Iran: Sanctions *Update*

09/05/2018 | North

Iran

Iran – Re-imposition of U.S. Sanctions - 9 May 2018

On 8 May 2018, President Trump announced that the U.S. would begin taking steps to re-impose, following a wind down period, all United States sanctions lifted or waived in connection with the Joint Comprehensive Plan of Action (“JCPOA”).

The U.S. Departments of State and of the Treasury will now take steps necessary to establish a 90 day and 180 day wind down period, as applicable, for activities involving Iran which were consistent with the U.S. sanctions relief provided for under the JCPOA, and in respect of which sanctions will now be re-imposed.

The sanctions relief provided for under the JCPOA led to the lifting of many of the U.S. secondary sanctions i.e. measures and prohibitions on non U.S. persons and entities. Therefore, the re-imposition of these secondary sanctions will directly impact on the ability of non-U.S. persons and entities to trade with Iran.

The U.S. has issued FAQ’s regarding the re-imposition of sanctions, which can be read here and which provides further detail of the sanctions to be re-introduced. A brief summary of some of the most critical points is set out below.

Party related sanctions

In accordance with the relaxation of sanctions, hundreds of individuals and entities were removed from the U.S. sanctions lists (or were no longer subject to secondary sanctions). These parties will now be relisted no later than 5 November 2018. After their relisting, most of these parties will be subject to secondary sanctions (some Iranian entities have remained on the Specially Designated National “SDN” list and subject to secondary sanctions throughout, whilst others had been listed only as non-SDNs not subject to secondary sanctions).

Activity related sanctions

After a 90-day wind down period which ends on 6 August 2018, sanctions will be re-imposed on:

  • The purchase or acquisition of U.S. dollar banknotes by the Government of Iran;
  • Iran’s trade in gold or precious metals;
  • The direct or indirect sale, supply, or transfer to or from Iran of graphite, raw, or semi-finished metals such as aluminum and steel, coal, and software for integrating industrial processes
  • Significant transactions related to the purchase or sale of Iranian currency, or the maintenance of significant funds or accounts outside the territory of Iran that occurs in Iranian currency; 
  • The purchase, subscription to, or facilitation of the issuance of Iran sovereign debt; 
  • Iran’s automotive sector.

After a 180-day wind down period which ends on 4 November 4 2018, sanctions will be re-imposed on:

  • Iran’s port operators and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines (IRISL), South Shipping Line, or their affiliates;
  • Petroleum related transactions, with, among others, the National Iranian Oil Company (“NIOC”), Naftiran Intertrade Company (“NICO”), and National Iranian Tanker Company (“NITC”) including the purchase of petroleum, petroleum products, or petrochemical products from Iran;
  • Transactions by foreign financial institutions with the Central Bank of Iran and other foreign financial institutions that have been designated under NDAA Section 1245;
  • The provision of specialized financial messaging services to the Central Bank of Iran and other Iranian financial institutions; 
  • The provision of underwriting services, insurance, or reinsurance; and 
  • Iran’s energy sector.

The FAQs state that any persons engaged in these activities should take steps necessary to wind down those activities by the end of the wind down periods to avoid exposure to sanctions or enforcement actions.

In addition, the U.S. plans to revoke specific and general licenses issued in connection with sanctions relief provided under the JCPOA, again subject to wind down periods, including General License H, which authorized U.S.-owned or -controlled foreign entities to engage in certain activities involving Iran.

Commentary

The decision by President Trump announced on 8 May to cease the U.S. participation in the JCPOA and to begin re-imposing U.S. nuclear-related sanctions is likely to have significant ramifications for maritime trade with Iran and the insurance of such trade.

As the sanctions relief introduced by the U.S. pursuant to the JCPOA focussed to a large extent on the relaxation of secondary sanctions and thus permitted non-U.S. persons to trade more freely with Iran, the re-imposition of these secondary sanctions will have the opposite effect. A full assessment of the likely impact of the decision will, however, only be possible following receipt of clarification of the position of the remaining JCPOA partners (China, France, Russia, the U.K., Germany and the European Union), who have recently reaffirmed their support for the JCPOA, together with further clarification from OFAC in relation to the management of the wind down periods envisaged under the decision.

All sanctions queries can be addressed to North’s dedicated sanctions advice team: sanctions.advice@nepia.com

 

President Trump De-certification of the Joint Comprehensive Plan of Action - 16 October 2017

The decision of President Trump to “de-certify” the JCPOA does not mean the inevitable re-imposition of sanctions revoked by the JCPOA.   It remains the position that lawful trading to Iran does not of itself prejudice Club cover and cover will remain in place, subject as ever to the Club Rules.  The de-certification does, however, herald a new period of increased uncertainty as to whether or not the deal will survive and whether or not sanctions will be re-imposed.

