Implementation Day, with the heralded lifting of US and EU sanctions on Iran's oil sector under the Joint Comprehensive Plan of Action, may soon be around the corner.
But even as western oil companies have beat a steady path to Tehran over the past year in anticipation of the country opening up, confusion still reigns over what activities will be permissible for those looking to do business in Iran.
After all, only the nuclear-related sanctions on Iran's oil sector imposed in the last few years will be lifted, assuming Iran complies with the provisions of the JCPOA.
All other Iran sanctions -- including those imposed for Iran's support for terrorist groups and violations of human rights -- will remain in place.
This includes a US trade embargo that is becoming a source of friction for many American companies.
While the lifting of EU sanctions on Implementation Day will allow all European companies carte blanche to enter Iran, American companies, including the likes of ExxonMobil and Chevron, will be left on the sidelines due to the US trade embargo that bars US entities from transacting with Iran.
This has led to griping at the US government for creating an uneven playing field that disadvantages US companies.
"Most companies I speak with in the United States are shocked to learn that they will continue to be prohibited from doing business with Iran while their counterparts in Europe and Asia are currently sending business envoys to Tehran," said Kaveh Miremadi, a Washington-based sanctions lawyer for Price Benowitz. "They see it as fundamentally unfair, which I believe contributes to their overall confusion about the JCPOA's sanctions relief."
Kent Robinson, a spokesman for Chevron, said his company is taking great pains to ensure it remains in compliance with all US sanctions regulations.
"Like others in the industry, we are awaiting clarification from the US government on the specifics of the Joint Comprehensive Plan of Action to fully understand its implications," Robinson said. "We remain in full and strict compliance with existing US and international laws and regulatory frameworks that govern commercial activity with Iran."
ExxonMobil did not respond to a request for comment. The company has experience navigating US sanctions, having had to suspend a joint drilling operation with Russian state oil company Rosneft in the Arctic last year after the US imposed sanctions on Moscow over the Ukrainian crisis.
US TECHNOLOGY RESTRICTIONS
The US trade embargo may also be tricky for foreign companies to deal with.
For the oil and gas sector, it includes restrictions on US upstream and downstream technologies that could be used in Iran.
A company that wished to contract a drilling rig and take it into Iranian territory, for example, would need to make sure that the rig is compliant with US export control laws, which require a specific license for use of US technology in Iran, according to Anthony Patten, a Singapore-based lawyer who deals with sanctions compliance for US-based law firm Shearman & Sterling.
"Generally speaking, oil and gas deals are engineering based," he said. "You have to look at your deal and how much of it involves US content. It's really difficult. How many US components go into an oil rig? Or if you build an LNG plant, how much of it is a US design or patent?"
"Even if you're a non-US company that in principle can do business in Iran, structuring your deal in a way that complies with US export restrictions is still challenging," he added.
Further complicating matters is that transactions involving the US dollar, which transits US banks, would be prohibited under the US sanctions regime that will remain in place, even if conducted by a foreign company that is not explicitly barred by the US trade embargo.
"Obviously a lot of transactions touch the US banking system in some way," Patton said. "The US financial system block makes a lot of banks -- English banks, European banks -- still pretty wary. If they look into things carefully, they probably could still do business, but there's a risk you might inadvertently breach something and the US government has been tough on banks that have fallen afoul of sanctions."
In addition, the Iranian Revolutionary Guard Corps, the IRGC Quds Force and key Iranian defense organizations will still be listed under US sanctions, and given how much of the Iranian economy their subsidiaries are involved in, companies will have to take care not to get entangled in the US sanctions regime.
In all, more than 200 Iran-linked firms and individuals will still be subject to US sanctions, according to US officials.
Obama administration officials have acknowledged the confusion surrounding Implementation Day and have warned companies to tread carefully.
Adam Szubin, the US Treasury's top sanctions official, has said that the administration would in the coming weeks issue guidance documents that would help provide clarity to companies wishing to invest in Iran.
In the meantime, he said his department, Treasury's Office of Foreign Assets Control, is available to clarify any questions.
"The US will not stand in the way of business activities in Iran that are consistent with the JCPOA," Szubin said at a recent Atlantic Council forum in Washington. "It does mean, though, that companies going into Iran need to take care. They need to conduct the due diligence necessary to ensure that their Iranian counterparts are not affiliated with designated individuals or organizations."
'TESTING THE WATERS'
With Iranian officials saying the country would be able to complete all the key steps that would pave the way to Implementation Day by late January, sanctions experts and consultants say additional guidance from Treasury is sorely needed.
Miremadi said one particular area Treasury needs to clarify is how foreign subsidiaries of US companies will be allowed to engage in certain activities in Iran. Specifically, the JCPOA includes a provision that states OFAC will authorize foreign entities owned or controlled by US persons to engage in transactions with Iran.
But Miremadi said the scope of such authorizations has yet to be outlined by Treasury.
"OFAC has stated several times that guidance on this issue (and possibly the issuance of several general licenses) are forthcoming," he said. "Without any actual text to work with, US companies are confused about the level of engagement their foreign subsidiaries, partners, or affiliates will be able to have with Iran and whether their US person-employees will be allowed to take part in such transactions with Iran."
Given the confusion, as well as the reputational risk associated with doing business in Iran, he said many potential players may choose not to engage with Iran until many of the regulatory issues involving sanctions are addressed.
Other experts agree. Elizabeth Rosenberg, director of the energy, economics and security program at the Center for a New American Security, said US officials are under tremendous domestic pressure not to appear soft on Iran.
Many members of Congress have been critical of the nuclear deal, saying it fails to completely denuclearize Iran, and Republican presidential candidates have threatened to undo the deal if they win the White House in the November presidential election.
Because of this, Rosenberg said she expects companies to be cautious about entering Iran and that there will be a period of "testing the waters" to see how US officials respond.
"Because of the careful political balancing that the US political and regulatory officials will have to do, they will be in a position to try and lean hard into enforcement actions into Iran and companies pursuing new business opportunities in Iran," she said at the Atlantic Council event. "It will be difficult for companies."
