Iran - US Sanctions against shipment of refined petroleum products to Iran - “CISAD” Entry into force
As anticipated in our Circular of 17 February 2010, legislation has been introduced in the Unitied States which creates a risk of sanctions being imposed on any party involved in selling, financing or shipping refined petroleum products to Iran. The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 ( “CISAD”) HR 2194, which is 124 pages long, started was signed by President Obama on 1 July and takes immediate effect.
The Act, which started out as the Iran Refined Petroleum Sanctions Act (IRPSA), is wide enough to expose insurers to the risk of sanctions, such as the blocking of USD transactions and freezing of US assets. This could severely affect the Association’s normal operation and, in order to protect the interests of members as a whole, the Board will, as previously advised, be invited as a matter of urgency to consider restrictions on cover for vessels involved in shipments of refined petroleum products to Iran. The Act contains an exception for underwriters and insurance providers who have exercised due diligence in establishing and enforcing procedures and controls. It is not clear how much reliance can be placed on this provision but it will be dependent on the insurer being able to demonstrate that measures have been taken to ensure compliance with the Act.
Considerable concern has been expressed by insurers and reinsurers about the extra-territorial effect of domestic legislation. Perhaps in response to this, the President has been granted authority to make a waiver for persons “from countries that closely cooperate in multilateral efforts to constrain Iran” but at this stage it is impossible to know if and how this discretion will be exercised.
The Act provides that “refined petroleum products means diesel, gasoline, jet fuel (including naptha-type and kerosene-type jet fuel), and aviation gasoline”.
Further information will be provided shortly.