On January 14, Germany, France and the UK initiated the dispute resolution mechanism in the Joint Comprehensive Plan of Action (JCPOA) based on Iran’s decision to pull away from its obligations under the agreement. While the European participants see the dispute resolution mechanism as a way to keep the JCPOA alive, triggering the mechanism also serves as the first of several steps that must be taken before UN and EU sanctions could potentially be reimposed. Though the reimposition of sanctions is far from inevitable, it is important to understand the functioning of the dispute resolution mechanism in order to anticipate the timeline of any possible future developments.
Continue Reading Germany, France and the UK begin the JCPOA’s Dispute Resolution Mechanism Process – A Gateway for the Reimposition of UN and EU sanctions?

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On January 10, 2020, the US Treasury Department’s Office of Foreign Assets Control (OFAC) named Beijing-based Pamchel Trading Beijing Co. Ltd., its Seychelles-based affiliate, and a Chinese vessel and vessel operator as Specially Designated Nationals (SDNs) pursuant to Executive Order (EO) 13871 of May 8, 2019, for engaging in significant transactions involving Iran’s metals sectors. OFAC also designated 13 Iranian steel and iron manufacturers, an Oman-based supplier, and three Iranian aluminum and copper companies under EO 13871. The announcement signaled an increasingly aggressive posture toward Iran’s metals industry and the foreign firms who engage with it.

Concurrently, the US President issued a new EO (EO 13902) authorizing sanctions on, among others, persons operating in the construction, mining, manufacturing, or textiles sectors of the Iranian economy; persons who knowingly engage “in a significant transaction for the sale, supply, or transfer to or from Iran of significant goods or services used in connection with” those sectors; and persons who have “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of” any person designated as an SDN under the EO or entities owned 50% or more by them. Notably, the EO also authorizes sanctions on correspondent and payable-through-accounts of foreign financial institutions that have “knowingly conducted or facilitated any significant financial transaction” involving activities targeted by the EO.Continue Reading UPDATED: OFAC Targets Chinese Firms for Iranian Metals Trade, Designates Iranian Officials, as White House Expands Secondary Sanctions with New Executive Order

On September 20, 2019, OFAC announced the designation of the Central Bank of Iran (“CBI”), the National Development Fund of Iran (Iran’s sovereign wealth fund), and an Iran-based company allegedly involved in concealing financial transactions on behalf of Iran’s military.  These designations were made under Executive Order 13224, as recently amended, which is OFAC’s main counterterrorism sanctions authority.  OFAC said in its press release that “Iran’s Central Bank has provided billions of dollars to the Islamic Revolutionary Guards Corps (IRGC), its Qods Force (IRGC-QF) and its terrorist proxy, Hizballah.”  These designations were announced in response to aerial strikes against oil facilities in Saudi Arabia, although a designation of the CBI may not come as a complete surprise given the multiple U.S. sanctions designations in the past several months of senior CBI officials including the CBI Governor for alleged involvement in financial support to the IRGC-QF and Hizballah.  President Trump tweeted that, in response to the strikes in Saudi Arabia, he had directed Secretary of the Treasury Steven Mnuchin “to substantially increase Sanctions on the country of Iran.”  Secretary of State Mike Pompeo called the attacks an “act of war.”   At a press event President Trump characterized these sanctions as “[t]he highest sanctions ever imposed on a country. We’ve never done it to this level.”  Secretary of the Treasury Steven Mnuchin specified that “this is very big — we’ve now cut off all source of funds to Iran.”

So what do these new sanctions against the CBI actually do?  To be clear, the CBI was previously subject to U.S. sanctions, including secondary sanctions that apply to non-U.S. persons.  However, these previous sanctions against the CBI were imposed only under OFAC’s authority targeting parties associated with the Government of Iran.  Now an additional layer of sanctions have been imposed on the CBI – this time under OFAC’s counterterrorism authority in EO 13224.  The conventional wisdom seems to be that this added layer of counterterrorism sanctions against the CBI will now make it unlawful or sanctionable to deliver humanitarian goods to Iran.  In practice, that could be the way things develop, as this additional sanctions designation against the CBI could heighten the already considerable level of anxiety many international banks face in considering whether to engage with Iran, by creating yet more complexity and uncertainty.  However, it is worth examining more closely the extent to which U.S. law still contemplates lawful humanitarian trade with Iran in agricultural commodities, medicine and medical devices.Continue Reading More Sanctions on Iran’s Central Bank – What’s New This Time?

