Global leaders have been locked in intense discussions with the Iranian Government in Lausanne, Switzerland to broker a deal involving the lifting of Iranian economic sanctions in return for Iranian pledges on their nuclear program. The discussions failed to yield any fruit by the self-imposed deadline of 31 March 2015 but an extension was agreed. On 2 April, news out of Lausanne was that there has been a breakthrough and a ‘Joint Comprehensive Plan of Action’ outlining the way in which the sanctions can be lifted was agreed.

What are sanctions?

Economic sanctions can be defined as the coercive exertion of pressure by one state or a collection of states to bring about a change in political behaviour of another state. Economic sanctions are usually directed at the entire population of the sanctioned country while targeted sanctions are directed at the State’s government and/or individuals. In the case of Iran, sanctions are targeted at the Government of Iran and any entity closely connected with them or working on their behalf.

What is the status quo?

Sanctions on Iran have been imposed from 3 main sources, the US, EU, UN. Sanctions have been implemented in an attempt to halt or stem the progression of Iran’s nuclear capabilities. Individual nations, including the UAE, have taken action against Iran in order to preserve other trade relationships in the international market. Broadly speaking, the sanctions have targeted any industry that would, save for the sanction,support Iran’s nuclear program. This has resulted in wide-reachingsanctions that have deeply affected the shipping and oil & gas industries, stemmed finance and insurance to Iranian oil/government-related entitiesand isolated Iran from the international banking system (for example, by prohibiting SWIFT payments in Iran).
EU sanctions pertain by and large to activities that involve cooperation with Iran in foreign trade and transport, financial services, energy sectors, technologies and insurance. These sanctions have extended to specific companies which are domiciled outside of Iran, as far afield as Germany, Singapore, Hong Kong, China and Dubai.

US sanctions, which are extra-territorial in nature, primarily target Iran’s ability to import and produce refined petroleum products. The sanctions provide for the ability to punish US citizens for breaching sanctions against Iran as well as foreign sanction evaders.
Lastly, the UN sanctions encompass targeted asset freezes against individuals and companies, a ban on the supply of nuclear related materials, an arms embargo and monitoring of Iranian bank activity and ship inspections.

What impact has this had on those in the maritime industry?

The impact of the sanctions on the shipping industry has been deep and widespread. The sanctions collectively ensure that providing most forms of services to Iranian owned or chartered vessels was prohibited. By way of example, the sanctions have covered the sale of bunkers, towage services and general supply to blacklisted ships. They also prohibitfinancial services for ships and marine insurance. The latter has lead to the creation of an Iranian P&I Club and other local marine insurance solutions. Insurance has been denied to non-Iranian entities for dealing with blacklisted Iranian entities even where the insurance claim has been factually unconnected to the sanctioned entity. Of particular sensitivity has been any activities in support, service or on behalf of the Islamic Revolutionary Guard Corps or designated Islamic Republic of Iran Shipping Lines (IRISL) related entities.

In light of the above, the wider non-Iranian maritime community has lost business from Iran’s shipping industry. Although Iran are known to have adapted in ways which have neutered the sanctions (ie, by vessel flag change or creation of shell companies) the lifting of the sanctions would undoubtedly open the floodgates for maritime business, not least for the Gulf region and the London insurance market which would particularly profit from increased Iranian trade imports and exports and marine insurance requirements respectively.

Will the sanctions definitely be lifted?

In short, no. The sanctions will only be lifted if Iran complies with the following key conditions:
• Reduction of Iran’s low-enriched uranium stockpiles from more than eight tonnes to 300 kg, either by export or dilution.
• Reducing Iran’s installed centrifuges from approximately 19,000 to just over 6,000. The remaining 13,000 would be disabled and put under IAEA seal.
• Elimination of the core of the heavy water reactor at Arak, rendering it inoperable.
• Iran’s agreement to a regime of more intrusive inspections carried out by the International Atomic Energy Agency (IAEA).
• Allowing the IAEA the access to inspect suspected nuclear related sites and investigate key individuals. Increased cooperation with an IAEA investigation into evidence of past work on nuclear armament will also be necessary.

How will the sanctions be lifted?

Subject to Iran’s compliance with the conditions, the EU would remove the sanctions and the US would have to issue waivers tothe sanctions because they are extra-territorial and would penalize anyone in the EU who breaches these sanctions in the US. The lifting of sanctions will need to be complete and not partial as it was agreed that partial removal of sanctions would still prevent parties from dealing with Iran in fear of breaching the residual sanctions.

How long will it be before the sanctions are completely lifted?

The agreement is due to be signed in June 2015. Thereafter, the speed of the process depends entirely on the rapidity of Iranian compliance. The EU have stated that Iran are expected to need at least 2 months to comply with the conditions set although other experts have mentioned 6 to 8 months being more realistic. Upon satisfaction of the requirements, the EU have indicated that they will immediately lift the sanctions which will be simultaneously lifted in the US. Therefore, we are looking at a realistic timeframe of 1 year before the sanctions are removed.

What can I do now?

Contact us before entering into any commercial dealings with Iranian entities or anyone connected with Iranian sanctioned entities. Until the sanctions are lifted they continue to operate as normal. The sanctions will be lifted subject to Iran’s compliance with the conditions which will take time. Watch this space.

Author: Atoussa Mahmoudpour

Iran Sanctions was last modified: January 7th, 2018 by Fichte Legal