The Geneva Joint Plan of Action (“JPOA”), which was agreed between the P5+1 and Iran on 24 November 2013, came into effect on 20 January 2014 and was the result of extensive interaction between the EU, the USA and Iran.

What is now in place is a comprehensive system of temporarily suspended sanctions against Iran which, if Iran maintains its commitment to reducing its nuclear programme, could be extended in due course. 

One of the key areas for which a relaxation of sanctions has occurred is in respect of the transportation of specified crude oil, petroleum and petrochemical products, as well as gold and other precious metals and vessels designed for the storage of oil/petrochemical products. 

The EU

The new amendments to Regulation 267/2012 (the “Regulation”) are to be found in Regulation 42/2014 (the “2014 Regulation”). From a transportation perspective, the following temporary relaxations are likely to be of interest:

  • Crude oil and petroleum products

The transportation of crude oil and petroleum products which are from Iran, or which originate in Iran, by EU owned or registered vessels is now permitted, provided that such transportation is not to an EU country but rather is to a country which has received a National Defense Authorisation Act (“NDAA”) waiver (i.e. China, India, Japan, Republic of Korea, Taiwan or Turkey).

Insurers will be able to provide cover to EU and non-EU owned or registered vessels transporting such products, always provided that such cover is only provided to contracts which terminate prior to 20 July 2014 and that the recipient country is an NDAA waiver country.

The products covered by this temporary suspension are listed in Annex XI of the Regulation.

  • Petrochemical products

Prohibitions relating to the import, purchase, transportation into the EU and insurance and re-insurance of petrochemical products from Iran or which are of Iranian origination have been suspended.  This means that EU and non-EU owned or registered vessels will be able to transport petrochemical products from Iran both within and out with the EU and insurers will be able to provide cover, again provided that the contracts come to an end prior to 20 July 2014. 

The relevant products are listed in Article 13 and Annex V of the Regulation.

  • Gold and precious metals

Prohibitions relating to the direct or indirect supply, sale, transfer or export, insurance and reinsurance of gold and precious metals to or from the Government of Iran, its public bodies, corporations and agencies or any person, entity or body acting on their behalf, at their direction or controlled by them have been suspended.  The relevant products are listed in Annex XII of the Regulation and it should be noted that diamonds are not currently included within the suspension.

  • Vessels designed for storage of oil/petrochemical products

The prohibition on making vessels designed for the transport or storage of oil and petrochemical products available to Iranian persons, entities or bodies has been suspended, with the exception of charters to or contracts with designated entities.

The USA

The USA published a number of documents on 20 January 2014, the key three being:

  • Guidance Relating to Provision of Certain Temporary Sanctions Relief in Order to Implement the Joint Plan of Action.
  • A Statement of Licensing Policy on Activities Relating to the Safety of Iran’s Civil Aviation Industry.
  • Frequently Asked Questions.

Essentially, the USA is easing sanctions in respect of trade in Iranian petrochemical products, the sale, supply or transfer into Iran of goods or services used in connection with the automotive sector and trade to or from Iran of gold and other precious metals.  The USA has also permitted services linked to these activities, including insurance, transportation and financial services. The suspension are designed to be similar in nature those in the EU.

There are limitations to the USA suspensions, including that US persons remain prohibited from involvement in the above activities, all activities must be completed by 20 July 2014 and transactions with Specially Designated Nationals remain prohibited.

Comment

What can be seen from this joint effort by the EU and the USA is that all parties remain committed to honouring the obligations agreed in Geneva in November 2013. That said, from a business perspective, while there is certainly now some scope for engaging with Iranian entities, a few words of caution are necessary:

  • At present, neither the EU nor the US have confirmed their understanding as to the validity of any insurance cover provided during the period 20 January 2014 – 20 July 2014.  One important result of this, therefore, is that at present it appears that any insurance provided will only be effective until 20 July 2014, where after any payment made in respect of a claim, the cause of which occurred during the relief period, would be in breach of sanctions.  As such, most insurers are recommending to their assureds that they do not enter into contracts for the transportation of crude oil, petroleum oil and petrochemical products with an Iranian element.  
  • Should Iran fail to comply in some way with its obligations, the sanctions relief could be quickly withdrawn and, without adequate contractual protections in place, insurers and those contracting with Iranian entities may find themselves in the position of either being in breach of contract or in breach of sanctions. 
  • The sanctions relief is temporary.  While it is hoped that further progress in the dialogue between the P5+1 and Iran will be made, there is no guarantee that, at the end of the initial six month period, the suspensions will be maintained.  To that end, any contracts agreed pursuant to these relaxations will need to be concluded and all obligations executed prior to 20 July 2014.
  • It should be noted that there are still EU and US restrictions on various activities linked to Iran and, while some activities are now permitted by the 2014 Regulation, in so engaging in these activities, insurers and those contracting with Iranian entities may find themselves in breach of ancillary prohibitions.  Entities should further be aware of the extraterritoriality of US sanctions, which continue to bite.

Conclusion

Iran is a country with a wealth of potential opportunities, particularly for those involved in the international movement of oil, petroleum and petrochemical products, but caution must be exercised when dealing with contracts linked to Iran.  In particular any contract must contain suitable wording linked to the current (temporary) sanctions position.