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Washington — Companies that sign contracts with Iran after the nuclear deal is implemented would not be "grandfathered in" automatically and would have to wind down their work there if the US snap backs sanctions on Tehran, according analysts and persons familiar with the Obama administration's plans to enforce the pact.

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To allow the contracts to continue would undermine the credibility of any snap-back, sources close to the negotiations, who spoke on condition of anonymity, said in interviews.

Under the deal announced July 14, the US, EU and UN have agreed to begin phasing out their sanctions on Iran's oil sector once it meets certain conditions of the nuclear pact, though they have reserved the right to snap back, or reapply, sanctions if they determine Iran is not complying with any aspect of the deal.

But critics have pointed to language in the deal that they said appeared to grandfather in contracts signed between the lifting of sanctions and the snap back of sanctions.

The agreement says that snap-back sanctions "would not apply with retroactive effect to contracts signed between any party and Iran or Iranian individuals and entities."

"The way we read it, those contracts are grandfathered," Senator Bob Corker, a Tennessee Republican who chairs the Senate Foreign Relations Committee, said at a hearing last week. "You can continue to do business under those contracts even if sanctions are put in place after. We asked the White House for red lines, and we didn't get that."

But US negotiators have made clear to other parties in the P5+1 discussions with Iran that no blanket exemption or grandfather clause would be allowed for contracts in a snap-back scenario, sources said.

Rather, the language in the resolution merely affirms that sanctions would not be applied retroactively to legitimate business conducted under those contracts signed before a snap-back occurs, sources said.

Michael Cohen, an analyst with Barclays, said that practice is consistent with previous sanctions regimes.

For instance, none of the contracts signed before the US imposed Iranian sanctions on financial institutions in 2010 were grandfathered in, he said, aside from a few specific exemptions, such as a waiver for gas production the North Sea Rhum field, jointly owned by BP and National Iranian Oil Company.

"The point is that snap-back should cause companies ... to be very cautious," he said.

For now, oil companies have said they are taking a wait-and-see approach to Iran, which is gearing up to invite upstream bids on tens of billions of dollars worth in projects once sanctions are lifted under the nuclear pact.

ExxonMobil Senior Vice President Jeff Woodbury said on an earnings call Friday that the company will "continue to monitor the circumstance" in Iran, while stressing that it would "remain in full compliance with existing sanctions."

In Russia, ExxonMobil last fall had to wind down its exploratory drilling program in the Kara Sea, a joint venture with state-owned Rosneft, after the US imposed sanctions prohibiting western firms from providing assistance to Russia on Arctic, deepwater and shale projects.

Though the US sanctions required all such activities to cease by September 26, ExxonMobil was granted a waiver to wind down its Kara Sea drilling by October 10, due to the difficulties capping a partially completed deep-sea well would have presented.

Liz Rosenberg, a former senior adviser at the Treasury Department in the Obama administration, companies in Iran would likely be given similar wind-down periods in the event of a snap back.

US and EU negotiators have said they will not grandfather all Iran contracts on a blanket basis, she added.

"Contrary to a lot of the rumors out there, the agreement does not say that their project will be grandfathered in and allowed to go forward if sanctions are re-imposed," said Rosenberg, now a senior fellow at the Center for a New American Security. "That will be a decision of sitting policymakers when sanctions are re-imposed."

--Herman Wang,
--Edited by Derek Sands,