Sanctions - Iran

European Union

The majority of EU sanctions against Iran as set out in Regulation 267/2012 and subsequent amendments have been lifted. Further details can be found in Regulation 2015/1861 and the EU has also produced an Information Note which includes some FAQs. Members are strongly advised to consider these in detail if considering trading to Iran.

Activities which are now permissible and of particular interest to the Club and its Members include:

• Transportation of Iranian crude, petroleum products, petrochemicals and natural gas
• Supply and carriage of certain equipment for the oil and gas industry and naval equipment
• Provision of insurance services to Iranian persons
• Provision of bunkering, ship supply and other services relating to Iranian-controlled tonnage
• Supply of oil transport and storage vessels to Iranian persons
• Transferring funds to and from Iran
• Sale, supply, transfer or export of certain graphite and raw or semi-finished metals*

_{*NB: as per Article 15a of Regulation 2015/1861 prior authorisation from the relevant Competent Authority is required for the "sale, supply, transfer or export" and related services including transport for the materials listed in Annex VIIB of that Regulation. A copy of the list can be found here Appendix VIIB for ease of reference. For shipments originating in the EU it is the cargo shipper who must obtain the authorisation (the carrier does not need to seek additional authorisation). For shipments from outside the EU, where the carrier is subject to EU sanctions (see below) then that carrier must obtain authorisation to carry the goods, but where such shipments are carried by non-EU vessels no authorisation is required.}

A total embargo remains in place against the supply to Iran of arms as listed in the EU's Common Military List, missile technology, equipment which might be used for internal repression and equipment for monitoring telecommunications.

Prior authorisation from the relevant Competent Authority is required for the supply to Iran of certain nuclear materials, some dual-use goods and technology which could contribute to enrichment activities, enterprise resource planning software for use in the nuclear and military sectors, and certain graphite and raw or semi-finished metals (as noted above).

Although numerous individuals and entities have been removed from the EU's asset-freeze list (including many of the major Iranian oil and gas companies and banks) some remain on that list. It remains prohibited to make funds or economic resources available to those parties. Please see the important section on SDNs below.

EU sanctions apply in the following circumstances:　

(a) within the territory of the Union, including its airspace;

(b) on board any aircraft or any vessel under the jurisdiction of a Member State;

(c) to any person inside or outside the territory of the Union who is a national of a Member State;

(d) to any legal person, entity or body, inside or outside the territory of the Union, which is incorporated or constituted under the law of a Member State;

(e) to any legal person, entity or body in respect of any business done in whole or in part within the Union.

In an effort to breath life into the JCPOA, the EU implemented Regulation 1100/2018 in August 2018 which extended the applicability of a previous so-called Blocking Regulation 2271/1996 to now include Iran. This has the effect of requiring all EU entities not to comply with US secondary sanctions. This potentially places shipowners and insurers in an obvious dilemma and the Regulation allows for an EU entity which believes that compliance with the Blocking Regulation will seriously damage their interests to apply to for an exemption from the Regualtion under Article 5. Full details, including the text of the Regulations and guidance notes issued by the EU, can be found in Notice to Members No.7 2018/2019, which EU Members looking to trade to Iran are advised to read.

United States

Following Implementation Day the US lifted nuclear-related secondary sanctions against Iran. These permitted non-US persons to undertake trade with Iran. As noted above, however, President Trump announced on 8 May 2018 that the United States would unilaterally withdraw from the JCPOA and that secondary sanctions were to be reimposed. The Club issued New Items concerning the announcement on 9 May and 15 May 2018 and the Club’s U.S. attorneys Freehill Hogan & Mahar have provided guidance in a Client Alert, all of which Members are strongly advised to read.

A set of initial FAQs were issued by OFAC in the immediate aftermath of President Trump’s announcement and a copy of which can be found here Frequently Asked Questions. President Trump then issued an Executive Order on 6 August 2018 which essentially re-imposed the secondary sanctions against Iran which were contained in the Executive Orders revoked when the JCPOA was implemented in January 2016. A copy of that Executive order can be found here Reimposing Iran Sanctions and updated FAQs found below. A News Item was published by the Club on 7 August 2018 and Freehill Hogan & Mahar also published a further Client Alert.

