On 16 January 2016 (Implementation Day), the International Atomic Energy Agency (IAEA) announced that Iran had fulfilled its nuclear-related obligations under the Joint Comprehensive Plan of Action (JCPOA). Immediately following the IAEA’s announcement, the United States (US), the European Union (EU) and the United Nations (UN) proceeded to implement sanctions relief as set out in the JCPOA.
We set out below a brief overview of the changes to the Iran sanctions from Implementation Day.
The core US sanctions that prohibit US persons and entities from engaging in most commercial transactions with Iran remain in place. The US has however lifted most secondary sanctions against Iran (i.e. supplementary sanctions regulations directed towards non-US persons).
Non-US persons are now no longer subject to US sanctions which had prohibited them from engaging in a wide range of activities with Iran. In particular, the US has lifted secondary sanctions on the following activities and sectors:
- Iran’s oil and gas industry (including purchases of Iranian oil and liquefied natural gas; investments in oil exploration and production; and expansion of Iran’s petrochemical sector)
- Iran’s shipping and shipbuilding industry (including the provision of insurance, bunkering, and classification services to Iranian vessels)
- Provision of US banknotes to the government of Iran
- Trade in gold and other precious metals with Iran
- Trade in graphite and raw or semi-finished metals such as aluminium, steel, and coal with Iran
- Iran’s automotive industry
- Purchase, subscription or facilitation of the issuance of Iranian sovereign debt
In addition, the US has also removed more than 400 individuals and entities from the Specially Designated Nationals (SDN) list. These entities include Iranian companies and Iranian financial institutions such as Iran Air, the Islamic Republic of Iran Shipping Lines, the National Iranian Oil Company and the National Iranian Tanker Company.
Restrictions on US persons largely remain in place, except for the following changes:
- US persons may now seek specific licenses from Office of Foreign Asset Control (OFAC) to export and re-export commercial passenger aircrafts to Iran.
- Importations of Iranian carpets and foodstuff are now permitted.
US-owned or controlled foreign entities
Prior to 16 January 2016, US-owned or controlled foreign entities had been subject to the same sanctions as US persons. Since Implementation Day however, OFAC has issued the new General License H, which allows non-US entities that are “owned or controlled” by a US person to engage in certain transactions with Iran, provided US persons are not involved in and do not approve or facilitate such transactions. This new General License H effectively turns back time to the pre-2012 era, before primary sanctions were extended to include the activities of foreign subsidiaries of US companies.
General License H however does not permit the following:
- Direct or indirect export / re-export of any goods, technology or services from the US to Iran, with limited exceptions for certain items such as food, medicine and medical equipment specified under the Iranian Transactions and Sanctions Regulations.
- Transfer of funds to, from or through a US depository institution in connection with an Iran-related transaction.
- Engaging in transactions with entities on the SDN list, the Iranian military or Iranian law enforcement agencies.
The EU has lifted the majority of the EU sanctions against Iran, including the oil embargo. However, proliferation-related sanctions and human rights violation-related sanctions, including the following, remain in place:
- The ban on the sale, supply, transfer or export to Iran, of all military goods and technology
- The ban on the sale, supply, transfer or export of equipment which might be used for internal repression
- The ban on the provision of technical assistance, brokering services and financial assistance related to the aforementioned categories of transactions and activities.
The EU has removed restrictions on the following sectors and activities:
- Transfer of funds between EU entities and Iran, including financial and credit institutions
- Banking activities, including new branches of Iranian banks opening in EU Member States, and EU entities opening new offices, subsidiaries, joint ventures and bank accounts in Iran
- Insurance and reinsurance for Iranian entities
- Import of Iranian oil, gas, and petrochemical products
- Investment in the export to Iran of equipment for oil, gas and petrochemical sectors
- Shipping, shipbuilding and transport sectors
- Export of gold, precious metals and diamonds
The EU has also lifted the asset freeze on certain Iranian entities in the financial, energy, shipping and transport sectors, including the Central Bank of Iran. Iran has also been given access to financial messaging services such as SWIFT.
The UN sanctions against Iran primarily targeted transactions relating to Iran’s nuclear programme and were narrower in scope than the US or EU sanctions. Most of these UN sanctions were lifted on Implementation Day pursuant to United Nations Security Council Resolution 2231. Previous Resolutions implementing sanctions against Iran were terminated and certain individuals and entities were removed from the United Nations Security Council Blacklist.
Position in Singapore
In Singapore, United Nations Security Council Resolutions are made legally binding through two implementing Regulations: the United Nations (Sanctions – Iran) Regulations 2014 and the Monetary Authority of Singapore (Sanctions and Freezing of Assets of Persons – Iran) Regulations 2007.
At the time of writing, both these implementing Regulations are still in force and have not yet been rescinded. The position in Singapore, for the time being, is therefore that the pre-Implementation Day UN Sanctions continue to remain in force.
We would add that in addition to these Regulations, the MAS had also previously independently issued a separate Notice in 2012 which specifically prohibited financial institutions from transacting with the Iranian Government and Iranian financial institutions. Recently, on 28 January 2016, the MAS cancelled the Notice and lifted the prohibition. As the 2012 Notice was independent of the UN Sanctions or implementing Regulations, its cancellation does not have any impact on the Regulations – which continue to remain in place.
It would be prudent for Singapore citizens and institutions / persons within Singapore jurisdiction to wait for the United Nations Security Council Resolution 2231 to be formally adopted under Singapore legislation first before treating the UN sanctions as having been lifted. The Ministry of Foreign Affairs of Singapore has welcomed the announcement of Implementation Day in their official press release and we would expect the changes to the UN Sanctions to be implemented in Singapore.
Other Points to Note
The JCPOA contains ‘snap-back’ provisions that would allow nuclear-related sanctions to be re-imposed if Iran were to fail to meet its continuing obligations under the JCPOA while it remains in place. Iran will only be free of its obligations under the JCPOA when the term of the plan expires in 10 years’ time. It is also worth noting that governments and international bodies are also always free to unilaterally impose other sanctions that may not relate to the JCPOA.
While sanctions are ever changing, they continue to remain a firm feature of international commerce. It is important for parties engaged in international business, and specifically business involving sanctioned countries to keep abreast of any changes.