Risks from US sanctions on investment in Iran

In a Belt and Road project recently handled by the authors, the Iranian geopolitical environment and foreign investment environment were found to be very complex, making foreign investment quite risky. According to statistics, close to 100 Chinese enterprises are presently active in numerous sectors in Iran, including infrastructure, energy, electric power, chemicals, telecommunications, automotive manufacturing, etc. Instances where projects are affected by factors relating to the sanctions on Iran frequently arise. There additionally are projects that are not Iran projects per se, but because they involve such factors as Iranian shareholders, due diligence relating to US sanctions on Iran must be added.

On 8 May 2018, US president Trump announced that the US was withdrawing from the Joint Comprehensive Plan of Action (JCPOA). Pursuant to the president’s order, in different industries and sectors, sanctions on Iran will fully resume after a transition period of 90 or 180 days. Although the UK, France, Germany, China, Russia and the European Union have not followed the US in withdrawing from the JCPOA, due to the US’s massive influence on the international economic and financial systems, the uncertainty in Iran’s foreign investment environment has clearly increased.

The US’s sanctions on Iran may be divided into two types, direct jurisdiction and indirect jurisdiction.

Wang Jihong is a partner and Sun Lifeng is an associate at Zhong Lun Law Firm