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Iran Sanctions Update: the EU implements the new restrictive measures announced in January, and expands the scope of pre-existing measures

Companies which trade in Iranian crude oil, petroleum products or petrochemical products (as well as those engaged in related transactions, such as shipping, insurance or financing) need to be aware of the restrictions imposed by Council Regulation (EU) No 267/2012 (the “Regulation”) which was published on 24 March 2012, and which has immediate effect (including direct effect on EU individuals and companies).

In addition, the Regulation will also have an impact on those companies which make or receive non-electronic transfers of funds to or from any Iranian person, entity or body, companies which are involved in the supply of equipment for the petrochemical industry, companies which are engaged in the import or export of precious metals and diamonds to or from Iran, and insurance brokers placing any Iranian business.

The Regulation, which implements the measures contained in Council Decision 2012/35/CFSP (the “Decision”), repeals and replaces Council Regulation (EU) No 961/2010.

Summary

The new restrictive measures contained in the Regulation include the following:

  • Prohibitions on the import, purchase, or transport of crude oil, petroleum products and petrochemical products from Iran, as well as prohibitions on related financing, insurance and technical assistance. The dates for the transitional periods in relation to these prohibitions remain unchanged from those set out in the Decision, please click here.
  • Prohibitions on the supply of key equipment and technology (and related technical and financial assistance) to the Iranian petrochemical industry, as well as the granting of financial loans to, and the acquisition of shares in, any Iranian person or entity engaged in the petrochemical industry, subject to certain transitional periods. These prohibitions build on equivalent existing prohibitions in relation to the oil and gas industry in Iran.
  • Prohibitions on certain trade with Iran (covering imports and exports) in gold, precious metals and diamonds plus prohibitions on the sale, supply, transfer or export of Iranian banknotes and coinage.
  • Enhanced or more detailed measures in relation to the process to be followed for transfers of funds (including transactions by non-electronic means) to Iranian persons, and in relation to the insurance prohibition.

While this briefing deals only with the Regulation, any companies which supply equipment which may be used for monitoring or interception of internet or telephone communications, or equipment which might be used for internal repression, need to be aware of Council Regulation (EU) No 264/2012, which was also published on 24 March 2012 and which also has immediate effect, as this restricts not only direct supply to Iran of this equipment, but also indirect supply to Iran.

The ban on the import, purchase and transport of Iranian crude oil, petroleum products and petrochemical products

The Regulation prohibits the following:

  • The import of crude oil, petroleum products, or petrochemical products into the Union if they originate in Iran, or have been exported from Iran.
  • The purchase of crude oil, petroleum products, or petrochemical products which are located in or which originated in Iran.
  • The transport of crude oil, petroleum products, or petrochemical products if they originate in Iran, or are being exported from Iran to any other country.
  • The provision, directly, or indirectly, of financing or financial assistance, including financial derivatives, as well as insurance and re-insurance related to the import, purchase, or transport of crude oil, petroleum products or petrochemical products of Iranian origin, or that have been imported from Iran.
  • The above prohibitions shall not apply to:

    • The execution until 1 July 2012 (for crude oil and petroleum products) or 1 May 2012 (for petrochemical products) of trade contracts concluded before 23 January 2012, or of ancillary contracts necessary for the execution of such contracts. The execution of contracts concluded before 23 January 2012, or of ancillary contracts, including transport or insurance contracts, where a contract specifically provides that the supply of Iranian crude oil, petroleum products, or petrochemical products, or the proceeds derived from their supply, are for the reimbursement of outstanding amounts to persons or entities under the jurisdiction of EU Member States.
    • The import, purchase and transport of crude oil, petroleum products, or petrochemical products which had been exported from Iran prior to 23 January 2012, or which had been exported after that date pursuant to the two exemptions above.

    In order to benefit from the above exemptions, the person, entity or body seeking to perform the contract concerned must give at least 20 working days prior notification of the activity or transaction to the competent authority.