On 16 January 2016, Implementation Day under the Joint Comprehensive Plan of Action or “JCPOA”, the E.U. and the U.S. revoked sanctions introduced in response to Iran’s nuclear programme.  The JCPOA was an agreement reached between Iran and the E3/EU+3 (China, France, Russia, the United Kingdom, the United States, Germany,  with the High Representative of the European Union for Foreign Affairs and Security Policy). 

Whilst, as set out in our Loss Prevention briefing, the JCPOA did not lead to the lifting of all sanctions, it did become lawful for non-U.S shipowners and charterers to trade to Iran and carry almost all cargoes to and from that country.  The E.U. restrictions on the transfer of funds to and from Iranian entities were also lifted, except where that entity was designated.    The U.S. committed to the removal of most of the secondary sanctions affecting non-U.S. persons.  The U.S. primary sanctions regime, which applied to “U.S. persons”, remained largely unchanged.  

Trading with and to Iran has not become risk free or straightforward following Implementation Day.  One of the most significant issues faced has been the reluctance of major banks to process payments involving Iran, whatever the currency.   This has led to difficulties in receiving hire and freight in relation to lawful trade and has also hindered the practical ability of the Club to provide security, where it has been unclear whether the Club will be able to honour its terms when triggered.

On Friday 13 October 2017, President Donald Trump outlined a new strategy for Iran. The White House Press Release asserted that with regards to the Iranian Nuclear Program and the JCPOA:

  • The Iranian regime’s activities severely undercut whatever positive contributions to “regional and international peace and security” the Joint Comprehensive Plan of Action (JCPOA) sought to achieve.
  • Even with regard to JCPOA itself, the Iranian regime has displayed a disturbing pattern of behavior, seeking to exploit loopholes and test the international community’s resolve.
  • Iranian military leaders have stated publicly that they will refuse to allow International Atomic Energy Agency (IAEA) inspections of their military sites. These statements fly in the face of Iran’s commitments under JCPOA and the Additional Protocol. Not long ago these same organizations hid nuclear facilities on military sites.
  • This behavior cannot be tolerated; the deal must be strictly enforced, and the IAEA must fully utilize its inspection authorities.

President Trump confirmed in his speech that he would “de-certify” the Iran nuclear deal.  This does not mean that the U.S. sanctions revoked by the JCPOA will be instantly re-imposed and indeed the Press Release called, as set out above, for the Iran deal to be “strictly enforced”.  De-certification is a U.S. statutory requirement not imbedded in the JCPOA itself.  The Iran Nuclear Agreement Review Act of 2015 (“INARA”) required the President to certify compliance by Iran with the terms of the JCPOA every 90 days.  Where the President does not so certify then the INARA provides for a 60 day period for Congress to consider re-imposing sanctions.  

If both houses of Congress pass a bill re-imposing sanctions then President Trump can approve or veto the proposed bill.   President Trump has called for Congress to use the 60 days to “address the deal’s many serious flaws” and if they did not, he has indicated that “the agreement will be terminated”.  

The leaders of France, Germany and the United Kingdom issued a joint statement also on 13 October which stated that:

“We stand committed to the JCPoA and its full implementation by all sides. Preserving the JCPoA is in our shared national security interest. The nuclear deal was the culmination of 13 years of diplomacy and was a major step towards ensuring that Iran’s nuclear programme is not diverted for military purposes. The JCPoA was unanimously endorsed by the UN Security Council in Resolution 2231. The International Atomic Energy Agency has repeatedly confirmed Iran’s compliance with the JCPoA through its long-term verification and monitoring programme. Therefore, we encourage the US Administration and Congress to consider the implications to the security of the US and its allies before taking any steps that might undermine the JCPoA, such as re-imposing sanctions on Iran lifted under the agreement…”

In summary, the de-certification by President Trump does not of itself mean the inevitable re-imposition of sanctions revoked by the JCPOA.  It remains the position that lawful trading to Iran does not of itself prejudice Club cover and cover will remain in place, subject as ever to the Club Rules.   De-certification does, however, herald a new period of increased uncertainty as to whether or not the deal will survive and whether or not sanctions will be re-imposed.  It also evidences that the United States now takes a markedly different view of the JCPOA to its allies in Europe.  It is unclear at present whether the dispute resolution process in the JCPOA could be triggered or if President Trump would seek to operate outside of this mechanism should he ultimately decide to “terminate” the agreement.  In short, Members wishing to trade with Iran should be aware of this uncertainty and the potential for the position to change significantly over the coming months.

