Enhanced EU and UK Sanctions Against Iran and the Oil and Natural Gas Industry
On the 8th July, this year, President Obama signed into law the Comprehensive Iran Sanctions, Accountability and Divestment Act (CISADA), and illustrated how CISADA could render non-US companies liable to severe economic sanctions were they held to assist the Government of Iran in the development of petroleum resources. The US Treasury Office of Foreign Assets Control (OFAC) has yet to issue the regulations for the operation of CISADA, but a significant number of commercial organizations are already complying with the CISADA in their day-to-day operations.
We anticipated that the EU would adopt an enhanced sanctions regime, towards the end of July. On the 26th July, the EU Council Decision "concerning restrictive measures against Iran" was reached, repealing the existing regime (the EU Decision).
The EU, in reaching its decision, followed (but widened) UN Security Council Resolution 1929 on the 9th June (UNSCR 1929).
UNSCR 1929 affirms the UN’s opposition to Iran’s nuclear and ballistic missile programmes, and requires Member States to take greater steps to deny Iran the means to further develop these programmes.
The EU Decision
The EU Council has gone further than UNSCR 1929 and, although it does not refer to CISADA in its Decision, it complements it, particularly in respect of Iran’s domestic and overseas Oil and Natural Gas Industry. It is on the Oil and Natural Gas Industry that this bulletin will concentrate, although the EU Decision also address the financial and transport sectors, and goods and technology subject to export controls.
The Oil and Natural Gas Industry
Article 4 of the EU Decision prohibits "the sale, supply or transfer of key equipment and technology for the following key sectors of the oil and gas industry in Iran, or to Iranian or Iranian-owned enterprises engaged in those sectors outside Iran:"
- by Nationals of Member States; or
- from the territories of Member States; or
- using vessels or aircraft under the jurisdiction of Member States.
The four key sectors are:
- Liquefied Natural Gas (LNG)
In addition to the prohibition on the sale, supply or transfer of key equipment and technology for the four key sectors, there is also the prohibition on:
- the provision of technical assistance or training and other services related to key equipment and technology; and
- the financing or financial assistance for any sale, supply, transfer or export of key equipment and technology; and
- the granting of any financial loan or credit to enterprises in the four key sectors in Iran or to Iranian or Iranian-owned enterprises engaged in those sectors outside Iran, (to include the acquisition of participating shares and securities); and
- the creation of any joint venture with enterprises in Iran in the four key sectors, and with any subsidiary or affiliate under Iranian control.
Contracts Concluded Before the 26th July 2010
The EU Decision provides for exclusions for obligations arising under contracts or agreements, and contractual obligations for extensions of participation, provided the contracts or agreements were concluded before the 26th July 2010.
It is a criminal offence to violate EU sanctions, under UK domestic law, with a maximum term of two years’ imprisonment, a fine, or both. Where the offence is committed by a body corporate, both the corporate and an officer (or officers) of the corporate are guilty of the offence and liable to imprisonment, on conviction.
How We Can Help
There is undoubtedly a willingness, on the part of EU (through Member States, including the UK), to enforce a greatly enhanced Iranian sanctions regime. By targeting Iran’s domestic and overseas oil and natural gas sector, the EU and the US have created challenges for the international oil and natural gas industry in continuing commercial operations without knowingly or unwittingly assisting the Government of Iran and named individuals and corporate entities deemed indivisible from it.
We can offer practical advice on corporate sanctions compliance programmes and individual transactions where the issue of sanctions compliance may be relevant. We also understand the interaction between US, EU, and UK sanctions and can advise on remedies where violations are alleged.