Thursday, July 15, 2010

Iran sanctions - update, unilateral sanctions from the USA

The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”).
Cisada is amending the Iran Sactions Act ("ISA") to create additional activities that could subject non-US firms to sanctions.

The additional activities that are now subject to sanctions include those that support the production of refined petroleum products and the one that involve the importation of refined petroleum product into Iran.
Further, in line with the most recent UN sanctions, the new law targets all financial institutions that support Iran's development of its nuclear program and the activities of the Revolutionary Guard Corps.

The implication of this legislation can be far reaching as it now involves the operations of non-US subsidiaries or affiliates  and non US business partners. 

The new amendments targeted investments of US $1M or more or an aggregate market value of US $5M or more in a 12-month period. Prior of this latest amendment the targeted investment were US $20M or more.

Specifically, the Amendments sanction the sale, lease or provision to Iran of:

"goods, services, technology, information, or support that could directly and significantly facilitate the maintenance or expansion of Iran's domestic production of refined petroleum products, including any direct and significant assistance with respect to the construction, modernization, or repair of petroleum refineries"; and

refined petroleum products or "goods, services, technology, information, or support that could directly and significantly contribute to the enhancement of Iran's ability to import refined petroleum products," including activities such as underwriting, insuring, reinsuring, financing, brokering, or providing ships or shipping services.

According to the "ISA" investigations into this matter are initiated by the President upon receipt of credible information.
If the President determines that sanctions must be enacted according to the previous "ISA" directive the President had to impose 2 out of 6 sanctions:
  • Denial of Export-Import Bank loans, credits or guarantees; 
  • Denial of licenses to export military or militarily useful technology;
  • Prohibition on U.S. financial institutions making loans or providing credit of more than US$10 million in any twelve-month period (with minor exceptions);
  • Prohibition on obtaining U.S. Government procurement contracts;
  • Restrictions on imports into the United States; and
  • If the violator is a financial institution, prohibition on being designated as a primary dealer in U.S. Government debit and/or prohibition on acting as an agent for U.S. Government funds.
With the new Amendments the ISA now requires the President to apply 3 out of the 9 sanctions available. 3 additional sanctions have been added and would prohibit:
  • Foreign exchange transactions in the United States; 
  • Transfer of credits or payments by financial institutions in the United States; and 
  • Dealings in property in the United States.
The Amendments also expand the definition of "person" and "petroleum resources":

The definition of "person" now includes: financial institutions, insurers, underwriters, guarantors, and other business organizations. 
The definition of "Petroleum resources" is now defined to include "petroleum, refined petroleum products, oil or liquefied natural gas, natural gas resources, oil or liquefied natural gas tankers, and products used to construct or maintain pipelines used to transport oil or liquefied natural gas."


The Amendments take effect immediately. The Amendments provide a one-year grace period for the launching of investigations of persons engaging in activities related to the production or importation of refined petroleum products, however. Such persons are subject to investigation only for sanctionable activities that commence on the one-year anniversary date of the Amendment's enactment, or thereafter.

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