via Sanctions Law
I suppose the President has gotten tired of Congress getting all of the attention when it comes to imposing new sanctions on Iran. Earlier this week, he issued a new executive order implementing certain sanctions that were previously called for in the Iran Freedom [...]]]>
via Sanctions Law
I suppose the President has gotten tired of Congress getting all of the attention when it comes to imposing new sanctions on Iran. Earlier this week, he issued a new executive order implementing certain sanctions that were previously called for in the Iran Freedom and Counter Proliferation Act (IFCA) and adding some new sanctions of his own. Here are the highlights:
1) Energy Sanctions: These sanctions target activities related to the exploration, extraction, production, refinement, or liquefaction of petroleum, natural gas, or petroleum products in Iran. They allow for the targeting of those parties involved in the supply or provision of goods or services that contribute to Iran’s ability to develop its domestic petroleum resources, the maintenance or expansion of Iran’s domestic production of petroleum products; and Iran’s ability to import or export petroleum or petroleum products.
2) Shipping Sanctions: These sanctions target activities related to the transportation of goods by seagoing vessels flying the flag of the Islamic Republic of Iran, or controlled directly or indirectly by the Government of Iran. When these sanctions go into effect they will already target the National Iranian Tanker Company and the Islamic Republic of Iran Shipping Lines. These sanctions will allow for the targeting of those parties involved in the provision of crude and product tankers to Iran, the provision of registry, flagging, or classification services of any kind, the supervision of and participation in the repair of ships and their parts, the inspection, testing, and certification of marine equipment materials and components, the carrying out of surveys, inspections, audits and visits, and the issuance, renewal or endorsement of the relevant certificates and documents of compliance, as they relate to ships and shipping, or the supply or provision of any other goods or services relating to the maintenance, supply, bunkering, and docking of vessels flying the flag of the Islamic Republic of Iran, or controlled directly or indirectly by, or on behalf of the Government of Iran (GOI) or an Iranian person.
It should be noted, however, that if a non-Iranian vessel is transporting non-sanctionable goods to or from Iran, bunkering in a third country will not be subject to sanctions provided that no other sanctionable activity is involved.
3) Shipbuilding Sanctions: These sanctions target activities related to the construction of seagoing vessels, including oil tankers and cargo vessels, in Iran. Once implemented they will allow for the targeting of those parties involved in the building and refit of vessels, the provision or refit of items such as (i) steam turbines and their parts for marine propulsions; (ii) marine propulsion engines and parts used solely or principally with them; (iii) other gas turbines for marine propulsion; (iv) ship or boat propellers and blades; and (v) direction finding compasses and other navigational instruments and appliances solely for the maritime industry; (vi) the provision of other goods used in connection with building and propulsion of vessels; (vii) and the provision of technical assistance and training relating to, and financing of, the building, maintenance or re-fitting of vessels.
4) Precious Metal and Semi-Raw Material Sanctions: These sanctions will target activities related to the provision of the following raw materials to Iran: various types of steel; aluminum metal and its alloys; base metals of single or complex borides of titanium; beryllium metal and its alloys; boron metal and its alloys; cobalt metal and its alloys; copper infiltrated tungsten metal; copper-beryllium metal; germanium metal and its alloys; graphites; hastelloy; inconel; magnesium metal and its alloys; molybdenum metal and its alloys; neptunium-237 metal and its alloys; nickel metal and its alloys; nickel aluminide metals; niobium metal and its alloys; niobium-titanium filaments; plutonium metal and its alloys; porous nickel metal; silver infiltrated tungsten metal; tantalum metal and its alloys; tellurium metal and its alloys; titanium aluminide metals; titanium metal and its alloys; tungsten metal, tungsten carbide metal, and their alloys; uranium titanium alloy metals; and zirconium metal and its alloys and compounds.
Further, the provision of the following precious metals will also be cause for sanctions targeting: silver (including silver plated with gold or platinum); gold (including gold plated with platinum); base metals or silver, clad with gold, not further worked than semi-manufactured; platinum; iridium; osmium; palladium; rhodium; ruthenium; base metals, silver or gold, clad with platinum, not further worked than semi-manufactured; waste and scrap of precious metal or of metal clad with precious metals, other waste and scrap containing precious metal or precious-metal compounds, of a kind used principally for the recovery of precious metal.
