On November 21 2011 the United States imposed new sanctions against Iran in response to the recent alleged assassination plot against the Saudi ambassador in the United States and new findings by the International Atomic Energy Agency concerning Iran's nuclear activities. Since the United States already maintains a nearly comprehensive embargo of Iran, these new sanctions primarily target non-US persons with dealings in Iran's petroleum, petrochemical, banking and nuclear sectors. The sanctions are accompanied by complementary measures imposed by the United Kingdom and Canada, with additional jurisdictions expected to impose similar measures before long.
Pursuant to the Iran Sanctions Act, the United States already maintains a sanctions regime that targets non-US persons who knowingly support Iran's petroleum sector by:
- investing in the development of Iran's petroleum resources; or
- selling, leasing or providing to Iran goods, services, technology or other support that could permit:
- the maintenance or expansion of Iran's domestic production of refined petroleum products; or
- the import of refined petroleum products into Iran.
These activities are sanctionable under the act when they exceed certain dollar thresholds.
Executive Order 13590 similarly targets non-US persons involved in the petroleum sector supply chain. Sanctions may now be applied to non-US persons who knowingly sell, lease or provide to Iran goods, services, technology or other support that could directly and significantly contribute to the maintenance or enhancement of Iran's ability to develop its domestic petroleum resources, when the value of a single transaction is at least $1 million or when aggregate transactions are worth at least $5 million over a 12-month period.
The term 'develop' includes exploration, extraction, refinement and transport by pipeline of petroleum resources. The term 'petroleum resources' covers petroleum, oil, natural gas, liquefied natural gas and refined petroleum products (ie, diesel, gasoline, jet fuel and aviation gasoline).
Sanctions mirror those imposed under the Iran Sanctions Act and include:
- the denial of export credits, export licences and government contracts; and
- prohibitions on foreign exchange, banking and property-related transactions (to the extent that such transactions are subject to US jurisdiction).
The State Department has discretion in the selection of sanctions imposed on a person found to have violated the executive order.
Executive Order 13590 also targets the activities of non-US persons in the petrochemical sector. The president can now sanction non-US persons who knowingly sell, lease or provide to Iran goods, services, technology or support that could directly and significantly contribute to the maintenance or expansion of its domestic production of petrochemical products, when the value of a single transaction is at least $250,000 or when aggregate transactions are worth at least $1 million over a 12-month period. The term 'petrochemical products' includes aromatic, olefin and synthesis gas, and any of their derivatives (ie, ethylene, propylene, butadiene, benzene, toluene, xylene, ammonia, methanol and urea). The sanctions are the same as those identified above with respect to the petroleum sector.
The petrochemical sector is a new target of US economic sanctions. The administration identified it as a sector of interest because petrochemicals are a significant source of Iran's export revenues and because imports of petrochemicals can serve as a cover for other sanctioned imports. To accompany the new sanctions targeting the petrochemical sector, the administration has announced that it will launch a worldwide diplomatic campaign to encourage other countries to shift purchases of Iranian petrochemical products to other suppliers.
The US Treasury Department has also designated Iran as a jurisdiction of primary money-laundering concern under Section 311 of the USA PATRIOT Act. This designation covers the entire Iranian financial sector, including Iran's Central Bank, private Iranian banks and subsidiaries or branches of Iranian banks operating outside of Iran.
Once such a designation is made, US financial institutions must take it into account as part of their overall risk management programmes, and – as a practical matter – non-US financial institutions must also consider such designations when contemplating transactions. The administration anticipates that Iran's designation under Section 311 will have a chilling effect on the willingness of non-US financial institutions to do business involving Iran – a prospect that does not bode well for companies engaged in authorised trade under the Trade Sanctions Reform Act.
In addition, based on a designation under Section 311, the Treasury Department has the authority to require US financial institutions and financial agencies to take special measures against a jurisdiction of primary money-laundering concern. The imposition of these measures must follow a regulatory process, including a notice and comment period. Accordingly, in connection with Iran's designation under Section 311, the Treasury's Financial Crimes Enforcement Network issued a notice of proposed rule making, in which it proposes to require US financial institutions to implement additional due diligence measures in order to prevent any improper, indirect access by Iranian banking institutions to US correspondent accounts. Comments on this proposal are due within 60 days of its publication.
Finally, pursuant to Executive Order 13382, the United States sanctioned 11 individuals and entities for their role in Iran's nuclear procurement networks and nuclear development programmes. These are:
- the Nuclear Reactors Fuel Company;
- the Noor Afzar Gostar Company;
- the Fulmen Group;
- Yasa Part;
- Javad Rahiqi;
- the Modern Industries Technique Company;
- Neka Novin;
- Parto Sanat;
- Paya Partov;
- Simatic; and
- the Iran Centrifuge Technology Company.
The assets of these persons and entities within the US jurisdiction are now blocked, and US persons are prohibited from engaging in transactions with them.
For further information on this topic please contact Robert Torresen or Lisa Crosby at Sidley Austin LLP by telephone (+1 202 736 8000), fax (+1 202 736 8711) or email ([email protected] or [email protected]).