On Wednesday, August 1, 2012, the House of Representatives and Senate passed the Iran Threat Reduction and Syria Human Rights Act (“H.R. 1905”), which President Obama signed into law on Friday, August 10, 2012. Coinciding with Congress’ actions, on Tuesday, July 31, President Obama announced new sanctions targeting payment mechanisms that allow for the circumvention of existing sanctions, titled “Authorizing Additional Sanctions With Respect to Iran” (the “Executive Order”).
The new sanctions package put forth by Congress and President Obama underscores and strengthens all of the existing U.S. sanctions applicable to persons or entities should they provide goods, services, technology or infrastructure to Iran’s oil and gas industry. H.R. 1905 substantially intensifies existing sanctions against Iran by authorizing sanctions against any person or entity who: (a) works in Iran’s petroleum, petrochemical, or natural gas sector; (b) provides goods, services, infrastructure, or technology to Iran’s oil and natural gas sector, including financial services, consulting, and maintenance and repair; (c) insures or re-insures investments in Iran’s oil sector; (d) engages in joint ventures with the National Iranian Oil Company (NIOC); (e) provides insurance or re-insurance to NIOC or the National Iranian Tanker Company (NITC); (f) helps Iran evade oil sanctions through reflagging of vessels; (g) transports crude oil from Iran or transport refined petroleum products to Iran; (h) provides special financial messaging services to designated Iranian banks or those who enable such activity; or (i) engages in uranium mining with Iran anywhere in the world.
Notably, under this new Iran sanctions package, a person sanctioned for transporting crude oil from Iran or transporting refined petroleum products to Iran, could find its vessel(s) barred from landing at U.S. ports for up to two (2) years. In addition, H.R. 1905 includes a new requirement that companies that trade on the U.S. Stock Exchange must disclose any Iran-related business to the Securities and Exchange Commission.
The Executive Order invokes the power granted to President Obama under the legislation signed December 31, 2011 to sanction any person or entity conducting any transactions using any payment method, including alternative methods such as bartering, to purchase or acquire Iranian crude oil. Prior to the implementation of this Executive Order, Section 1245 of the National Defense Authorization Act of FY 2012 prohibited transactions for the purchase or sale of Iranian crude oil or petrochemicals, provided that such transactions involved the Central Bank of Iran. The Executive Order also tightens the noose on Iran’s economy by imposing sanctions on persons or entities buying petrochemical products from Iran.
Pursuant to the Executive Order, non-U.S. financial institutions are prohibited form entering into any transactions, or facilitating transactions with, the National Iranian Oil Company or Naftiran Intertrade Company, subject to limited exceptions. Non-U.S. financial institutions found to be in violation of the Executive Order will no longer be able to do business in the U.S., or to transact business in U.S. dollars.
Finally, the Executive Order grants the authority to impose sanctions on any person upon determining that the person has materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, NIOC, NICO, or the Central Bank of Iran, or the purchase or acquisition of U.S. bank notes or precious metals by the Government of Iran.
Simultaneously with the issuance of this order, the Treasury Department announced the imposition of sanctions against China’s Bank of Kunlun and Iraq’s Elaf Islamic Bank which have facilitated transactions with Iran in recent years.
Taken together, the Administration’s actions make clear that the U.S. intends to sanction those who engage in transactions with Iran through formal and informal means to avoid existing sanctions, and underscores the efforts being made by the United States to cut off all of Iran’s access points to the international financial system.
If you have any questions or concerns about U.S. sanctions against Iran, please contact one of the attorneys listed below.
