Ramifications of EU Sanctions Against Iran

The international law firm Clyde & Co has outlined the ramifications of the new tough EU sanctions for energy, insurance, transport and financial sectors. Their overview was appeared on Wednesday’s issue of the International Freighting Weekly (ifw). The highlights are as follows:

Insurance: It is prohibited to provide insurance or reinsurance to the government of Iran, any entities incorporated in Iran or subject to its jurisdiction, or to any entities acting on behalf of or controlled by Iranian entities. The sole exception to this ban is the provision of health and travel insurance to individuals.

Energy: The sale, supply or transfer of equipment and technology to Iran for the following key sectors is prohibited: refining, production and exploration of oil and gas, and liquefied natural gas. The provision of technical assistance or training, or financing or financial assistance in respect of the above items or any technical assistance or training is prohibited. Providing finance extends to the granting of any loan or credit to the Iranian oil sector, the acquisition or extension of participation in enterprises engaged in the Iranian oil sector (including the acquisition of participating shares or securities), and the creation of any joint venture in the Iranian oil sector are also prohibited.

Finance: Grants, financial assistance and concessional loans to the government of Iran, with the exception of humanitarian, developmental and agricultural purposes, are prohibited. This includes the Iranian government's participation in international financial institutions. Member states of the EU will exercise enhanced monitoring over activities of specific financial institutions within their jurisdiction, including banks domiciled in Iran (and particularly the Central Bank of Iran) and their EU and non-EU based branches and subsidiaries, and also over financial entities that are not domiciled in Iran but are controlled by entities domiciled in Iran. The opening of new branches, subsidiaries or representative offices of Iranian banks in the EU, and the establishment by them of new joint ventures, ownership interests or correspondent-banking relationships is prohibited.

Capital: It is prohibited to participate in the direct or indirect sale or purchase of public or public-guaranteed bonds issued by the government of Iran, the Central Bank of Iran or any banks domiciled in Iran (including their EU-based branches or subsidiaries), including providing brokering or assistance in respect of the sale or purchase of these bonds.

Fund Transfer: Funds being transferred to or from Iran are subject to new reporting requirements: 


- Transfers of funds for foodstuffs, healthcare or humanitarian purposes may be carried out without prior authorization, but transfers above €10,000 must be notified to the relevant competent authority of the member state.

- Any other transfer under €40,000 may be carried out without prior authorization, but must be notified to the relevant competent authority if above €10,000; 


- All transfers above €40,000 must be authorized prior to the transfer by the relevant competent authority.

- Member States are required to inform other Member States of any rejected authorizations.

Cargo Inspection: All goods from/to a member state to/from Iran are now required to have additional pre-arrival or pre-departure information. All member states are required to inspect all cargo, air and sea, to and from Iran if they have reasonable grounds to believe that the cargo contains items, the sale, supply, transfer or export of which is prohibited under these sanctions. Member states may request inspections on the high seas, with the consent of the flag state. Member states are required to co-operate with inspection requests by other member states. 
Any prohibited items will be seized and disposed of by the member states, and the costs of this disposal are to be met by the exporter/importer, or any other person responsible for the attempted supply, sale or transfer.

Transport:

- Sea: The provision of bunkering or ship supply services, or servicing of vessels by nationals of member states to Iranian-owned or contracted vessels, including chartered vessels, is prohibited if that national has reasonable grounds to believe that the vessel carries items prohibited under the sanctions, with the exception of services necessary for humanitarian purposes or if the cargo has been inspected, and if necessary, seized and disposed of. 



- Air: 
Member states are to take all necessary measures to prevent access to airports under their jurisdiction by cargo flights operated by Iranian carriers or originating from Iran, with the exception of mixed cargo and passenger flights. The provision of engineering and maintenance services to Iranian cargo aircraft shall be prohibited if there are reasonable grounds to believe that the cargo aircraft carries items prohibited under the sanctions, with the exception of services necessary for safety or humanitarian purposes, or if the cargo has been inspected, and if necessary, seized and disposed of.

Technical Assistance: It is prohibited to provide technical assistance, training, investment services, brokering services, financing or financial assistance (including grants, loans and export credit insurance) in respect of the provision of nuclear-related technology to Iran.

Export/Import: The sanctions prohibit the sale, transfer or supply to Iran of goods or technology which could contribute to enrichment-related, reprocessing or heavy water-related activities, or to the development of nuclear weapons systems. The export to Iran of dual-use goods and technology is also prohibited. The ban also covers arms and all other related material. The ban will not apply if the items are for food, agricultural, medical or other humanitarian purposes.

Asset Freeze: The assets of those persons listed in Annex I to the Council Decision appended to the sanctions are frozen, as well as the assets of those persons engaged in, directly associated with or providing support for Iran's development of nuclear weapon delivery systems. Entities present on the list of freezing orders now include subsidiaries of the Islamic Republic of Iran Shipping Lines (IRISL) including Irano Hind Shipping Company, IRISL Benelux NV and South Shipping Line Iran.

Travel and Educational Bans: 
Travel to and from member states by designated persons, listed in Annex I to the Council Decision, is prohibited. This list will updated as and when new persons are designated by the UN and other bodies. 
Member states must also take measures to prevent the specialized teaching or training within their territories or by their nationals of Iranian nationals in disciplines which might contribute to Iran's development of nuclear weapons.

Start Date: The sanctions went into effect on 26 July 2010. The prohibitions do not apply to the execution of any obligation relating to the delivery of goods under contracts concluded prior to that date.

US Sanctions: The United States sanctions regime against Iran remains unchanged: Prohibitions on US persons from exporting, re-exporting, selling or supplying goods and technology to Iran, participating in any transactions including transportation, financing or brokering transactions, and the servicing of accounts of certain Iranian banks. Prohibitions on US persons trading in Iranian oil or refined petroleum products, or supplying goods or technology which would benefit the Iranian oil industry. The enabling act passed on 1 July 2010 amends the Iran Sanctions Act of 1996, and prohibits the provision of refined petroleum or support related to the production of refined petroleum to Iran. It includes in its definition of “person” financial institutions, insurers, underwriters, guarantors and any other business organization including foreign subsidiaries, parents or affiliates.