Yesterday President Obama issued a new Executive Order (the Order) regarding Iran. The Order does not impose new sanctions regarding Iran, but rather it addresses the U.S. Treasury Department's implementation of certain sanctions measures set forth in the Iran Sanctions Act of 1996 (ISA), as amended by the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA). In addition, today the State Department designated seven additional companies pursuant to ISA/CISADA, and Treasury designated certain of these entities as Specially Designated Nationals (SDNs). The list of companies can be found on the State Department's website.
Executive Order and Treasury Department Designations
In summary, the Order specifies how the Treasury Department will implement five of the nine possible measures that the State Department could impose against entities determined by the State Department to have engaged in sanctionable activities under section 5 of ISA/CISADA (targeting the Iranian oil/gas sector). The State Department will continue to have the authority to conduct investigations and make determinations under section 5 of ISA/CISADA as to which persons/entities have engaged in sanctionable activities, and which measures (one or more of the nine) would be imposed against that person or entity.
Of particular interest is the way in which the Treasury Department will implement the President's authority to prohibit any person from acquiring, holding, or dealing in property of a sanctioned person that comes within the jurisdiction of the United States or possession or control of U.S. persons. The Order states that such property will be considered "blocked" (similar to property of SDNs) under a variety of other U.S. sanctions programs). That is, the sanctioned entity's property within U.S. jurisdiction could not be dealt in by U.S. persons, and U.S. persons would be required to block such property and file blocked property reports with the Treasury Department's Office of Foreign Assets Control (OFAC). This measure would cause particular concern if the sanctioned entity has a U.S. subsidiary, which could be subject to the blocking. Note below how the U.S. government dealt with this issue in one of its designations today regarding a Venezuelan entity.
When the State Department investigates and designates entities pursuant to ISA, as amended by CISADA, and chooses to apply one of the sanctions for which the Treasury Department also bears responsibility, OFAC may make further additions to its SDN list to reflect the designations. In fact, in conjunction with the Order and pursuant to State Department designations today, OFAC has published additions to the SDN list, as follows:
- ASSOCIATED SHIPBROKING (a.k.a. ASSOCIATED SHIPBROKING S.A.M.; a.k.a. "SAM")
- ROYAL OYSTER GROUP
- SPEEDY SHIP FZC (a.k.a. SEPAHAN OIL COMPANY; a.k.a. "SPD")
- PETROCHEMICAL COMMERCIAL COMPANY INTERNATIONAL LIMITED (a.k.a. PETROCHEMICAL COMMERCIAL COMPANY INTERNATIONAL LTD; a.k.a. PETROCHEMICAL TRADING COMPANY LIMITED; a.k.a. "PCCI") (this entity was already listed as Government of Iran owned, but has now been designated specifically under ISA)
The President also issued a letter to Congress summarizing the new Order and attaching a copy.
State Department Designations and Fact Sheet
These Treasury Department SDN designations follow the State Department's designation of the following companies under ISA/CISADA:
- PCCI (Jersey/Iran)
- Royal Oyster Group (UAE)
- Speedy Ship (UAE/Iran)
- Tanker Pacific (Singapore)
- Ofer Brothers Group (Israel)
- Associated Shipbroking (Monaco)
- Petróleos de Venezuela (PDVSA) (Venezuela)
The State Department imposed measures against these entities as follows:
- PCCI, Royal Oyster Group, Speedy Ship, and Associated Shipbroking to bar them from U.S. foreign exchange transactions, U.S. banking transactions, and all U.S. property transactions.
- Tanker Pacific and Ofer Brothers Group are barred from securing financing from the Export-Import Bank of the United States, from obtaining loans of over US$10 million from U.S. financial institutions, and from receiving U.S. export licenses.
- PDVSA, the state-owned oil company of Venezuela, is prohibited from competing for U.S. government procurement contracts, from securing financing from the Export-Import Bank of the United States, and from obtaining U.S. export licenses. The State Department specifically noted that its measures do not apply to PDVSA subsidiaries and do not prohibit the export of crude oil to the United States.
In a State Department Fact Sheet published today the State Department noted its efforts pursuant to ISA/CISADA. The Fact Sheet states that "major insurers, including Lloyds of London, have stopped covering shipments of refined petroleum to Iran" and that "the State Department has also convinced the jet fuel suppliers in 17 cities in Europe to which Iran Air flies to stop providing fuel." The Fact Sheet also names several other entities that have stopped, or committed to stopping, certain business with Iran, including: Tupras, Total, Shell, Petronas, Vitol, Trafigura, Lukoil, BP, ThyssenKrupp, and INPEX.
The EU has also taken actions this week to strengthen sanctions against Iran, as well as Libya, Syria, and Belarus.
Please let us know if you have any questions or would like additional information.