Iran Sanctions

On March 23, 2012, the Foreign Affairs Council of the European Union (Council) adopted new and expanded measures against Iran.  Council Regulation (EU) No. 267/2012: (1) defines the precise scope of the measures agreed in January 2012 (see previous client advisory here); (2) clarifies relevant administrative procedures for national authorities implementing the sanctions; and (3) repeals and replaces Regulation (EU) No. 961/2010.  Council Decision 2012/168/CFSP reinforces restrictive measures adopted in response to serious human rights violations in Iran, prolongs them by 12 months, and adds 17 persons to the list of those subject to an EU travel ban and asset freeze.  Finally, Council Regulation (EU) No. 264/2012 prohibits export of telecommunications monitoring equipment for use by the Iranian regime.  The new sanctions entered into force on March 24, 2012.  The new measures apply to EU Member States, as well as persons or entities within the territories of Member States or under their jurisdiction (collectively, EU Persons).

Definitions: The new measures adopt or amend certain definitions, as follows:  

  • The definition of "brokering services" now adds that when a competent authority authorizes brokering services, no separate authorization from another authority is required.
  • The definition of "transfer of funds" now includes non-electronic transfers, so as to counter attempts at circumventing restrictive measures.
  • "Iranian person, entity, or body" covers: (1) the State of Iran or any public authority thereof; (2) any natural person in, or resident in, Iran; (3) any legal person, entity, or body having its registered office in Iran; and (4) any legal person, entity, or body wherever located, and controlled by any of the above (collectively, Iranian persons).

Export and Import Restrictions: The new measures provide updated and expanded lists of Annexes, several of which have been previously published, to ensure the effective implementation of Iranian prohibitions:

  • Annexes I, II, III cover military and dual-use goods and technology.  EU Persons are prohibited in trading all items listed in Annex I and II, as expanded, with any Iranian persons, or for use in Iran.  The prohibitions do not apply to transactions in items that received authorization before the entry into force of the new measures.  Items in Annex III cannot be exported to Iran without prior authorization.  The prohibition extends to any brokering, technical, or financial assistance for those items, except Annex III items, which requires prior authorization.
  • Annex IV covers oil and petroleum products.  The new measures prohibit EU Persons from importing, purchasing, transporting, providing financial assistance, insurance or re-insurance for items listed in Annex IV.  Contracts concluded before  January 23, 2012, and executed until July 1, 2012, including ancillary contracts and contracts where reimbursement is outstanding, are excluded from the prohibition, but require the EU Person engaging in such excluded transactions to notify the competent authority at least 20 working days in advance of such transactions.
  • Annex V covers petrochemical products.  The new measures prohibit EU Persons from importing, purchasing, and transporting, or providing financial assistance, insurance or re-insurance for, items listed in Annex V.  Contracts concluded before January 23, 2012 and executed until May 1, 2012, including ancillary contracts and contracts where reimbursement is outstanding, are excluded from the prohibition, but require the same advance notification requirement set forth above.
  • Annex VI covers oil, gas, and petrochemical industry key equipment and technology.  As expanded, these trade prohibitions extend to any Annex VI listed key equipment and technology for the oil, gas, and petrochemical industry of Iran, whether they are for exploration, production, or refining in the oil or petrochemical sectors, or liquefaction of natural gas.  EU persons are prohibited from cooperating with Iranian persons in the sector of natural gas transmission.  Transactions in the petrochemical industry concluded before March 24, 2012, or ancillary contracts concluded before  January 23, 2012 and relating to an investment made in Iran before the same date, are excluded from the prohibition, but require the same advance notification requirement set forth above.
  • Annex VII covers gold, precious metals, and diamonds.  The new measures prohibit any trade, brokering, technical or finance assistance for Annex VII items solely with the Government of Iran, or any person, entity, or body acting on the Government of Iran's behalf.
  • Annexes VIII and IX cover freezing of funds and economic resources.  Freezing of funds and economic resources is imposed against persons or entities listed in Annexes VIII and IX, as expanded.  The measures require that all funds and economic resources are to be frozen by EU Persons without delay, including those of successor entities, given Iran's attempts to circumvent the sanctions.  Furthermore, no EU Persons may supply specialized financial messaging services to entities specifically listed in the above Annexes VIII and IX, subject to certain exceptions.
  • Annex X publicly identifies the competent authorities of the Member States, as designated.

