Re-Imposition of Iran Sanctions by Trump Administration
On 8 May 2018 President Donald Trump announced his decision to abandon the 2015 Iran nuclear deal - the Joint Comprehensive Plan of Action (the "JCPOA") agreed in July 2014. While some tightening up of sanctions was expected, Trump has gone further than some expected. He has done what he said he would do and has torn down the entire sanctions relief introduced on Implementation Day under the JCPOA on 16 January 2016. The measures in place prior to the JCPOA will be re-imposed so that the restrictions which applied prior to 16 January will come back into force including secondary sanctions. The only relief comes in the form of wind-down periods of 3 and 6 months. More information can be found in OFAC FAQs regarding Re-Imposition of Sanctions published on 8 May 2018.
One of the stated objectives of the US administration is to reduce Iran's export of crude oil.
After a 180 day wind-down period ending on 4 November 2018 sanctions will be re-imposed on inter alia
- Iran's port operators, and shipping and shipbuilding sectors, including on the Islamic Republic of Iran Shipping Lines (IRISL), South Shipping Line Iran, or their affiliates;
- petroleum-related transactions with, among others, the National Iranian Oil Company (NIOC), Naftiran Intertrade Company (NICO), and National Iranian Tanker Company (NITC), including the purchase of petroleum, petroleum products, or petrochemical products from Iran;
- the provision of underwriting services, insurance, or reinsurance;
- Iran's energy sector.
In addition General License H (GLH) will be revoked with effect from 5 November 2018. GLH authorises US owned or controlled foreign entities to engage in certain activities involving Iran. OFAC warns that any activities by US-owned or -controlled foreign entities that continue after that period may be subject to enforcement actions by OFAC.
Certain other activities are subject to a 90 day wind-down period, including direct or indirect trade in graphite, raw, or semi-finished metals such as aluminium, steel and coal.
The above activities appear to be those most directly related to shipping but members are referred to the OFAC FAQs for full details of sanctioned activities.
Update 14 May 2018: It appears that the relief provided by the wind-down periods is only intended to apply to contracts entered into prior to 8 May 2018. New transactions entered into after 8 May will be subject to US sanctions.
The JCPOA largely retained primary sanctions against US entities and individuals but removed secondary sanctions against non-US entities to enable them to do business with Iran. The Trump administration has brought back secondary sanctions. OFAC advises non-US persons to use the 90 and 180 day periods to wind down their activities with or involving Iran that will become sanctionable at the end of the applicable wind-down period.
While secondary sanctions were in place prior to Implementation Day, the Obama administration was focused on achieving a diplomatic solution with Iran rather than taking enforcement action against non-US entities. The Trump administration can be expected to take a far more aggressive approach to the enforcement of secondary sanctions. The BBC reports the US National Security Adviser John Bolton as saying that European companies doing business with Iran will have to finish within six months or face US sanctions.
Sanctioned entities and individuals
On Implementation Day, the US administration issued Executive Order 13599 (EO) which contained a lengthy list of entities, individuals and vessels which would no longer be subject to secondary sanctions. The aim of the EO was to allow non-US organisations to conduct business with Iran without fear of US reprisals. OFAC has announced that it will no later than 5 November 2018 move entries on this list to the SDN List thus removing the relief from secondary sanctions provided by the EO.
The future of the JCPOA
The JCPOA has been severely damaged by the action of the Trump administration but the other parties to the Agreement (France, Germany, UK, EU, China, Russia and Iran) have pledged to stand by it. It remains to be seen whether measures will be taken by the other parties and what effect this will have on the shipping and insurance sectors. The diplomatic dialogue between the US and Europe which preceded Trumps' announcement will no doubt continue during the wind-down periods. This may result in agreement on measures to mitigate the impact of secondary sanctions on European companies. However Trump's announcement has strained relations between the US and Europe and the outcome of these discussions is highly uncertain.
This Alert is intended to provide general information. Although detailed FAQs have been issued, the legislation and regulations have not yet been published. The Association will monitor developments and provide further information once it is available.