In the latest effort to intensify economic sanctions against the Government of Iran, on October 15, 2012, the Council of the European Union issued Decision 2012/635/CFSP, expanding the nature and scope of European restrictions on financial transactions or other commerce involving Iran. These new EU measures come on the heels of the EU’s Iran oil embargo, which went into effect on July 1 of this year and severely restrict Iran’s ability to export crude. These new EU measures also follow the enactment by the United States of its third major Iran sanctions law in the last two years—the August 15, 2012 Iran Threat Reduction and Syria Human Rights Act.1

Key Components

The EU Council’s October 15 Decision outlines several new or expanded sanctions against Iran, with the stated goal of persuading Iran to engage constructively in international negotiations about Iran’s nuclear program. The additions to the EU’s asset freezing list are effective immediately. The other measures agreed upon by the EU Council must be implemented by a forthcoming EU Regulation, the timing for which has not yet been announced.

These new sanctions measures include:

  • Freezing the assets of 34 individuals and entities, including those of the National Iranian Oil Company ("NIOC") and certain of its affiliates, the National Iranian Tanker Company ("NITC"), and other Iranian State-owned oil and gas firms;
  • Prohibiting all financial transactions between the EU financial sector and Iranian banks, (including branches and subsidiaries outside Iran) unless authorised in advance and for humanitarian purposes;
  • Expanding existing prohibitions on medium and long-term export credits for trade with Iran to also prohibit short-term export credits;
  • Banning the import, purchase or transport of Iranian natural gas, into the EU, and prohibiting EU member states and institutions from providing related finance or insurance for such activities;
  • Prohibiting the sale, supply or transfer to Iran of certain materials that could be helpful to Iran’s nuclear program or Iran’s ballistic missile program, such as graphite, raw or semi-finished metals (e.g., aluminum and steel), or software for integrating industrial processes; and
  • Broadly prohibiting any transactions with, or assistance for, Iran’s shipbuilding sector or with vessels that transport or store Iranian oil or petrochemical products.

Scope of Coverage

The forthcoming EU Regulation implementing the Decision will be binding in all EU Member States, without the need for additional national measures. Nevertheless, some EU Member States, such as the United Kingdom, are likely to adopt State-level measures to ensure that national authorities can properly enforce the provisions of the Regulation.

The EU Iran sanctions generally apply within the territory of the EU, including its airspace; on any vessel or aircraft under the jurisdiction of an EU Member State; to any national of a Member State, regardless of where they are located; to any legal person, body or entity constituted or incorporated in a Member State, regardless of where they are located; and to any legal person, body or entity in respect of any business done in whole or in part within the EU.

In addition to EU sanctions against Iran, the UK has already implemented several of its own restrictions on dealing with the Iranian banking sector. In the UK, financial institutions have been unable to carry on much, if any, trade with the Iranian banking system since 2011 (under the Financial Restrictions (Iran) Order 2011). Under domestic measures made using powers under the Counter Terrorism Act (CTA) 2008, UK banks must apply to the UK Treasury for a license to deal with Iranian banks. When the new EU Regulation takes effect, the UK Treasury is expected to take measures to ensure consistency between the two regimes, including by consolidating or harmonizing licenses and notifications where appropriate.


The new EU Council Decision reflects the growing global consensus on further restricting Iran’s access to capital, particularly for activities in Iran’s energy sector. The Decision also indicates that non-energy commercial linkages with Iran are also the subject of intense scrutiny. While the forthcoming EU Regulation implementing the Decision will define what types of trade, if any, remain permissible—and if so, under what conditions—businesses should consider the possibility that urgent withdrawal from the Iranian market may become even more prudent.

The expansion of EU sanctions, and the increasing frequency of modifications and expansions of US sanctions, counsel heavily in favor of active monitoring of the policy landscape. Within this environment of extraordinary focus on Iran, heightened diligence and enhanced compliance protocols are also advisable.

View the Council’s October 15, 2012 decision.