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Proposed Easing of EU and US Iranian Sanctions

Easing of Iranian Sanctions - proposed EU regulation and U.S. developments - 14 January 2014

Further to the First Step Understanding with Iran concluded in November 2013 by the group of countries known as P5 +1 (United States, United Kingdom, Germany, France, Russia and China), the European Union (EU) has published a draft regulation to lift certain restrictive measures against Iran.  There is as yet no announced date for introduction of the new regulation. The Club and the International Group are monitoring the situation but it is not yet possible to give definite advice as to the implications for the cover offered by the Club as the proposed EU regulation remains in draft and could be subject to change. Further details will be published as soon as the position becomes clearer.  It is also worth noting that there is as yet no information about any specific changes there might be to the US Sanctions regime. Unless US sanctions are lifted at the same time as EU sanctions, the scope and availability of Club cover may not be greatly affected by the unilateral lifting of EU sanctions. In particular the Club, as an insurer, will need to ensure that it does not contravene the US ban on providing insurance or reinsurance to or for any activity with respect to Iran for which sanctions have been imposed under the various sanctions laws of the US.

We set out further details of the EU proposals below as well as a link to the draft regulation.

On the basis that Iran abides by its commitments to limit its nuclear programme, the draft EU regulation proposes the temporary suspension of the following restrictive measures set out in EU Regulation 267/2012, as amended by EU Regulation 1263/2012:

  • The prohibition on the transport of Iranian crude oil or petroleum products if they originate in Iran or are being exported from Iran to any other (i.e. non-EU) country  (Article 11.1 (c) of Reg 267/2012);
  • The prohibition on the provision of insurance and reinsurance related to the import, purchase or transport of crude oil and petroleum products  of Iranian origin or that have been imported from Iran (Article 11.1 (d) of Reg 267/2012);
  • The prohibition on the import, purchase or transport  of Iranian petrochemical products and on the provision of related financial services, including insurance/reinsurance ( Article 13.1 ( a)-(d) of Reg 267/2012;
  • The prohibition on trade in gold, precious metals and diamonds with the Government of Iran, its public bodies and the Central Bank of Iran, or persons and entities acting on their behalf (Article 15.1 ( a) – (c) of Reg 267/2012;)
  • The prohibition on making available vessels designed for the storage of oil and petrochemical products to any Iranian person entity or body, or to others where the vessel is used to carry or store oil or petrochemical products that originate in Iran or which have been exported from Iran (Article 37 (b) set out in EU Regulation 1263/2012);  
  • A derogation from the asset freezing provisions in Article 23 ( 2) and (3) of Reg 267/2012 in favour of the Iranian Ministry  of Petroleum, to enable funds and economic resources to be made available  where necessary for the execution of contracts for import, purchase or transport of petrochemical products that originate in Iran or which have been imported from Iran.;
  • The increase by tenfold of the authorisation thresholds for personal remittances from Euro 40,000 to Euro 400,000; for transactions regarding foodstuffs, healthcare, medical equipment or for agricultural or humanitarian purposes  from 100,000 to Euro 1 million; and for all other transfers of funds to and from Iran from Euro 10,000 to Euro 100,000. (Article 30 set out in Reg 1263/2012).

It is important to note however that the prohibitions in Articles 11 1  (a) and (b ) of EU Regulation 267 remain, banning:

(a) the importation of crude oil or petroleum products into the E. U. if they: (i) originate in Iran or (ii) have been exported from Iran; and
(b) the purchase of crude oil or petroleum products which are located in or which originated in Iran.

Assuming therefore that the proposals are adopted into a Council Decision and Regulation, the prohibitions against the import and purchase of Iranian origin crude or petroleum products into the EU remain, but it seems that the transport and insurance or reinsurance of activities in relation to these cargoes would be permissible if such Iranian origin crude oil or petroleum products are exported from Iran to any other non-EU country.

The IG secretariat is continuing to engage with the European Commission  concerning implementation of the new Regulation and in particular to clarify the timescales for suspending or reattaching sanctions. 

The IG secretariat is also providing details of the EU proposals  to the US authorities and urging them  to align their policies and legislation with that proposed by the EU.  It should be noted that until amending legislation is passed, the existing US sanctions will remain in full force. These currently include but are not limited to:

  • (under S 202 of ITRA[1]) a ban on owning, operating, controlling or insuring  a vessel used to transport crude oil from Iran to another country, unless to a country benefitting from a US Presidential waiver under NDAA 2012[2] permitting the import of Iranian oil;
  • Measures targeting the energy, shipping and shipbuilding sectors of Iran, including port operators under S 1244 of IFCPA[3];
  • A ban on supplying precious, raw and semi-finished metals to Iran under S 1245 of IFCPA;
  • A ban (in S 1246 of IFCPA) on providing insurance or reinsurance to or for any activity with respect to Iran for which sanctions have been imposed under the various sanctions laws of the US;
  • The sale or provision to Iran of refined petroleum products (RPP) under CISADA, or which significantly contribute to Iran’s ability to maintain or expand its domestic production of petrochemicals (Executive Order 13590 of November 2011);
  • The sale or provision to Iran of goods or services enhancing Iran’s ability to maintain or expand its domestic production of RPP, including assistance with the construction, modernisation or repair of petroleum refineries (CISADA[4]).

On 12th January 2014 the White House issued a press release stating that implementation of the Joint Plan of Action (“JPA”- agreed in November 2013) will begin on 20th January 2014. However no particulars of specific US legislative proposals to lift sanctions have yet been published. An Executive Order may be issued to this effect on or after 20th January 2014. It does appear that the US and the EU intend to work together to ease restrictions, but until the US aligns its position with that of the EU through amending legislation, the lifting of the EU restrictions identified above, and in particular the lifting of the ban on transport of Iranian crude oil and the related restriction on provision of insurance, may be of limited effect. 

Whilst the goal of the negotiations with Iran has been focused on preventing Iran from developing nuclear weapons, the U.S. remains very concerned about the flow of weapons and support from Iran to terrorist groups such as Hezbollah in Syria and Lebanon. Notwithstanding express threats of a presidential veto, the U.S. Congress may move forward with new sanctions legislation. Fifty-eight senators have signed as co-sponsors of the Nuclear Weapons Free Act of 2013 introduced in December 2013. This Act would impose additional sanctions on Iran and would be likely to derail the current rapprochement.

The law firm Holland & Knight have kindly given their consent to publication on our website of their article on the latest U.S. developments. A copy of the article may be accessed here.

1 The Iran Threat Reduction and Syria Human Rights Act 2012
2 The National Defence Authorisation Act for the Fiscal Year 2012
3 Iran Freedom and Counter-Proliferation Act 2012
4 Comprehensive Iran Sanctions, Accountability and Divestment Act 2010