Yesterday, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) published a new version of the United States’ principal set of embargo and economic sanctions regulations regarding Iran. Now named the Iranian Transactions and Sanctions Regulations (“ITSR”), the regulations consolidate, implement and, in some respects, clarify sanctions policies of a variety of statutory provisions and executive orders that the U.S. government has established over the last couple of years. OFAC’s action follows on the broad expansion of Iran sanctions that the European Union announced last week.

OFAC promulgated the ITSR mainly to capture in regulations a series of “blocking” measures against Iran. The blocking measures apply broadly to, among others, the Iranian government, Iranian government-owned and controlled entities, all Iranian financial institutions, and entities that are 50%-or-more owned by the foregoing. U.S. persons (U.S. citizens and residents, U.S. companies, and all persons in the United States) are generally forbidden to take action with respect to property and property interests of such “blocked persons” that come within the possession or control of a U.S. person or that come within the United States. In effect, the regulations generally ban transactions in which blocked persons have a direct or indirect interest. With the addition of broad blocking measures, the ITSR reinforce an embargo against Iran that has reached historic proportions.

The ITSR reestablish most policies of prior Iran embargo regulations (the Iranian Transactions Regulations). The new regulations also change and add rules, however. For example, OFAC has long administered a principle that OFAC licenses and exceptions to prohibitions authorize not only activities that are expressly permitted but also actions that are “ordinarily incident” to expressly authorized activities. The ITSR specify that, in general, a payment or transfer of funds will no longer be deemed “ordinarily incident” to a licensed transaction and, rather, must be expressly authorized by OFAC.

Notably, the ITSR do not reflect the recent extension of the embargo to non-U.S. subsidiaries of U.S. companies. As mandated by the August 2012 Iran Sanctions, Accountability, and Human Rights Act, an executive order released earlier this month generally prohibits any transaction by a non-U.S. subsidiary of a U.S. company with the Iranian government or a person who is subject to the Iranian government’s jurisdiction if the transaction would violate U.S. sanctions if undertaken by a U.S. person. Under the new rule, the U.S. parent company is exposed to penalties if its non-U.S. subsidiary engages in such a transaction. Although not reflected in the ITSR, this rule has been in force since October 9.