On July 22, 2019, Secretary of State Mike Pompeo announced that the US Government would impose sanctions on Chinese state-owned oil trading company Zhuhai Zhenrong Company Limited and its chief executive Youmin Li for knowingly purchasing or acquiring oil from Iran.  Zhuhai Zhenrong was previously sanctioned in 2012 due to alleged dealings with Iran, but those sanctions were far less extensive, and were removed in 2016 pursuant to the Iran nuclear deal. This action announced by Secretary Pompeo involves the addition of these parties to the Specially Designated Nationals (SDN) list, as a result of which any transactions or dealings involving US persons with these parties or their “interests in property” are prohibited, and US persons are required to freeze any such property pursuant to specific rules promulgated by the US Treasury Department’s Office of Foreign Assets Control (OFAC). In addition, Youmin Li is subject to a US visa ban.

According to the Department of State, these sanctions resulted from Zhuhai Zhenrong’s purchase or acquisition of crude oil from Iran after the expiration of China’s Significant Reduction Exception (SRE), which we have previously discussed and which allowed China to continue buying oil from Iran until May 2, 2019 without the risk of sanctions for companies and financial institutions involved in that trade. These sanctions were imposed under Executive Order (EO) 13846. Section 3(a)(ii) of EO 13846 authorizes the imposition of different types of sanctions, ranging from less severe measures to the most severe measure of designation on the SDN list, for persons determined to have, “on or after November 5, 2018, knowingly engaged in a significant transaction for the purchase, acquisition, sale, transport, or marketing of petroleum or petroleum products from Iran.” Section 3 also authorizes sanctions on a person determined to be a “successor entity to,” or, if there is some knowledge or participation in the relevant activity, a person that “owns or controls” or “is owned or controlled by or under common ownership or control with,” a person designated under Section 3 of EO 13846. 
Continue Reading US Sanctions Chinese Company for Buying Oil from Iran

President Trump issued an executive order (EO) on May 8, 2019 imposing broad new sanctions against Iran’s metals industries that go beyond pre-existing sanctions on that sector.  President Trump issued a statement about the EO, which came on the one year anniversary of the US withdrawal from the Iran nuclear deal, calling Iran’s iron, steel, aluminum, and copper sectors “the regime’s largest non-petroleum-related sources of export revenue,” said to constitute 10% of Iran’s “export economy.”  The President said this EO “puts other nations on notice that allowing Iranian steel and other metals into your ports will no longer be tolerated.”  But the scope of the EO is actually quite a bit broader than that – it puts within the crosshairs of US sanctions enforcement not just third-country importers of Iranian metals products, but also exporters in Europe, Asia and elsewhere that provide raw materials and other inputs, along with industrial machinery and other capital goods used in the production of Iranian metals.  As usual, banks, insurers, shippers, traders, investors and other intermediaries and stakeholders in these industries would also be at risk.  It appears that the Trump Administration is continuing along a path of rising escalation, with President Trump noting in his statement that “Tehran can expect further actions unless it fundamentally alters its conduct.”

The EO provides for any person to be listed as a Specially Designated National (SDN) if they are determined:
Continue Reading Sweeping New Metals Sector Sanctions on Iran with 90-Day Wind-Down Period

Secretary of State Mike Pompeo’s announcement yesterday that the US Government will not renew any of the significant reduction exemptions (SREs), previously granted to eight countries under Section 1245 of the National Defense Authorization Act for Fiscal Year 2012 (NDAA), could significantly impair Iran’s ability to conduct international trade.  If fully implemented, this move would create a new, high level of risk for those engaging in continued trade in oil and related products with Iran. It also could directly impact ancillary activity such as shipping and insurance.  Moreover, any such move could have indirect effects on other, non-oil sectors that rely on third country banking arrangements to fund trade with Iran.  Although there are broad provisions of US law restricting the President’s authority to impose sanctions for trade with Iran in agricultural commodities, food, medicine, and medical devices, even this trade could be indirectly impacted by reduced availability of funds and banking channels.  No sanctions restrictions have ever been imposed under the NDAA, although the firmness of US policy in this area may now be put to the test, as the current SRE waivers are set to expire on May 2, 2019.

