On 8 May 2018, President Trump announced that the United States would withdraw from the Joint Comprehensive Plan of Action (JCPOA). In conjunction with that announcement, the President issued a National Security Presidential Memorandum (NSPM) directing the re-imposition of certain secondary sanctions, being those that apply to non-U.S. persons even where there is no U.S. nexus (e.g. no U.S. persons, no U.S.-origin goods, or U.S. dollar payments). As discussed in our earlier blog post, the first batch of sanctions was reimposed on 6 August and the second batch will become effective 5 November.
On 5 November, the United States will re-impose the following secondary sanctions:
- Sanctions on Iran’s port operators and shipping and shipbuilding sectors, including IRISL;
- Sanctions on petroleum-related transactions, including the purchase of petroleum, petroleum products or petrochemicals from Iran;
- Sanctions on foreign financial institutions who engage with the Central Bank of Iran and other designated Iranian financial institutions;
- Sanctions on the provision of specialised financial messaging services to the Central Bank of Iran and Iranian financial institutions;
- Sanctions on the provision of underwriting services, insurance or reinsurance to SDNs or for sanctioned activities;
- Sanctions on Iran’s energy sector.
These sanctions will also apply to the provision of associated services. For example, an insurance company could potentially face exposure to secondary sanctions if the coverage it provided pertained to the transportation of sanctioned goods and/or involved a sanctioned entity.
Equally as important, no later than 5 November, the U.S. will re-list as SDNs many of the persons and entities removed from the SDN list pursuant to the JCPOA. Therefore, even if your Iran-related business is not connected to a sanctioned business sector, it is important to ensure that your transactions do not involve persons or entities on the SDN List.
EU companies, in navigating their exposure to the reimposed U.S. secondary sanctions, must also be mindful of the EU’s so-called “Blocking Regulation”. That piece of legislation seeks to limit the impact of the U.S. secondary sanctions with a view to signalling the EU’s ongoing commitment to the JCPOA – so long as Iran continues to comply with the restrictions on its nuclear ambitions as required by that agreement. In reality that can mean EU companies facing the decision of continuing to perform Iran-related business and risk being in breach of the U.S. secondary sanctions, or bringing such business to an end and risk being in breach of the EU Blocking Regulation. In addition to the Blocking Regulation, as we reported here, the EU is considering implementing a mechanism of facilitating payments for Iranian exports that would by-pass the traditional banking systems and thereby limit the risk of influence of the U.S. authorities. Whilst we await details of how such a mechanism might work (a bartering style system has been referenced), a note of caution: in the eyes of the Trump Administration, the use of this mechanism could constitute an evasion of the U.S. sanctions on Iran. Additionally, and importantly in the context of a potential barter-style system, sanctions can be triggered even when funds are not exchanged.
In recent weeks, we have also seen some guidance from the English High Court specifically in relation to the scope and application of the U.S. secondary sanctions and the EU Blocking Regulation regimes. Details of the judgment were reported in our previous blog post.