Articles Posted in Iran Sanctions

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There has been much discussion of U.S. and EU sanctions changes following Implementation Day under the Joint Comprehensive Plan of Action (“JCPOA”), but a number of countries had imposed sanctions for Iran and it is worth examining how other key markets are adjusting policy. In particular, Canada and Australia recently implemented amendments to their sanctions regimes pertaining to Iran.

Canada

Canada had maintained a broad and complex sanctions regime for Iran, as described below. Following the arrival of Implementation Day, Canada took action on February 5, 2016 to remove many of these sanctions, opening a wide variety of permitted economic activity.  The sanctions and export controls still in place include:

  • A reduced, but still substantial list of designated parties subject to asset freezes.
  • Export controls on dual-use and certain other strategic goods and technology. Applications for export permits will be considered on a case-by-case basis, but exports of more sensitive items normally will be denied.
  • Prohibition on trade in arms and related material as well as the export of goods, items, material and technology related to uranium enrichment.
  • The provision of property, technical or financial assistance and services to Iranian persons for the supply sale, transfer, manufacture or use of products whose export is prohibited.

These rules apply to persons in Canada and Canadian citizens and corporations wherever situated.

Canada’s sanctions regime has been imposed under the United Nations Act implemented by the Regulations Implementing the United Nations Resolutions on Iran (“UN Regulations”) and the Special Economic Measures Act, implemented by the Special Economic Measures (Iran) Regulations (“SEMA Regulations”).  With the reforms of February 5, 2016, the following key restrictions have been removed:

  • Prohibitions against engaging in and financing the Iranian oil and gas sector or providing services to Iranian vessels.
  • Prohibitions against engaging with the Iranian financial sector including the prohibition on opening of correspondent banking accounts in Canada.
  • The blanket prohibition on exports to Iran and imports from Iran expect for sensitive items discussed above.
  • The prohibition on making investments in Iranian entities.

Australia

Like Canada, Australia had maintained a complex sanctions regime for Iran. Australia’s Department of Foreign Affairs and Trade (DFAT) has announced that it will implement plans to lift nuclear-related economic and financial sanctions by making changes to the Charter of the United Nations (Sanctions-Iran) Regulations 2008 and suspending certain provisions of the Autonomous Sanctions Regulations 2011.  Australian law will generally permit business with Iran with the following continuing limitations:

  • There will be a reduced, but still substantial list of designated parties subject to asset freezes.
  • Australia will continue to maintain anti-money laundering controls for Iran. Under the Anti-Money Laundering and Counter-Terrorism Financing (Iran Countermeasures) Regulations 2014, Australian financial institutions are prohibited from providing certain designated services to Iranian persons and entities for transactions exceeding AUD 20,000 unless exempted by the DFAT.
  • Restrictions on export to Iran of arms and related material, including some dual use goods, remains in place.

Australia’s revised rules with respect to Iran will no longer prohibit:

  • Exports, including – equipment and technology for the oil, gas and petrochemical industry; vessels for transport and storage of oil and gas; gold, diamonds and precious metals; newly issued Iranian bank notes; and certain naval equipment and technology.
  • Imports, including – crude oil, petroleum, petrochemical and natural gas products; and gold, diamonds and precious metals from the Government of Iran.
  • Provision of technical advice or financial assistance and service for the export of certain goods such as oil and gas, naval equipment or gold, diamonds and precious metals.
  • Investment in Iranian companies in the oil, gas and petrochemical sector. Likewise, Iranian entities will be able to invest in Australia’s oil, gas and financial services sector including the establishment of representative offices, subsidiaries and correspondent banking relationships with Australian financial institutions.

Continued monitoring of legal risk

The amendments to the Australian and Canadian sanctions regimes, and continuing sanctions, should be considerations for businesses and banks with exposure to Iran-related transactions or Iranian customers.

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With “Implementation Day” came the lifting of certain key U.S. and EU sanctions on the civil aviation industry. However, many prohibitions still remain, and licensing requirements may attach to U.S. persons or non-U.S. persons who seek to do business in Iran or operate airline services to/from Iran. Companies must continue to navigate this complex sanctions framework if seeking to engage in Iran’s aviation sector.

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With the arrival of “Implementation Day” on January 16, 2016, the EU has lifted all economic and financial sanctions related to the Iranian nuclear program. Some European non-nuclear sanctions on Iran, however, still remain in place.  Furthermore, some EU companies could still be subject to U.S. primary and secondary sanction, as well as export control provisions.   Continue reading →

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Within days after the lifting of nuclear weapons-related sanctions against Iran, President Obama announced new sanctions against Iranian and other entities involved in Iran’s ballistic missile program.  These sanctions, which were triggered by a recent missile test by Iran in violation of UN prohibitions, designated eleven Iranian, Chinese, and UAE entities and individuals who were determined to be involved in procurement activities on behalf of Iran’s ballistic missile program. These entities and individuals (list found here) have been added to the U.S. Department of the Treasury’s Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals (SDN) List.