At the same time, even though the US Government will not renew the eight existing SRE waivers, the actual imposition of sanctions under the NDAA could still be delayed.  This blog post provides some brief background on the NDAA and the SRE waivers, what the consequences of non-renewal of these waivers may be, and how the Trump Administration may use other provisions of law to delay action in this area in order to sidestep confrontations with China, India, Turkey or other major Iranian trading partners were they to refuse to back down in the face of US sanctions threats as the “moment of truth” approaches.
Continue Reading US Decision Not to Renew Iran Oil Waivers Could Have Cascading Effects on Iran Sanctions – If Fully Implemented

Yesterday, Secretary of State Mike Pompeo announced his intent to designate Iran’s Islamic Revolutionary Guard Corps (IRGC) as a Foreign Terrorist Organization (FTO), noting that this is the first time the US government has designated part of another government as an FTO. The announcement explains: “This action underscores that the Iranian regime’s use of terrorism makes it fundamentally different from any other government. Iran employs terrorism as a central tool of its statecraft; it is an essential element of the regime’s foreign policy.” The related State Department fact sheet notes that the designation will occur on April 15, upon publication in the Federal Register. While this long-anticipated move could increase the risk to non-US persons of doing business with Iran, at least in certain sectors or with certain partners, its primary effect at least in the short-term will probably be to add yet another deterrent to commerce with Iran rather than leading to a significant increase in legal actions against entities continuing to engage with Iran.

The US government already maintains strict sanctions on dealings with the IRGC and its agents, including secondary sanctions targeting activity with the IRGC that has no jurisdictional link to the US. Although the FTO designation does provide that US financial institutions must block all transactions involving an FTO or its agents and report them to OFAC, in practice the FTO designation does not lead to any additional “blocking” requirement under US law, because the IRGC as a whole is already listed as a Specially Designated National (SDN) under Executive Order 13224 (i.e., as a Specially Designated Global Terrorist (SDGT)). So there are already broad sanctions in place both for US persons and non-US persons in dealing with the IRGC or its agents. 
Continue Reading Implications of the Designation of Iran’s IRGC as a Foreign Terrorist Organization

Sanctions compliance considerations have always been important for cryptocurrency companies, but several recent US government actions suggest regulators are increasingly focused on the intersection between digital currencies and economic sanctions.  This increased focus highlights the importance of sanctions compliance for blockchain-related companies, particularly for those considered to be US persons.

This intensified focus has been

On November 5, 2018, the US government reimposed the remaining sanctions on Iran that were previously lifted under the Joint Comprehensive Plan of Action (JCPOA) in 2016.  Treasury’s Office of Foreign Assets Control (OFAC) added over 700 Iranian entities, individuals, vessels, and aircrafts to the list of Specially Designated Nationals and Blocked Persons (“SDN List”), including scores of previously unlisted targets.  According to a statement from Treasury, these sanctions are “designed to disrupt the Iranian regime’s ability to fund its broad range of malign activities, and places unprecedented financial pressure on the Iranian regime to negotiate a comprehensive deal that will permanently prevent Iran from acquiring a nuclear weapon, cease Iran’s development of ballistic missiles, and end Iran’s broad range of malign activities.”

The new or reimposed SDN designations include nearly 250 persons and associated blocked property that had appeared on the so-called “EO 13599 list,” 50 additional Iranian banks and their subsidiaries, and over 400 additional affiliated targets in a range of sectors, including Iran’s shipping, energy, and aviation sectors, among others. OFAC has published a complete list of designated entities here.  Under the existing sanctions framework, foreign financial institutions and persons that facilitate or engage in transactions with designated entities are themselves potentially subject to US sanctions restrictions.
Continue Reading US Reimposes Sanctions and Then Some, as Iran Warns of “War Situation”

On October 3, 2018, the International Court of Justice (“ICJ” or the “Court”), the principal judicial organ of the United Nations, issued an Order ruling partly in favor of Iran on Iran’s request for provisional measures against the US for its May 8, 2018 withdrawal from the Joint Comprehensive Plan of Action (“JCPOA”) and re-imposition of sanctions on August 6, 2018.

On July 16, 2018, Iran instituted proceedings against the US with regard to alleged violations of the 1955 Treaty of Amity, Economic Relations and Consular Rights between the US and Iran (“Treaty of Amity”). On the same day, Iran submitted a request for certain provisional measures, including a request that the US “immediately take all measures at its disposal to ensure the suspension of the implementation and enforcement of all of the 8 May sanctions, including the extraterritorial sanctions, and refrain from imposing or threatening announced further sanctions and measures which might aggravate or extend the dispute submitted to the Court.” Iran’s filing essentially asked the ICJ to order the US to provisionally lift its sanctions in advance of more detailed arguments on the merits of the case.
Continue Reading US Withdraws from Treaty of Amity with Iran after International Court of Justice Imposes Limited Provisional Measures Against US Iran Sanctions