to engage in such transactions where no U.S.-nexus is involved. If it hasn’t already, this includes the issuance of waivers under various statutes (e.g., IFCA requires sanctions with respect to Iran’s energy and shipping sectors)—noting that Paragraph 10 only refers to the issuance of “waivers,” not licenses—and relevant public guidance.
OFAC has historically noted in its FAQs that subject to sanctions program-specific considerations, non-U.S. persons do not generally risk being sanctioned for engaging in or facilitating transactions for which a U.S. person would not require a specific license. GL X covers numerous programs, so a relevant FAQ that clarifies non-U.S. persons sanctions risks for all of them in the context of GL X is arguably necessary.
Additional OFAC guidance, including FAQs, may be necessary to clarify the scope of GL X for concerned parties. For example, in its current format, it remains unclear if the import into the United States of the covered commodities is authorized outright, or only where it is necessary to their sale, delivery, or offloading to another ultimate destination. Also, while GL X appears to address the involvement of U.S. intermediary financial institutions in processing underlying payments by indicating that payments may be made in U.S. dollar-denominated funds, relevant financial institutions may require more such specificity.
Finally, as the IRGC may be directly or indirectly involved in many such transactions authorized by GL X, the separate legal risks under U.S. law, including terrorism-related civil liability, judgment-enforcement, and criminal statutes remain. There is little the President could do on his own to address these risks.
PARAGRAPH 11
“The United States of America undertakes to make fully available for use the frozen or restricted funds and assets of the Islamic Republic of Iran. Upon the implementation of this MoU, the United States of America and the Islamic Republic of Iran will mutually agree on the procedures related to the release of these funds during the negotiation. Such funds, whether retained in the original account or transferred, shall be made fully usable for payment to any ultimate beneficiary designated by the Central Bank of the Islamic Republic of Iran. The United States of America undertakes to issue all necessary licenses and authorizations accordingly.“
What’s the Potential Relief?
The scope of Paragraph 11 depends almost entirely on what the parties mean by “frozen or restricted funds and assets.” Is the phrase limited to funds and assets that have been blocked and reported to OFAC because they are the property interests of the government of the Islamic Republic or other Iran-related parties, and/or does the phrase also include funds and assets that foreign parties have withheld because of their fear of so-called U.S. secondary sanctions authorities targeting Iran and its government? Once this is settled during the course of the negotiations, the U.S. government will have to determine how such funds and assets may be legally returned to the Iranian government unencumbered.
What Legal Actions Would Be Required?
Where the identified category of funds or assets are legally blocked because they are in the possession or control of U.S. persons, OFAC will need to issue license authorization—in the form of general and/or specific licenses—for their unblocking. Since the MOU contemplates not just their return to the Iranian government, but also to any ultimate beneficiary designated by the Central Bank of Iran, the licenses would likely need to expressly authorize such activity within their scope. This would include providing relevant authorizations for dealings with the Central Bank of Iran, since it is designated under a variety of sanctions authorities.
To the extent that such funds or assets also include those that aren’t necessarily blocked pursuant to OFAC’s sanctions programs, but because foreign parties and financial institutions have held onto them out of fear of secondary sanctions concerns or triggering primary sanctions authorities where a U.S.-nexus may be present, as discussed in relation to Paragraph 6 of the MOU, the Trump Administration will need to issue relevant statutory waivers and comfort letters, interpretive guidance, or similar assurances.
In short, the legal actions required for providing the relief contemplated by Paragraph 11 are very similar to hose contemplate by Paragraph 6 of the MOU.
Conclusion
The sanctions-related provisions of the MOU range from targeted transactional relief to the potential termination of broad categories of U.S. sanctions against Iran. However, the MOU itself does not change existing U.S. sanctions obligations. Any sanctions relief will require implementation through licenses, waivers, regulatory amendments, designation changes, Executive Orders, and, in some cases, congressional involvement.
While the legal and political obstacles to implementing such relief are substantial, the Trump Administration will not be operating in uncharted territory. The Obama Administration confronted many of the same challenges during implementation of the JCPOA, providing a practical roadmap for how the Administration may seek to translate the MOU’s political commitments into legally effective sanctions relief.
The author of this blog post is Kian Meshkat, an attorney specializing in U.S. economic sanctions and export controls matters. If you have any questions, please contact him at meshkat@meshkatlaw.com.