On November 5, 2018 the Office of Foreign Assets Control (“OFAC”) at the U.S. Department of the Treasury re-imposed U.S. nuclear-related sanctions against Iran that were originally lifted or waived in connection with the Joint Comprehensive Plan of Action (“JCPOA”). According to OFAC, these sanctions were implemented in the hope of negotiating a deal with Iran that is more comprehensive than the JCPOA. In this week’s edition of Downrange, we will examine five facets of OFAC’s revised sanctions against Iran.
1. Sanctioned Entities/Items.
In an effort to exert financial pressure on Iran, OFAC has sanctioned over 700 individuals, entities, aircraft, and vessels. The updated sanctions list includes 50 Iranian banks and their foreign and domestic subsidiaries, over 200 persons and vessels in the Iranian shipping and energy sectors, an Iranian airline (Iran Air), and more than 65 aircraft. In addition, nearly 250 persons and blocked property have been added to the list of Specially Designated Nationals and Blocked Persons (the “SDN List”). The complete list of sanctions is available here.
As a result of the newly implemented sanctions, all property and interests in property linked to Iranian sanctions that are in the U.S. or in the possession or control of U.S. persons must be blocked and reported to OFAC. Similarly, as with all sanctions, U.S. persons or persons within the U.S. that engage in transactions with sanctioned entities may themselves be subject to an enforcement action, designation, or sanction. Since the wind-down period for these sanctions has ended, providing goods, services, or loans to an Iranian counterparty, even if pursuant to written contracts or written agreements entered into prior to May 8, 2018, may result in the imposition of penalties.
3. Banking and Shipping Sector.
The updated sanctions target over 70 Iran-linked financial institutions and their foreign and domestic subsidiaries. The major banks targeted under OFAC’s sanctions include Bank Melli, Bank Saderat, the Export Development Bank of Iran, Ghavamin Bank, Bank Sepah, Bank of Industry and Mine, Bank Tejarat, Ayandeh Bank, and Day Bank. The affiliates of these banks are based in other regions, including in Germany, Belarus, and Venezuela.
In addition to targeting banks, these sanctions place Iran’s national maritime carrier, the Islamic Republic of Iran Shipping Lines (“IRISL”), on the SDN List. OFAC also sanctioned 65 IRISL subsidiaries and associated individuals. In addition to these entities, 122 vessels in which IRISL has a property interest have also been sanctioned. The National Iranian Tanker Company (“NITC”), an oil transporter, has been added to the SDN List as well, along with 37 NITC-affiliated entities and vessels.
As with other sanctions, the U.S. is maintaining exceptions for the Iranian sanctions. Under these exceptions, the sale of agricultural commodities, food, medicine, and medical services to Iran is not prohibited unless such sales involve persons on the SDN list. Similarly, the sale of consumer goods not involving persons on the SDN list are also permitted.
In addition to these exceptions, certain countries have received a “significant reduction exception” that allows for the purchase of petroleum or petroleum products from Iran. The exempt countries include China, India, Italy, Greece, Japan, South Korea, Taiwan, and Turkey.
5. European Special Purpose Vehicle.
To demonstrate its commitment to the deal between France, Germany, the U.K., and Iran pursuant to the JCPOA, Europe is currently working on designing a “clearing house” to help European companies bypass OFAC’s Iranian sanctions. The clearing house will be set up as a special purpose vehicle that would assist European companies in purchasing Iranian products without the use of U.S. dollars or any other monetary transfers between the European Union and Iran. Instead, an Iranian company selling goods to Europe would accumulate credits that could be used to buy products from a different European firm. The structure of the special purpose vehicle has not yet been finalized and whether it will effectively and legally sustain trade with Iran while bypassing OFAC sanctions remains to be seen.
Whether transacting with Iranian parties or otherwise, U.S. persons should screen all foreign counterparts against OFAC’s consolidated sanctions list, available here, prior to engaging in a transaction. If a transaction with a foreign person is subject to sanctions and not otherwise exempt, a U.S. person can apply for a specific license authorizing the transaction.
About the Authors
Downrange authors Jennifer S. Huber, Adam Munitz, and Lidiya Kurin are members of FH+H's International Trade + Transactions Practice. Focusing primarily on the defense, security, and intelligence sectors, Jennifer, Adam, and Lidiya help businesses translate their domestic successes into overseas growth and assist foreign entities with sensitive investments in, and acquisitions of, U.S. businesses.
Additional information regarding their capabilities and previous representations can be found here.