This Circular addresses the changes in EU and US sanctions measures relating principally to transportation and insurance of oil, petroleum and petrochemical cargoes from Iran.
These measures came into effect from Monday 20th January when the International Atomic Energy Agency (IAEA) confirmed that Iran complies with the nuclear measures in the Joint Plan of Action (JPoA).
On 24th November 2013, China, France, Germany, the Russian Federation, the United Kingdom and the United States reached an agreement with Iran on its nuclear programme. Part of the JPoA relies on the implementation of measures to be taken by both sides for a duration of six months and includes partial relief from EU and US Iran sanctions in exchange for IAEA access to Iran’s nuclear installations and enrichment plants.
The sanctions relief measures, which take the form of temporary suspension of certain current sanctions, are limited in scope and duration requiring the implementation of legislative amendments in both the European Union Member States and US. It should be noted that sanctions will be reinstated if the commitments and undertakings in the JPoA are not fulfilled. The effects of these measures are set out below. They are based on the information contained in the JPoA and on clarifications obtained by the International Group during its recent engagement with EU and US regulators. Further details of the JPoA can be found by using the below web link:
www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20140120.aspx
1. EU Measures
1.1 Timing
The European Commission issued an Implementing Regulation and an EU Council Decision giving effect to the political objectives set out in the Joint Plan of Action on 20th January. The Regulation will mirror the Commission Proposal. Further details can be found by using the web link below:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=JOIN:2013:0032:FIN:EN:HTML
The International Group has been advised that a harmonised and aligned approach will result in both the EU and US implementing their respective sanctions relief programmes simultaneously, subject to diplomatic and political approval.
1.2 General issues to note
In reviewing the implications of the sanctions suspension measures discussed further below, two important points in relation to these measures should be borne in mind by vessel owners and clubs;
a. Period of suspension of current measures
It is important to note that the suspension of sanctions measures is for a defined period of six months which will run from 20th January 2014 to 20th July 2014 inclusive. Continuation of the suspensions, or further suspension measures, will depend upon developments in the interim. To the extent that vessel owners wish to take advantage of the suspensions and enter into transportation contracts which will be permissible following the relaxation of the current measures on 20th January 2014, owners are advised to ensure that any contract/s fully executed by 20th July 2014 at the latest. Regulators have been unable to confirm whether, in the event that the suspension of sanctions measures is not extended after 20th July 2014, there would be any grace period/s for run-off similar to the grace period/s contained in the initiating Council Regulation (267/2012 EC)
b. Transactions with Designated Entities
The suspension of sanctions will not provide relief from the current prohibitions concerning designated persons or entities. By way of example, the suspension of Regulation 267/2012 Article 37b does not permit the chartering of vessels to NITC or other Iranian designated persons or entities. The European Commission has advised that if International Group clubs are obliged to have dealings with designated entities or persons, (e.g. port agents or operators), they should consult their Competent Authorities before entering into transactions. The practical and legal difficulties that owners and clubs may encounter was noted by the Commission officials who advised that it may be permissible to make payments to frozen accounts belonging to designated entities. This may, however, depend on the willingness of banks to facilitate the necessary transactions.
1.3 What will EU implementation of the Joint Plan of Action mean for owners and Clubs?
a . Oil and Petroleum products
(i)Import and purchase
The measures adopted do not include any suspension of the current prohibition on purchase by EU regulated entities and/or import into the EU of oil and petroleum products. However, those non-EU states which currently benefit from US National Defence Authorisation Act (NDAA) waivers (China, India, Japan, Republic of Korea, Taiwan and Turkey) will continue to be able to purchase and import oil and petroleum products consistent with the terms of their waivers and not exceeding current permitted purchase and import levels.
(ii) Transportation
From 00:00 on 20th January, by virtue of the suspension of Council Regulation 267/2012 Article 11.1(c), EU owned or registered vessels are permitted to transport oil and petroleum cargoes from Iran, or that originate in Iran, always consistent with the import and purchase restrictions identified above. As is currently the case, non-EU owned or registered vessels continue to be able to lift such cargoes.
(iii) Insurance
From 00:00 on 20th January, by virtue of the suspension of Council Regulation 267/2012 Article 11.1(d), clubs will be able to provide cover to both EU and non-EU owned or registered vessels undertaking transportation of oil and petroleum products, consistent with the import and purchase and transportation restrictions identified above.
The suspension of Article 11.1(c) and (d) does not reinstate, or make permissible, the transport and related insurance activities of oil and petroleum cargoes that are not destined for the NDAA waiver countries. A vessel owner transporting and an insurer providing insurance cover for an oil or petroleum cargo, e.g. from Iran to a non-NDAA waiver country, will be in breach of both EU and US sanctions.
b. Petrochemical products
The prohibitions in Council Regulation 267/2012 Article 13 have been suspended in full, resulting in relief from the current prohibition on import, purchase, transport and insurance of petrochemical products.
Consequently, EU (and non-EU) vessels will be able to transport petrochemical products from Iran for delivery within/outside the EU and clubs will be able to provide cover for such transport, subject always to any other applicable non-EU and non-US sanctions or prohibitions.
c. Financial Transactions
The current financial thresholds in Council Regulation 276/2012 Article 30(3)(a)(b) and (c) will be increased tenfold up to €400,000. Financial transactions involving entities or persons designated by the EU will however remain subject to sanctions.
d. Vessels designed for the storage or transport of oil and petrochemicals
The prohibition in Council Regulation 267/2012 amended by Regulation 1263/2012 (Article 37b) on making available vessels ‘designed for the transport or storage of oil and petrochemical products’ has been suspended, save for charters to or contracts with designated entities, e.g. NITC or entities owned or controlled by the IRGC.
- United States Sanctions Suspensions or Waivers
The International Group has discussed the more complex US sanctions landscape with US regulators who have confirmed that the US administration has mirrored the suspension of sanctions measures that have been adopted by the European Union Member States in accordance with the objectives and provisions of the JPoA.
In summary the US has:
- Suspended the implementation of sanctions on Iran’s petrochemical exports and Iran’s imports of goods and services for its automotive manufacturing sector;
- Begun to process expeditiously licence applications for the supply of spare parts and services, including inspection services, for the safety of flight of Iran’s civil aviation sector;
- Paused efforts to reduce Iran’s exports of crude oil to the six countries still purchasing from Iran;
- Facilitated the establishment of a financial channel to support humanitarian trade to Iran and to facilitate payments of UN obligations and tuition payments for Iranian students studying abroad;
- Modified the EU thresholds for authorisation of permitted financial transactions.
However, at this point there is no guarantee that the easing of sanctions will continue beyond 180 days and long-term contracts should not be entered into based on the relief granted on 20th January. Further, it should be noted that if a permissible activity under the eased sanctions is initiated within the JPoA period, but is not completed until after that period expires on 20th July 2014, the activity will be subject to sanctions.
Additionally, none of the relief relates to US persons or to foreign entities owned or controlled by US persons and who, with exception of licensed humanitarian transactions, are still subject to US sanctions. Finally, other than the limited easing of sanctions described above, all other US sanctions remain in effect and will be enforced.
We will issue a further update once the full impact of the EU and US temporary measures as implemented are known and clarified. We strongly encourage all Members to undertake due diligence in order to satisfy themselves that they do not expose their operations or the Club to sanctions, prohibitions or restrictions under United Nations resolutions, sanction laws or Regulations of the European Union, United Kingdom or United States of America.