    Recital 12 to the Regulation clarifies that “ancillary contracts” shall include transport, insurance or inspections contracts necessary for the execution of contracts which benefit from one of the above exemptions.

    The above prohibitions will not apply to the provision of third party liability insurance and environmental liability insurance and reinsurance, until 1 July 2012.

    We understand that the measures affecting insurance will be reviewed before the end of the exemption period, taking account of the availability and price of crude oil and petroleum products produced in countries other than Iran and the impact on global oil markets, as well as the impact on third countries.

    The new prohibitions for the Iranian petrochemical sector

    The Regulation assimilates the Iranian petrochemical industry into existing prohibitions relating to the oil and gas industry. The new prohibitions are as follows:

    • A ban on the sale, supply, transfer or export of specified key equipment or technology (or the provision of technical assistance, brokering services, financing, or financial assistance, in relation to the same) for the petrochemical industry in Iran, to any Iranian person, entity or body, or for use in, Iran. The ban shall not apply to transactions required by trade contracts concluded before 24 March 2012, or to ancillary contracts necessary for the execution of such contracts. It shall also not apply to transactions required by contracts concluded before 23 January 2012 which relate to an investment in Iran made before 23 January 2012, or the execution of an obligation arising therefrom. There is no long stop date for this exemption.
    • A ban on the granting of any financial loans or credit to, the acquisition or extension of a participation in, or the creation of any joint venture with, any Iranian person, entity or body engaged in the petrochemical industry. The ban shall not apply to loans to and participations in Iranian entities if the transaction is required by a contract entered into before 23 January 2012, provided that the competent authority has been notified at least 20 working days in advance of that contract. There is no long stop date for this exemption.

    The prohibition on trading in precious metals, diamonds and currency

    It is prohibited to sell, supply, transfer or export, directly or indirectly, gold, precious metals and diamonds, whether or not they originate in the Union, to the government of Iran, or anyone acting on its behalf.

    It is also prohibited to purchase, import or transport, directly or indirectly, gold, precious metals and diamonds, whether or not they originate in Iran, from the government of Iran, or anyone acting on its behalf.

    Further clarifications and amendments adopted in the Regulation

    The Regulation has clarified the process to be followed for obtaining authorisation for the transfers of funds to and from any Iranian person, entity or body, including those based in the Union. The Regulation also provides that transfers which are conducted by non-electronic means (for example, cash and cheques) fall within its scope.

    The prohibition on the provision of insurance to Iranian persons and entities has been expanded to include the brokering of insurance. The exemptions to the prohibition have also been clarified, to make it clear that the prohibition shall not apply to the provision of third party liability insurance or reinsurance to Iranian persons and entities based in the Union, nor to the provision of insurance to Iranian diplomatic or consular missions in the Union.

    The Regulation has also been amended to include a single prohibition on the participation, knowingly and intentionally, in activities the object or effect of which is to circumvent specific measures. Those measures include the new prohibitions in relation to the import, purchase and transport of Iranian crude oil, petroleum products and petrochemical products, and the new prohibitions in relation to the Iranian petrochemical sector, as set out above.

    Companies and individuals who are affected by the sanctions

    As with other sanctions against Iran, the Regulation applies:

    • Within the territory of the Union, including its airspace.
    • On board any aircraft or any vessel under the jurisdiction of a Member State.
    • To any person inside or outside the territory of the Union who is a national of a Member State.
    • To any legal person, entity or body, inside or outside the territory of the Union, which is incorporated or constituted under the law of a Member State.
    • To any legal person, entity or body in respect of any business or body in respect of any business done in whole or in part in the Union.

    For further information, please contact Anthony Woolich, Partner, on +44 (0)20 7264 8033 or anthony.woolich@hfw.com, or Daniel Martin, Associate, on +44 (0)20 7264 8189 or daniel.martin@hfw.com, or your usual HFW contact.

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