In the language of the Joint Comprehensive Plan of Action (JCPOA), the agreement reached between the P5+1 (China, France, Germany, Russia, UK and US), the European Union (EU) and Iran, was that 16 January 2016 was ‘Implementation Day’. Through the JCPOA, the international community has accepted, for the time being, that Iran’s nuclear programme will be peaceful.

Iran

In this article we aim to provide a summary of the position for the international shipping industry trading with Iranian interests and to Iranian ports as of 20 January 2016, post the lifting of the sanctions through the JCPOA.

EU position

All non-US citizens and entities are now allowed to transact with Iranian interests in a number of different trades, as long as there is no involvement of any person/entity which remains a designated person, or it does not relate to any activity, material or equipment which is connected to Iran’s nuclear industry. An indication of the activities that are now allowed with Iranian interests are as follows:

  • Financial transfers to and from Iran but not in US dollars (see below)
  • Banking activities, for example, the opening of branches
  • Import, purchase, swap and transport of crude oil and petroleum products, gas and petrochemical products from Iran
  • Export of equipment and technology, technical assistance training in the sectors of oil, gas and petrochemical industries, production and refining of oil, natural gas, liquefaction of natural gas
  • Shipping, shipbuilding and transport sections – sale, supply, transfer or export of naval equipment and technology for shipbuilding, maintenance or refit, design, construction of vessels and provision of vessels for the transport or storage of oil and petrochemical products, flagging and classification services, bunkering or ship supply services
  • Insurance & reinsurance.

US position

Sanctions remain in place for US citizens and entities, but the US lifted nuclear-related secondary sanctions, meaning sanctions that are directed at non-US persons or companies for specific conduct outside the US jurisdiction are now removed:

  • The US also lifted 400 individuals and entities from the OFAC’s List of Special Designated Nationals and blocked persons(known as the SDN List).
  • Primary sanctions, i.e. sanctions that involve US citizens/entities or have a US nexus remain in force meaning that the domestic trade embargo remains in place, save for a very small and limited category of products (including caviar and Iranian carpets).
  • Sanctions relating to anti-terrorism, human rights abuses, designations for asset freezes and provisions for equipment for internal repression, military goods and associated services remain in force.
  • Prohibitions on US financial institutions, US dollar transactions in connection with Iranian business and the provisions of insurance by US insurers and re-insurers remain in place.

Non-US entities that are owned or controlled by a US person, are prohibited from engaging into activities with Iranian interests, but can obtain a General License H (known as a GL H) from OFAC which, through changes in operating procedures of the company, would authorise this entity to engage in activities with Iran. Although the sanctions relating to anti-terrorism, human rights abuses, designations for assets freezes and provisions for equipment for internal repression, military goods and associated services continues to apply to these US-owned or controlled entities.

Snap-back provisions

Both the EU and the US made it clear that, in case that Iran reneges on its commitments under the JCPOA, sanctions will be quickly reimposed. These provisions of the JCPOA have real teeth. In the UN, the necessary resolution can be brought back in force within 30 days of it being tabled. If that were to happen there are provisions to exempt those signing contracts or engaging in otherwise sanctionable behaviour and a period of grace to extract yourself. Sanctions clauses will need to be amended to reflect this.

What does all that means to you

  • Due diligence is still required in relation to all business involving Iran cargoes carried, its use and to all the parties to such a transaction, as there are still individuals/entities that are subject to US designations and/or remain subject to EU restrictions, as well as, other specific restrictions that remain in place.
  • Checks should be carried out on whether there are any restrictions on insurance or finance arrangements to the parties/cargoes precluding transactions with Iranian interests.
  • Transactions with Iranian entities in US dollars and many financial institutions with US interests will either be unable to engage with Iranian interests at all or may be very limited in their involvement.
  • US insurers and reinsurers are still subject to the sanctions so those EU insurers providing primary cover for Iranian entities or business will need to be wary about their reinsurer’s ability to respond. This is certainly something that the International Group of P & I Clubs had concerns about as there is a risk of such a shortfall in recoveries from the Pool being suffered by their members.
  • Tidewater, a port operating company in Iran is on the SDN and EU designated lists, because it is owned by Iran’s Islamic Revolutionary Guard Corps (IRGC), consequently transactions between US or EU persons and Tidewater continue to be subject to sanctions.
  • Iran is seen as a country where there is a high risk of corruption, so UK companies in particular will want to dust off and revisit their own anti-bribery policies before and whilst engaging with Iranian interests.