Finally, the United States continues to introduce further non-nuclear related sanctions and on 13 October, amongst other steps, designated Iran’s Islamic Revolutionary Guard Corps (IRGC) pursuant to the global terrorism Executive Order (E.O.) 13224.  

Iran: “Fall-Back” Reinsurance Update - 8 March 2016

Further to our Circular Ref: 06/2016 of 22 February 2016, Members will be aware that the continuing application of US primary sanctions to US domiciled reinsurers participating in the Group's reinsurance arrangements means that members remain exposed under Club sanctions’ rules to the risk of a partial reinsurance shortfall in respect of non-certified liabilities towards or incurred by Iranian interests.

The Group continues to work on a “fall-back” reinsurance protection to cover this default risk, for which it has now obtained the approval of the US authorities, and the Group's brokers are currently in the process of placing corresponding reinsurance cover outside the US markets. Due to compliance implications, it is taking some time to put this cover in place, but it is hoped that this will be completed shortly. Once this cover is in place, clubs will then be able to confirm cover for non-certificated as well as certificated liabilities towards, or incurred by, Iranian interests (other than SDN's or liabilities arising out of prohibited trades).

The cover is however subject to a much lower limit, with one paid reinstatement only and more restricted terms, than the main Group GXL placement. For these reasons it is not considered to amount to an adequate long term solution to the problems presented to the Group’s reinsurance arrangements by continuing US Primary sanctions and the Group will continue to engage with the US authorities for the purpose of securing a comprehensive insurance solution to meet all shipowners’ needs.

Iran: Implementation Day - 16 January 2016

Under the Joint Comprehensive Plan of Action (JCPOA) dated  July 14, 2015 and following a positive report by the International Atomic Energy Authority on Iran’s adherence to its obligations under the JCPOA, the European Union and the US have on Saturday 16 January (now termed Implementation Day) lifted EU and U.S. nuclear-related economic sanctions on Iran. Anti-terrorism and human rights sanctions remain in force. 

By and large this will have the effect of restoring trade to and from Iran to the position it was in before the introduction of such measures. However if contemplating trade with Iran it is important that Members note that US Primary sanctions remain in full force and continue to prevent US persons (which include banks, insurers and reinsurers) from dealing with Iran. In certain circumstances this may affect the amount recoverable from the Association or give rise to practical difficulties when processing claims payments involving Iranian entities.

Further there remain a significant number of Iranian persons and businesses which are designated by the US and EU. This particularly applies to those parts of the state of Iran which are engaged in military activities, the development of weapons and human rights abuses. Ports owned and operated by Tidewater also remain designated by the US and EU.   Sanctions continue to apply to non-U.S. persons who knowingly facilitate significant financial transactions with or provide material or certain other support to those Iranian entities on the SDN List.

Members are therefore encouraged to exercise enhanced due diligence when engaging in trade with Iran and are asked to note the potential for a shortfall in any recovery in reinsurance which under club rules is born by the Member.

Further and more detailed guidance will be provided shortly.

Iran: US Department of the Treasury FAQs and Guidance - 10 August 2015

The US Department of the Treasury has issued FAQs and guidance relating to the continuation of certain temporary sanctions relief pursuant to the JPOA prior to implementation of the JCPOA.

Iran: Announcement of a Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran’s Nuclear Program - 14 July 2015

On 14 July 2015, the E3+3 and Iran reached a Joint Comprehensive Plan of Action (JCPOA) to ensure that Iran’s nuclear program will be exclusively peaceful. The JCPOA will provide Iran with phased sanctions relief upon verification, by the International Atomic Energy Agency (IAEA), that it has implemented key nuclear commitments.

Sanctions relief will begin on "Implementation Day" once the IAEA verifies that Iran has implemented key nuclear-related measures described in the JCPOA. Detailed guidance related to the JCPOA will be published prior to Implementation Day.

The E3+3 and Iran also decided on 14 July 2015 to further extend through Implementation Day the sanctions relief provided for in the Joint Plan of Action (JPOA) of 24 November 2013, as extended. This JPOA sanctions relief is the only Iran-related sanctions relief in effect until further notice and Members are reminded of their obligations to adhere strictly to all applicable sanctions legislation.

