On January 23, 2012, the European Union (EU) adopted a series of measures against Iran1. This “unprecedented set of sanctions” (William Hague, UK Foreign Secretary) is aimed to “dry out the financial sources for the atomic program” (Guido Westerwelle, German Foreign Minister), most notably by banning Iranian Oil and Petroleum sales in the EU.
The economic and practical impact of the new sanctions should not be underestimated: The EU is one of Iran’s largest trading partners. Its 2010 imports into the EU amounted to around €14.5 billion/$19 billion, 90% of which came from the oil sector.2
2012 EU Sanctions Against Iran
The new EU sanctions were published on January 24, 2012.3 They include a phased embargo of Iranian crude oil, petroleum products and petrochemical products targeting EU imports, purchases and transports, as well as related finance and insurance. The ban will take immediate effect. Previously concluded contracts can be implemented until July 1, 2012. In addition, the new sanctions prohibit any EU exports of key equipment and technology for the petrochemical sector to Iran or Iranian business abroad. Investments in Iranian petrochemical companies (including investments in Iranian-owned companies outside Iran) and joint ventures with such companies have also been banned.4 Further, trade (i.e., the sale, purchase, transportation or brokering) in gold, precious metals and diamonds with Iranian public bodies and the Iranian Central Bank has been banned. The EU also imposed asset freezes against the Iranian Central Bank, eight further entities and three members of the Islamic Revolutionary Guards Corps.5
The EU sanctions represent a (further) reaction to the report of the International Atomic Energy Agency (IAEA) in November 2011, identifying evidence that Iran continued to pursue the goal of producing nuclear weapons. The EU rules mainly focus on the Oil and Petroleum sector, while economic sanctions implemented by the UK and Canada in November 2011 in reaction to the IAEA’s report mainly targeted the Iranian banking sector.
In practical terms the new sanctions will bring the EU’s approach closer to the stricter US line, where virtually all trading by U.S. entities and individuals with Iran is prohibited already under existing OFAC sanctions. EU companies, especially those not subject to or complying with OFAC sanctions due to relationships with U.S. affiliates, should be reviewing any relationship that could involve an Iranian entity as a customer, supplier, intermediary, transporter, insurer, partner or counterparty.
The full force of the new sanctions will be felt in July when transitional rules expire. Those rules were concessions to EU Member States that currently rely more heavily on Iranian crude oil (most notably, Greece). A review of the new sanctions by May 1, 2012 will ensure not only their efficiency, but also that EU Member States have succeeded in finding alternative oil suppliers.
The new rules augment existing EU sanctions that have been gradually adopted since 2007. These measures – comprising sanctions based on UN Security Council Resolutions, as well as autonomous EU instruments – represent the most comprehensive set of sanctions currently employed by the EU against any third country. They include, in particular:
- Arms and nuclear sector: (i) an arms embargo (including dual-use goods); (ii) an embargo on nuclear goods and technology; (iii) a ban on EU investments for Iranians engaged in uranium mining and nuclear production;
- Oil and gas sector: (iv) a ban on investing in the Iranian oil and gas sector; (v) a ban on exporting certain equipment and technology for the Iranian oil and gas sector (including the provision of financial and technical assistance);
- Financial services sector: (vi) notification/approval requirements for transfers to and from Iranian banks (above €10,000/€40,000); (vii) a ban on Iranian and EU banks opening branches or forming joint ventures in the EU or Iran, respectively; (viii) a ban on trading or issuing Iranian government or public bonds;
- Other: (ix) visa bans against 113 persons (41 thereof had been designated by the UN); (x) asset freezes against around 494 entities and individuals (75 thereof had been designated by the UN).
Companies (including those not active in the Oil and Petroleum sector) should carefully scrutinize their existing business relations for any potential exposure, and should take action immediately to ensure compliance with the new EU sanctions regime against Iran.