Recap of sanctions against Iran

May 31, 2011

Attorney Barbara Linney has provided readers with a good summary of sanctions laws against Iran that have expanded over the past year.  From Lexology on Apr. 28:

U.S. Developments. On July 1, 2010, long sought amendments to the Iran Sanctions Act (“ISA”) became law. As amended by the Comprehensive Iran Sanctions Accountability & Divestment Act (“CISADA”), the ISA targets persons determined to have invested $20 million or more in Iran’s ability to develop or obtain petroleum resources. CISADA expanded the definition of petroleum resources to include petroleum, refined petroleum products, oil or liquefied natural gas, natural gas resources, oil or liquefied natural gas tankers, and products used to construct or maintain pipelines used to transport oil or liquefied natural gas. Also targeted are persons contributing to Iran’s conventional and nuclear weapons proliferation activities, persons supplying refined petroleum products to Iran, and those who supply goods, services, and technology that could facilitate or contribute to Iran’s ability to produce or import refined petroleum products (subject to certain materiality and value thresholds). Provision of ships or shipping services to deliver refined petroleum products to Iran is a sanctionable service. CISADA also imposed or required adoption of other measures designed to tighten the blockade of Iran, including increased penalties for violations of U.N. Security Council resolutions.

Acting to implement measures required by CISADA, OFAC issued (i) the Iranian Financial Sanctions Regulations, which principally target foreign financial institutions (including foreign subsidiaries of U.S. financial institutions) who facilitate proscribed activities by designated Iranian persons and entities, and (ii) the Iranian Human Rights Abuses Sanctions Regulations, which impose sanctions against Iranian persons designated as responsible for human rights abuses in Iran. These new regulations and related designations, together with a steady stream of additional designations of Iranian entities, individuals and vessels under pre-existing proliferation sanctions, have created a complex regulatory environment filled with pitfalls for those engaged in trade or financial transactions involving Iran or Iranian vessels.

Pressure for enhanced sanctions against those doing business with Iran continues to build. Legislation pending before the U.S. Congress would require disclosure to the Securities and Exchange Commission and mandatory investigation of certain activities involving Iran.

International Sanctions. Enhanced U.N. sanctions were adopted by the U.N. Security Council on June 9, 2010. The U.N. sanctions specifically target Iran’s nuclear program and require Member States to prohibit activities which may contribute to Iran’s proliferation or development of nuclear weapons capabilities. Of particular interest to the maritime industry are (i) prohibitions against use of Member State flag vessels to carry certain nuclear materials and technology and certain arms and related materiel to and from Iran; (ii) required inspection of vessels suspected of carrying banned conventional arms or sensitive nuclear or missile items and seizure and disposal of any such items; (iii) prohibitions against provision of bunkering and other services to Iranian owned or contracted vessels suspected of carrying prohibited cargo; (iv) required freezing of assets of various designated persons, including certain entities deemed to be owned, controlled by, or acting on behalf of the Islamic Republic of Iran Shipping Lines (“IRISL”); and (v) prohibitions against provision of financial services, including insurance or re-insurance, if there are reasonable grounds to believe that such services could contribute to Iran’s proliferation activities.

The European Union, like the United States, has not only implemented the U.N. sanctions but gone further to impose additional broad restrictions on trade, financial services, energy, and transport, and additional designations for visa ban and asset freeze. One such measure prohibits provision of insurance and re-insurance to the Government of Iran or Iranian entities, directly or indirectly. Another measure requires written notification or prior authorization of funds transfers to or from Iran in excess of certain thresholds. In addition, and significantly, the sanctions added IRISL, many of its affiliates, and several Iranian banks to the list of entities subjected to asset freeze in the European Union. Thus, the effect of the new E.U. sanctions has been to restrict Iran’s and IRISL’s access to European financial and insurance markets, which had previously compensated for Iran’s exclusion from U.S. markets.

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