Sanctions were consequently reimposed against the following as of 6 August 2018:

• The purchase or acquisition of U.S. dollar banknotes by the Government of Iran
• Iran’s trade in gold or precious metals
• The direct or indirect sale, supply, or transfer to or from Iran of graphite, raw, or semi-finished metals such as aluminium and steel, coal, and software for integrating industrial processes
• Significant transactions related to the purchase or sale of Iranian rials, or the maintenance of significant funds or accounts outside the territory of Iran denominated in the Iranian rial
• The purchase, subscription to, or facilitation of the issuance of Iranian sovereign debt, and
• Transactions with Iran’s automotive sector

However, the carriage to or from Iran of graphite, raw, or semi-finished metals such as aluminium and steel, coal, and software for integrating industrial processes was permissible prior to 8 May 2019 if:

• The cargo is not subject of a medium for barter, swap, or any other exchange or transaction.
• it is not listed as an asset of the Government for purposes of the national balance sheet.
• The cargo is not to be used in connection with the energy, shipping, or shipbuilding sectors of Iran or any sector of the Iranian economy determined to be controlled directly or indirectly by Iran’s Revolutionary Guard Corps; or if the material is resold, retransferred, or otherwise supplied to an end-user in one of these sectors.
• The cargo is not sold, supplied or transferred to or from a person/entity on the SDN list, or resold, retransferred, or otherwise supplied to such a person.
• The cargo is not determined to be used in connection with the nuclear, military or ballistic missile programs of Iran, or resold, retransferred or otherwise supplied for one of these programs.

But by an Executive Order dated 8 May 2019 President Trump extended Iran secondary sanctions to encompass the iron, steel, aluminium and copper sectors of the Iranian economy and which effectively prohibits, inter alia, a "significant" transaction for:

• The sale, supply, or transfer to Iran of significant goods or services used in connection with the iron, steel, aluminium, or copper sectors of Iran, and
• The purchase, acquisition, sale, transport, or marketing of iron, iron products, aluminium, aluminium products, steel, steel products, copper, or copper products from Iran.

Details can be found in our News item of 9 May 2019 and which includes a Client Alert on this topic from Freehill Hogan & Mahar.

These prohibitions had been subject to a wind-down period of 90 days for contracts concluded prior to 8 May but this grace period ended on 6 August 2019. For details please see our News Item of 12 August 2019.

In further FAQs (available here) OFAC have confirmed that the Executive Order includes a prohibition on the carriage of iron ore and similar commodities. They also sought to clarify the factors which OFAC will take into consideration when deciding whether any transaction is significant. Like previous such explanations however this does not provide any firm guidance on exactly what is significant or not and each case will continue to be judged on its own merits by taking a number of factors into account.

Sanctions were also reimposed against the following as of 5 November 2018:

• Iran’s port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines (IRISL), South Shipping Line Iran, or their affiliates;
• Petroleum-related transactions with, among others, the National Iranian Oil Company (NIOC), Naftiran Intertrade Company (NICO), and National Iranian Tanker Company (NITC), including the purchase of petroleum, petroleum products, or petrochemical products from Iran;
• Transactions by foreign financial institutions with the Central Bank of Iran and designated Iranian financial institutions under Section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (NDAA);
• The provision of specialized financial messaging services to the Central Bank of Iran and Iranian financial institutions described in Section 104(c)(2)(E)(ii) of the Comprehensive Iran Sanctions and Divestment Act of 2010 (CISADA);
• The provision of underwriting services, insurance, or reinsurance; and
• Iran’s energy sector.

If Members are continuing to trade with Iran with cargoes which are not currently subject to sanctions (such as food, agricultural commodities, medicines and humanitarian goods), they are reminded that it is prohibited for non-US persons to deal with any entity which remains on the US list of Specially Designated Nationals (please see below) and to engage in conduct that seeks to evade continuing US sanctions.

Members should also note that the continuing US primary sanctions not only prevent US-owned or controlled tonnage from trading to Iran and US-based insurers and reinsurers from involvement in claims concerning Iran or Iranian entities (see the "Club Cover" section below), importantly it also prevents US banks from handling any financial transaction which involves Iran. Any trade to or from Iran or which involves Iranian entities must consequently be structured so that all transactions are made in a currency other than US Dollars. Endeavouring to mask the fact that a payment in US Dollars is linked with an Iranian transaction in an effort to induce a US bank into handling the transaction will be a breach of sanctions.