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P5+1 and Iran Agree to Extend Limited Sanctions Relief

An agreement has been reached between Iran and the P5+1 countries (United States, United Kingdom, Germany, France, Russia and China), to extend for a period up to 24 November 2014 the terms of the sanctions relaxation measures adopted under the "Joint Plan of Action" ("JPA") from 20 January 2014 and which had been due to expire on 20 July 2014. 

During the limited period up to 24 November 2014, Iran has committed to convert an agreed amount of uranium oxide into fuel for the Tehran Research Reactor and to dilute all of its UF6 enriched up to 2% into natural uranium. In return, the P5+1 countries have committed to enable the repatriation of $2.8 billion of Iranian funds held overseas in instalments over the course of the 4 month extension period.

A link to a U.K. Government Press Release on this development can be found here, and a copy of a Joint Statement issued by the EU and Iran can be accessed from the link set out below.

Details of the sanctions measures that are subject to the JPA relaxation measures are set out in articles published on the Club website: Iran Sanctions.

Members are reminded that those relaxation measures apply to a very limited range of trade activities (and associated services including insurance) and apply only for a further short period of time up to 24 November 2014.  It remains the case that most trade involving Iran, and the provision of associated services such as P&I insurance, is prohibited, and that all trade involving Iran or Iranian entities is inherently risky and must be approached with utmost caution. 

The IG has previously sought clarification of the extent to which Club cover, which may be provided during the initial JPA Period in relation to trades permitted under the JPA, will be able to respond to liabilities arising during the JPA period but which may not be crystallised or presented until the expiry of the JPA period. No official clarification has thus far been received on this point.  In the absence of clear official guidance to the contrary,  Members should proceed on the basis that beyond any extension of the suspension period (24 November 2014), Club cover will not respond to claims presented after 24 November 2014 in respect of liabilities arising during the suspension period. Given that most P&I claims have a long tail, the suspension of the insurance prohibitions is of limited, if any, value.  In light of this, the provision of Club security in respect of claims arising during the suspension period is effectively precluded, given that the Club cannot commit to any payment obligations which it may legally be prohibited from complying.

For the protection of the Club and wider membership, the Rules and clauses endorsed on certificates of entry provide for automatic cessation of cover in the event that a Member or vessel becomes designated, or if the Member engages in sanctionable activity causing a risk to the Club.

Members are also reminded that certain port operators in Iran are designated by the EU and US, and the use of Iranian ports involves a very high degree of risk for shipowners, even if the underlying trade activity is lawful or exempted. The US expressly prohibits transactions by non-US as well as US persons involving the Iranian port operators Tidewater Middle East Co and South Sea Shipping Lines, and breach can put a shipowner at the risk of sanctions under Executive Order 13608 “Prohibiting Certain Transactions with and Suspending Entry into the United States of Foreign Sanctions Evaders with Respect to Iran and Syria” 1 May 2012, and the Iran Freedom and Counter-Proliferation Act 2012.

Members are advised to refer questions concerning sanctions measures to their usual Club contacts.

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