Persons determined by the Department of the Treasury or the Department of State, as appropriate, to have established and enforced official policies, procedures, and controls to ensure that the person does not sell, supply, or transfer to or from Iran, or facilitate or conduct a significant financial transaction to sell supply, or transfer to or from Iran, the materials listed above will not be targeted for sanctions pursuant to IFCA.
5) Industrial Software Sanctions: These sanctions allow for the targeting of parties, pursuant to IFCA, involved in the provision of industrial software to Iran.
6) Insurance Sanctions: These sanctions will, naturally, target the provision of insurance and re-insurance services to Iran, but will not apply in matters involving insuring humanitarian trade in food, medicine, and medical devices, or to parties determined to have established and enforced official policies, procedures, and controls to ensure that the person does not sell, supply, or transfer to or from Iran, or facilitate or conduct a significant financial transaction to sell supply, or transfer to or from Iran, insurance services will not be targeted for sanctions pursuant to IFCA.
7) Financial Sanctions: The new Executive Order also allows for the targeting of foreign financial institutions facilitating any type of significant financial transactions for parties on the OFAC SDN List. These sanctions include a prohibition on opening and maintaining correspondent banking relationships on behalf of such foreign financial institutions.
OFAC has made it clear, however, that these sanctions will not include targeting of foreign financial institutions who 1) facilitate transactions for the provision of agricultural commodities, food, medicine, or medical devices to Iran; 2) conduct a significant financial transaction for the purchase of petroleum or petroleum products from Iran if a significant reduction exception under the NDAA applies to the country with primary jurisdiction over the FFI and the financial transaction is for trade between Iran and the country with primary jurisdiction over the FFI, and any funds owed to Iran as a result of the trade are credited to an account located in the country with primary jurisdiction over the FFI; 3) conduct a significant financial transaction related to the sale, supply, or transfer of natural gas to or from Iran if the transaction is solely for trade between the country with primary jurisdiction over the FFI and Iran, and any funds owed to Iran as a result of such trade are credited to an account located in the country with primary jurisdiction over the FFI; and 4) participating in certain activities related to the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey.
8) Diversion of Goods Sanctions: These sanctions allow for the targeting of parties involved in the diversion of goods intended for the Iranian people or the misappropriation of proceeds from the sale or resale of such goods.
9) Currency Sanctions: These new sanctions allow for foreign Financial Institutions to lose their correspondent and payable-through account relationships with U.S. depository institutions if they are (i) knowingly conducting or facilitating significant transactions related to the purchase or sale of Iranian rials or a derivative, swap, future, forward, or other similar contract whose value is based on the exchange rate of the Iranian rial, or (ii) maintaining significant funds or accounts outside the territory of Iran denominated in the Iranian rial.
10) Automotive Sanctions: The new Executive Order authorizes the imposition of sanctions to impair the ability of foreign financial institutions to obtain correspondent and payable-through accounts in the U.S. and provides for Iran Sanctions Act-style sanctions for certain types of transactions, in cases where the provision of significant goods or services used in connection with Iran’s automotive sector have been made. That sector includes the manufacturing or assembling in Iran of light and heavy vehicles including passenger cars, trucks, buses, minibuses, pick-up trucks, and motorcycles, as well as original equipment manufacturing and after-market parts manufacturing relating to such vehicles. The goods and services implicated include goods or services that contribute to (i) Iran’s ability to research, develop, manufacture, and assemble light and heavy vehicles, and (ii) the manufacturing or assembling of original equipment and after-market parts used in Iran’s automotive industry.
11) Sanctioned Parties Sanctions: As if targeting an entity for sanctions wasn’t enough, the new Executive Order targets parties deemed to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to, or in support of, (i) Iranian persons included on the SDN List as well as other persons included on the SDN List whose property and interests in property are blocked pursuant to Executive Order 13599, and (ii) persons whose property and interests in property are blocked pursuant to subsection 2(a)(i) of the E.O. Certain activities relating to the pipeline project to supply natural gas from the Shah Deniz gas field in Azerbaijan to Europe and Turkey are excepted from the material support provision of the E.O., as are Iranian depository institutions solely blocked pursuant to Executive Order 13599.