The suspension of the restrictive measures specified in the Joint Plan of Action is therefore extended until 14 January 2016 under EU Council Decision 2015/1148. In practice this means sanctions against Iran in EU Regulation 267/2012 (as amended), including the current thresholds for prior notification or prior notification of Iran transfers remains unchanged and guidance issued by HM treasury can be read here.

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) issued a statement relating to the Joint Comprehensive Plan of Action regarding the Islamic Republic of Iran’s Nuclear Program which may be read here.

Read more about future sanctions policy

Iran: Continuation of Temporary Sanctions Relief Implementing the Joint Plan of Action - 10 July 2015

On 10 July 2015, the P5+1 and Iran decided by mutual consent to extend the JPOA for three days in order to continue with negotiations. In the meantime they will continue to implement the commitments described in the JPOA, and thus the U.S. government and the EU have extended the limited sanctions relief provided for in the JPOA.

There is therefore no material change to the sanctions against Iran, they remain in place save for the limited and specific sanctions relief introduced on 20th January 2014 and which has now been extended until 13 July 2015.

Iran: Continuation of Temporary Sanctions Relief Implementing the Joint Plan of Action - 8 July 2015

On 7 July 2015, the P5+1 and Iran decided by mutual consent to extend the JPOA for three days in order to continue with negotiations. In the meantime they will continue to implement the commitments described in the JPOA, and thus the U.S. government and the EU have extended the limited sanctions relief provided for in the JPOA.

There is therefore no material change to the sanctions against Iran, they remain in place save for the limited and specific sanctions relief introduced on 20th January 2014 and which has now been extended until 10 July 2015.

Iran: Continuation of Certain Temporary Sanctions Relief Implementing the Joint Plan of Action - 30 June 2015

On November 24, 2013, the United States and its partners in the P5 + 1 (China, France, Germany, Russia, the United Kingdom, and the United States, coordinated by the European Union’s High Representative) reached an initial understanding with Iran, outlined in a Joint Plan of Action (JPOA).

On 30 June 2015, the P5+1 and Iran decided by mutual consent to extend the JPOA for seven days in order to continue with negotiations. In the meantime they will continue to implement the commitments described in the JPOA, and thus the U.S. government and the EU have extended the limited sanctions relief provided for in the JPOA.

There is therefore no material change to the sanctions against Iran, they remain in place save for the limited and specific sanctions relief introduced on 20th January 2014 and which has now been extended until 7 July 2015.

The U.S. Office of Foreign Asset Control (“OFAC”) has issued new Guidance relating to the extension of the sanctions relief and published FAQ’s. In addition the EU has amended its earlier Decision to similarly extend the JPOA. Both the EU Decision and the OFAC guidance can be found below:

US Department of the Treasury - Continuation of Certain Temporary Sanctions Relief Implementing the Joint Plan of Action, as Extended

EU Council Decision (CFSP) 2015/1050 of 30 June 2015 amending Decision 2010/413/CFSP concerning restrictive measures against Iran

Update - 29 December 2014

In recent months, North's Members have been targeted as part of attempts to export crude oil originating from Iran in breach of applicable sanctions by means of ship to ship (STS) transfers at Khor Fakkan in the UAE.

It appears that such oil may routinely be described as being of Iraqi origin and as having been loaded on board the transferring vessel at Basra a couple of days before the proposed STS operation.   However, any such documentation should not be taken at face value.  On two recent occasions the supplying vessels loaded the cargo in Iran before shuttling across the straits of Hormuz to supply vessels with oil - ostensibly from Iraq - destined for countries that do not benefit from a waiver under applicable US sanctions legislation. 

It is unlawful for North to provide insurance to vessels which load Iranian cargo in such circumstances and cover will cease immediately such cargo is loaded in accordance with the Club's sanctions cesser rule. Members should also be aware that the transport of Iranian oil to states which do not benefit from a waiver under US law may trigger enforcement action against the vessel , its owners and related parties by the US authorities.

There is evidence of a sophisticated smuggling operation and those responsible may go to considerable lengths to disguise the true origin of the cargo. Cargo documentation is likely to appear credible and there may be no evidence of any designated parties being involved.  Members are therefore advised to exercise extreme caution when engaging in STS operations in the Arabian Gulf. In particular it is recommended that Members check with port agents to ensure that vessels providing cargo by means of an STS transfer in the region loaded the cargo at the port stated in the cargo documentation before any cargo is received. It is also advisable to ensure that charter parties contain an appropriate sanctions clause.

Members should contact a member of North's Sanctions Advice Team  (which can be contacted at sanctions.advice@nepia.com) should they have any queries or concerns about a proposed cargo.