OFAC Revokes Iran General License X: a Stark Reminder That Evolving Sanctions Require Continuous Vigilance

What to Know On July 7, 2026, the US Department of Treasury’s Office of Foreign Assets Control (OFAC) issued General License X1 (GL X1), immediately revoking General License X (GL X), which had, for the first time since the 1970’s, broadly authorized transactions involving Iranian crude oil, petroleum products and petrochemical products. GL X1 replaced GL X with a narrow wind-down authorization through July 17, 2026. GL X1 prohibits all new transactions involving Iranian crude oil, petroleum products or petrochemical products after July 7, 2026, absent a specific license from OFAC, except as “ordinarily incident and necessary” to effectuate wind down. Companies that relied on GL X should immediately assess any pending transactions, contractual commitments, cargoes in transit and payment obligations to determine whether they qualify for the wind-down authorization. A Lesson in Sanctions Volatility Sanctions have become a critical foreign policy tool for the United States as the government seeks to incentivize, reward and punish actors on the international stage. One of the chief benefits of this tool is the speed with which they can be imposed or revoked, and the Trump administration’s use of sanctions in its negotiations to end the Iran war is a prime example. Barely two weeks after issuing one of the most significant sanctions authorizations in decades to further those negotiations, OFAC has reversed course to punish Iran for continued hostilities. As Bracewell discussed in its breaking alert on GL X, when OFAC issued the license on June 22, 2026, it temporarily authorized broad commercial activity involving Iranian-origin crude oil, petrochemical products and petroleum products — including production, transportation, insurance, shipping, payment in US dollars and even importation into the United States — as part of the implementation of the June 17 US-Iran memorandum of understanding, the framework intended to end the conflict between the United States and Iran. At the time, we noted that GL X represented a dramatic departure from longstanding US sanctions policy and companies should exercise caution given the temporary nature of the authorization and the volatility of the underlying negotiations. That warning has proven well-founded. Following attacks by Iran’s Islamic Revolutionary Guard Corps (IRGC) on commercial tankers in the Strait of Hormuz and subsequent US retaliatory strikes, OFAC issued GL X1, revoking GL X in its entirety effective July 7, 2026, and providing a limited ten-day wind-down authorization. What GL X1 Authorizes GL X1 authorizes only transactions that are ordinarily incident and necessary to wind down activities previously authorized under GL X, through 12:01 a.m. EDT on July 17, 2026; it “does not authorize any new transactions.” GL X1 also materially changes the treatment of payments. Whereas GL X permitted payments owed to Iran or blocked persons to be made in US dollars, GL X1 requires that payments owed to blocked persons be deposited into blocked interest-bearing accounts located in the United States. Practical Implications The speed of this policy reversal underscores a recurring compliance challenge in sanctions practice: because governments use sanctions to respond to rapidly evolving geopolitical and national security developments, license authorizations can be taken away just as quickly as they are given. Here, businesses that spent the past two weeks evaluating or entering the Iranian energy market now have only a brief period to determine whether their GL X transactions qualify for wind-down treatment, suspend forward-looking commercial activity absent a specific license from OFAC, and assess contractual obligations, shipping logistics, payment mechanisms and insurance arrangements. These exercises are costly in both time and resources and create new areas of compliance risk. This practical lesson extends beyond this particular license. Companies justifiably want to take advantage of new regulatory authorizations and get in early on new opportunities. At the same time, they must temper this ambition when the opportunities depend on authorizations that are tied to evolving diplomatic negotiations, especially those with historically hostile countries. The Criminal and Civil Landscape Remains Complex Although OFAC may authorize or waive certain sanctions restrictions under the International Emergency Economic Powers Act, other legal authorities may continue to prohibit OFAC-licensed activity. For example, the IRGC remains designated as a Foreign Terrorist Organization (FTO), and the federal prohibition on providing material support to an FTO under 18 U.S.C. § 2339B is not suspended by OFAC authorizations. Relatedly, Section 105 of the Countering America’s Adversaries Through Sanctions Act mandates the IRGC’s FTO designation absent congressional action. While the interaction between these authorities and the now-revoked authorization was never fully tested, the episode illustrates why companies should avoid assuming that an OFAC authorization alone resolves the full spectrum of legal risk associated with transactions involving a sanctioned entity. Depending on the counterparties or facts involved, companies also may need to consider terrorism-related criminal statutes and the potential for civil litigation under 18 U.S.C. §§ 2331–39, the Anti-Terrorism Act, which enables Americans who are injured or whose property is damaged by acts of international terrorism to sue the perpetrators in US federal courts. Looking Forward In the immediate term, any entities that availed themselves of GL X must reassess their transactions and applicability of GL X1, and wind down their transactions appropriately. While OFAC has authority to issue specific licenses for Iran-related transactions on a case-by-case basis, companies should not assume such licenses will be granted. Rather, they should seek legal advice in concurrently requesting a license and preparing to comply with the general revocation. In the medium and long term, companies should anticipate continued regulatory uncertainty with Iran and seek legal advice before taking action in this space. Bracewell’s sanctions team continues to monitor developments and is available to assist companies in evaluating the impact of GL X1, winding down authorized activities pursuant to GL X1 and navigating the rapidly evolving Iran sanctions landscape.