That’s all for now. There is a lot of news about these new sanctions so surely additional commentary will be forthcoming soon. Stay tuned.
– The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.
]]>Sanctions Are Holding Back Our Talks with Iran
by Usha Sahay and Laicie Heeley
There is a consensus in Washington that more sanctions will help convince Iran to halt its nuclear development. On June 3, President Obama issued an executive order — his sixth in two years —
Sanctions Are Holding Back Our Talks with Iran
by Usha Sahay and Laicie Heeley
There is a consensus in Washington that more sanctions will help convince Iran to halt its nuclear development. On June 3, President Obama issued an executive order — his sixth in two years — announcing new sanctions targeting Iran’s currency and its auto industry. Meanwhile, a number of separate sanctions bills are being circulated in Congress, with additional penalties expected to be passed later this summer. Senate Foreign Relations Committee Chairman Robert Menendez recently remarked, “The sanctions are working – but they aren’t enough, and they aren’t working fast enough.”
The logic of both the White House and Congress seems to be that we need more sanctions to compel Iran to negotiate and freeze its controversial nuclear program. But our research suggests the opposite: repeated intensifications of economic pressure are not bringing Iran to the negotiating table. In fact, sanctions now appear to be pushing the long-sought-after nuclear agreement further away.
A report released this week by the Center for Arms Control and Non-Proliferation concluded that sanctions are not “working” the way they should be. Yes, they’ve hit Iran’s economy hard — but that doesn’t mean the policy is succeeding. Crucially, sanctions haven’t persuaded Iran’s leadership to come to an agreement with the West and may have begun to strengthen the Iranian regime and cement its determination to continue defying the international community.
How is it that sanctions are doing the opposite of what they were supposed to? This wasn’t always the case. Particularly in the early years of the Obama administration, when the President exerted considerable political muscle to get international allies on board with tough penalties on Iran, sanctions helped signal to Tehran that the international community was serious about the nuclear issue. Moreover, by focusing on sanctions instead of taking the drastic step toward military action, the President showed a preference for resolving the impasse through diplomacy rather than war.
Since then, however, a curious thing has happened. Thanks to the sheer number of sanctions that have been put in place, the American commitment to a diplomatic solution appears increasingly hollow. Theoretically, Iran should be interested in talking to the West in order to negotiate for sanctions relief. But the actual process of lifting sanctions is far more complicated than it appears — a number of legal and political hurdles have prevented the U.S. and its European allies from credibly committing to significant sanctions relief during negotiations with Iran.
For instance, sanctions passed by Congress require another act of Congress before they can be repealed and U.S. lawmakers would be loath to pass such legislation for fear of appearing weak on Iran. Another problem is that many sanctions are written with built-in conditions that need to be met before they can be terminated. Some of these conditions are so out of reach that Iran may no longer see a point in even showing up for the negotiations.
Due to all the strings attached to sanctions legislation, Iranians perceive the U.S. as being more interested in sanctions than in coming to an agreement.
Even as these legal and bureaucratic difficulties stall the diplomatic process, the impact of sanctions within Iran is also hurting U.S. interests. Rather than weakening the defiant regime, sanctions have actually given the Iranian government the ability to manage the economy and consolidate its power. Through patronage, currency manipulation, and other methods, Iran’s leaders have taken advantage of the sanctions by forcing people in dire economic straits to rely on special government favors.
Meanwhile, younger Iranians and political moderates — who, somewhere down the line, could be useful allies for the U.S. — are seeing their economic and political power diminished. They’re also starting to blame the West for their woes.
In the long term, then, sanctions are eroding American influence in Iran. And in the short term, sanctions aren’t giving the U.S. and its allies the leverage they need in nuclear negotiations. More sanctions, according to our research, will not solve this problem. In fact, more sanctions will make the problem harder to solve. As veteran Middle East diplomat Ryan Crocker recently warned, “…it seems to me that the more you press this regime, the more they dig in.”
On June 3, while unveiling the new executive branch sanctions, White House Press Secretary Jay Carney noted, “Even as we intensify our pressure on the Iranian government, we hold the door open to a diplomatic solution.” Carney’s comments obscured a troubling reality: sanctions no longer go hand in hand with the diplomatic process. Rather, sanctions are hindering efforts to negotiate with the Iranians and to resolve the problem peacefully.