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The front line of Iran sanctions compliance and enforcement has been the banking sector. With the arrival of “Implementation Day” under the Joint Comprehensive Plan of Action (JCPOA), financial institutions and persons engaging in financial transactions face an adjusted, but still complex, sanctions environment. Continue reading →

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On January 16, 2016, known as “Implementation Day” under the Joint Comprehensive Plan of Action (JCPOA), the Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued General License H, which allows foreign subsidiaries of U.S. companies to engage in business with Iran, but with strict limitation on the extent to which their parent companies can be involved. Prior to 2012, the U.S. embargo did not apply to companies incorporated abroad, including foreign subsidiaries of U.S. companies. Section 218 of The Iran Threat Reduction and Syria Human Rights Act of 2012 extended the reach of U.S. sanctions, making U.S. companies potentially liable if their foreign subsidiaries did business with Iran. As part of the JCPOA, the United States committed to rolling back this sanction.

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January 16, 2016 was “Implementation Day” under the Joint Comprehensive Plan of Action (JCPOA), bringing into effect the sanctions commitments of the United States and European Union (EU).  The International Atomic Energy Agency (IAEA) confirmed in Vienna that Iran had met its JCPOA milestones with respect to its nuclear program.  The U.S. sanctions changes involve partial relief within a complex regime with continuing primary sanctions and designations on Iranian parties which carry secondary sanctions.

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC)  issued Implementation Day guidance describing the changes to the U.S. sanctions program for Iran, which largely reflect what had been expected under the JCPOA.  This includes the ending of secondary sanctions on Iran related to nuclear weapons proliferation; delisting of over 400 Iranian and Iran-related Specially Designated Nationals (SDNs); issuance of general licenses for non-U.S. entities owned or controlled by U.S. persons to engage in certain activities in Iran, as well as for import to the United States of Iranian carpets and foodstuffs including pistachios and caviar; and adjustment of licensing policy to allow authorization of certain exports, sales, leasing and transfers of civilian passenger aircraft.  Existing authorizations for agricultural commodities (including food), medicine, and medical supplies remain unchanged.  Exports and reexports of U.S. origin products (as well as foreign-origin products with more than 10% U.S. content) still require a license, and U.S. persons still may not participate in business transactions with Iran unless licensed.

Following will be a series of posts on key aspects of the adjustments to U.S. and EU regulations relating to Iran.

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On October 18, 2015, both the United States and the European Union took action to prepare for future changes to sanctions policy which will be effective upon IAEA verification of Iran’s commitments under the Joint Comprehensive Plan of Action (JCPOA).  This was a required step under the JCPOA, termed “Adoption Day,” scheduled to occur ninety (90) days after the JCPOA was endorsed by the UN Security Council via resolution 2231.

Importantly, Adoption Day does not bring about any immediate sanctions relief.  OFAC reminded companies again about potential violations related to arranging agreements and contingent contracts with Iranian parties prior to Implementation Day.

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Under the terms of the Iran Nuclear Agreement Review Act, Congress had until September 18 to reject President Obama’s promised sanctions relief for Iran agreed to under the Joint Comprehensive Plan of Action (JCPOA). Although the House of Representatives voted to reject the deal, Senate Democrats blocked debate on a similar resolution, thus preventing a vote in the Senate. Consequently, Congress took no action, which means that the JCPOA will continue to be implemented on a step-by-step basis (see our blog post here for full details).  Looking ahead, there are several key issues for businesses contemplating entering the Iran market to consider.

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On July 14, 2015, representatives of the P5+1 countries reached an agreement with Iran on a “Joint Comprehensive Plan of Action” (JCPOA) regarding Iran’s Nuclear Program. Subject to review by several of the parties’ legislatures and after verification by the International Atomic Energy Agency (IAEA) of steps to be taken by Iran, the United States and the EU committed to provide sanctions relief, although the U.S. commitments are not as extensive.

The agreement is complex and some hurdles remain, particularly a vote by the U.S. Congress and a review by IAEA of Iran’s past activities and its implementation of the commitments. If there is full implementation as described below, sanctions reforms would substantially open the Iranian market to EU and other non-U.S. companies. Substantial restrictions would remain at least initially for U.S. companies and non-U.S. companies that they own or control, although U.S. policy would permit some trade and market participation in limited sectors.

This blog post provides a broad overview of the July 14 agreement. We will provide more detailed commentary in the coming days.

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