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Web Alert: US strengthens Iran sanctions again

01 August 2012

The US Treasury has confirmed new sanctions against Iran following the issue of a new Executive Order. The Executive Order imposes new sanctions against the Iranian energy and petrochemical sectors.

1 - Under the new sanctions, the US Treasury may impose financial sanctions upon “foreign financial institutions” who knowingly conduct or facilitate any significant financial transactions:

  • with National Iranian Oil Company (NIOC) or Naftiran Intertrade Company (NICO) or their subsidiaries;
  • for the purchase or acquisition of petroleum or petroleum products from Iran through any channel (not just with NIOC/NICO);
  • for the purchase or acquisition of petrochemical products from Iran.

2 - The term “petroleum products” include liquefied petroleum gases, pentanes, aviation and motor gasoline, naptha and kerosene type jet fuel, lubricants and petroleum coke. The term does not include natural gas, liquefied natural gas, biofuels, methanol and other non-petroleum fuels. The term “petrochemical products” include any aromatic, olefin and synthesis gas and their derivatives including ethylene, propylene, butadiene, benzene, toluene, xylene, ammonia, methanol and urea.

The US Treasury may also block the property of any person who materially assists or provides financial support for or goods or services in support of

  • NIOC, NICO or the Central Bank of Iran;
  • The purchase of US bank notes or precious metals by the Government of Iran.

3 - The State Department may impose a range of sanctions on any individual or entity who knowingly engages in significant transactions for the purchase or acquisition of petroleum, petroleum products or petrochemical products from Iran.

CISADA penalties imposed

Evidence of the willingness of the US to sanction foreign entities has been demonstrated by specific sanctions to be imposed upon foreign companies who continue to deal with Iran. The US Treasury has imposed sanctions under the US Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 against two non-US banks, namely Bank of Kunlun (China) and Elaf Islamic Bank (Iraq).

The US authorities maintain that these banks have continued to provide financial assistance to Iran which has facilitated the movement of millions of dollars in international transactions. These two non-US banks now face financial sanctions for continuing to facilitate monetary transactions for Iran/Iranian entities.

Commentary

The US wants to further isolate NIOC and NICO which are already sanctioned under US law; these sanctions aim to deter foreign financial institutions from continuing to deal with them.

Additional aims of the sanctions are to deter efforts to circumvent existing US sanctions and to further isolate Iran’s petroleum and petrochemical industries. There are limited exemptions for Iran’s trade partners who have significantly reduced their purchase of Iranian crude oil.

These sanctions are silent as to whether they apply to shipowners carrying petroleum, petroleum products or petrochemical products from Iran. Equally it is not entirely clear whether the sanctions apply to the provision of insurance for ships carrying the relevant cargoes.

The managers are seeking further information in relation to the scope and application of these sanctions and will keep members advised.
 
Members are reminded of the need to continue to exercise due diligence when dealing with any potentially sanctionable trade or entity.

Link: 2013 OFAC Recent Actions