Financial Restrictions and Requirements:  The new measures require EU credit and financial institutions to conduct enhanced vigilance in relation to the activities of Iranian credit and financial institutions to prevent circumvention of the sanctions, including the review of any transfer of €10,000 or more.  Iranian institutions with EU branches must also notify the appropriate competent authority of all transfers of funds they carry out within five (5) working days, including the names of the parties, the amount, and date of transaction.  In addition, no EU Person may grant any financial loan or credit to, acquire or extend an ownership stake in, or create a joint venture with, anyone in Iran engaged in the manufacturing of items listed in the Common Military List of the European Union and Annexes I and II, in the exploration or production of crude oil and natural gas, the refining of fuels, or the liquefaction of natural gas, and in the production plans for manufacturing of items listed in Annex V.  Lastly, the asset freeze mandates that vessels owned or chartered by the Islamic Republic of Iran Shipping Lines (IRISL) cannot load or unload cargoes in ports of Member States, but does not require impounding or detention of cargoes belonging to third parties or the crew.  

The measures exclude Central Bank of Iran funds necessary: (1) for the execution of exempted trade contracts until  July 1, 2012; (2) to provide credit or financial institutions with liquidity for the financing of trade, or the servicing of trade loans; (3) for the execution of specific trade contracts, provided a Member State has granted authorization; and (4) for contracts relating to and foodstuffs, healthcare, medical equipment, or for humanitarian purposes. Other excepted transactions now require that the designated competent authority must be informed at least 20 working days in advance of such transactions.

Insurance and Re-Insurance Services: The new measures clarify restrictions on insurance and re-insurance services.  They prohibit providing insurance or re-insurance, or brokering the provision of such services, to Iranian persons.  However, certain services are excluded: (1) the provision of such services to the owner of a vessel, aircraft, or vehicle chartered by an Iranian person; (2) the provision or brokering of compulsory or third party liability insurance or re-insurance to Iranian persons based in the EU or part of the Iranian diplomatic or consular missions in the EU; (3) insurance and re-insurance necessary for the execution until July 1, 2012 (for oil and petroleum products) and May 1, 2012 (for petrochemical products) of trade contracts concluded before  January 23, 2012 relating to the import, purchase, and transport of such products; and (4) third party liability insurance and environmental liability insurance and re-insurance is exempted until July 1, 2012 (for oil and petroleum products) and May 1, 2012 (for petrochemical products).  This last exclusion is intended to provide a limited grace period to those EU insurers and re-insurers covering shipments of such products from Iran to other non-EU countries.   

Human Rights: The Council adopted new and expanded measures in response to serious human rights violations in Iran, and are valid until 13 April 2013.  Seventeen  persons have been added to the Annex to Decision 2011/235/CFSP, bringing the total number of targeted persons to 78.  The persons on that Annex are subject to an EU travel ban and asset freeze.  The new measures also prohibit the export of telecommunications monitoring equipment for use by the Iranian regime, amending Regulation (EU) No. 359/2011.  Additionally, the measures transfer the prohibition on the trade of equipment which might be used for internal repression to Decision 2011/235/CFSP.  Finally, the measures specify that the EU travel ban and freezing of assets extends to persons acting on behalf of the Iranian Revolutionary Guard Corp (IRGC) and IRISL.

Syria Sanctions

On March 23, 2012, the Council also adopted Council Implementing Decision 2012/172/CFSP and Council Implementing Regulation (EU) No. 266/2012.  The new measures prohibit 12 persons closely associated with the Assad regime from entering the EU, including President Assad's family.  These persons, along with the Syrian Petroleum Company and the Mahrukat Company (a Syrian company responsible for storage and distribution of petroleum products) are also subject to an EU asset freeze.  This brings the number of designated persons to 126 and the total of targeted entities to 41.  The measures entered into force on  March 24, 2012.

Conclusion

The new Iranian measures provide an expanded framework and guidance for implementing previously published sanctions regarding certain EU person trade with Iran, reinforce measures in response to serious human rights violations in Iran, and ban the export of certain telecommunications equipment to the Iranian regime.  The new Syrian measures include new entities in the EU travel ban and asset freeze, and expand on a series of measures targeting the Assad regime.  Collectively, the new measures signal the EU's commitment to escalating pressure in response to Iran's and Syria's continuing conduct that disregards the international community.

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