Economic sanctions could have served as a useful element of a sophisticated, multi-faceted effort to prevent a nuclear-armed Iran. Now, however, sanctions are fast becoming the entirety of our policy — and a policy of pressure alone has little chance of succeeding. To make genuine progress on the Iranian nuclear issue, the Obama administration and Congress must shift their focus toward sanctions relief and compromise, rather than sticking with the pressure-only approach that’s proving increasingly counterproductive.
]]>via Sanctions Law
This was a big year for sanctions. Although 2012 isn’t over yet and there is some pending legislation threatening to impose more sanctions against Iran and a forthcoming set of regulations from OFAC on some of the additional Iran sanctions we saw in the late summer/early fall, [...]]]>
via Sanctions Law
This was a big year for sanctions. Although 2012 isn’t over yet and there is some pending legislation threatening to impose more sanctions against Iran and a forthcoming set of regulations from OFAC on some of the additional Iran sanctions we saw in the late summer/early fall, I thought I would recap some of the big sanction developments of 2012. I may update this list if additional events do come to pass.
December 31, 2011: President Obama signs into law the National Defense Authorization Act (NDAA) of 2012 (NDAA), which includes Section 1245, calling on the President to block all Iranian banks and the Central Bank of Iran.
January 23, 2012: Bank Tejarat is designated under Executive Order 13382 for its involvement in Iran’s weapons of mass destruction proliferation efforts. Tejarat was frequently used to initiate payments for U.S. exports of agricultural commodities, medicine, and medical devices. That same day the European Union (EU) institutes an oil embargo against Iran and targets the Central Bank of Iran for sanctions.
February 6, 2012: President Obama issues Executive Order 13599, effectively blocking all Iranian financial institutions.
February 23, 2012: Designations under the Transnational Criminal Organizations sanctions program applied to a number of individuals believed to be members of Brother’s Circle and Yakuza.
February 27, 2012: The EU applies sanctions to the Central Bank of Syria.
February 28, 2012: The first NDAA deadline passes.
March 15, 2012: EU prohibits SWIFT from providing financial messaging services to EU designated banks.
March 20, 2012: First NDAA exemptions are announced. Eleven (11) countries receive sanctions waivers.
April 23, 2012: The Grave Human Rights Abuses by the Governments of Iran and Syria Via Information Technology (GHRAVITY) executive order is issued.
May 1, 2012: Foreign Sanctions Evaders Executive Order is issued.
May 16, 2012: Yemeni Sanctions Executive Order is issued. EU suspends sanctions targeting Burma.
May 22, 2012: Belarus based JSC CredexBank is targeted as a financial institution of primary money laundering concern under Section 311 of the USA PATRIOT Act.
June 6, 2012: The United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) announces $619 million sanctions settlement against ING Bank. The announcement marks the largest settlement in the history of OFAC.
June 11, 2012: 2nd NDAA exemptions are announced.
June 28, 2012: 2nd NDAA deadline concerning oil activity and public/private banks.
July 1, 2012: EU Oil Embargo against Iran goes into effect.
July 11, 2012: OFAC issues two general licenses which significantly ease U.S. sanctions targeting Burma.
July 17, 2012: U.S. Senate releases report and holds hearing on the activities of HSBC which includes evidence of money laundering and sanctions violations.
July 31, 2012: First designations under the Comprehensive Iran Sanctions Accountability, Divestment Act of 2010 (CISADA). Kunlun Bank and Elaf Islamic Bank added to the new Part 561 List. President Obama also issues Executive Order 13622 implementing further sanctions against Iran, specifically targeting the National Iranian Oil Company, and Naftiran Intertrade Company.
August 6, 2012: New York Department of Financial Services announces violations of banking laws and sanctions by Standard Chartered Bank.
August 10, 2012: The Iran Threat Reduction and Syria Human Rights Act of 2012 (“TRA”) is signed into law.
October 9, 2012: Executive Order 13628 issued. U.S. parent companies become liable for their foreign subsidiaries dealings with Iran.
October 11, 2012: MS-13 is designated under the Transnational Criminal Organizations sanctions program.
October 15, 2012: EU bans dealings between EU financial institutions and Iranian banks.
– Erich Ferrari an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.