Iran: Overview of Recent Sanctions

This week former Iranian President Rafsanjani, implicitly criticised President Ahmadinejad for failing to take the latest sanctions seriously. Rafsanjani is reported as saying "We have never had such intensified sanctions and they are getting more and more intensified every day. Wherever we find a loophole, they (Western powers) block it."

We have seen during this week that indeed the loopholes are closing and we have taken the opportunity to summarise some of the key developments from recent days.

Recent Developments

In our Update of 10th August we summarised the draft EU Regulation that (when adopted) will implement Council Decision 2010/413/CSFP dated 26 July 2010. We understand that the draft is still being discussed at working party level, including representatives from Member States, the Council's General Secretariat and the Commission. After a final text is agreed it will be distributed to the Member States and formally adopted at a Council meeting. This Regulation will have direct effect throughout the European Union from the day after its publication.

The EU's sanctions, in common with the USA's, will impose even tougher restrictions than those envisaged by the UN in Security Council Resolution 1929. Other UN member states have enacted domestic sanctions against Iran but in many cases these are closer to the UN resolution than the EU and US versions. For example:

Australia announced significant new measures, including restrictions on Australian business dealings with Iran's oil and gas, transportation and financial services sectors; a trade ban on all arms and related materiel and all dual-use items for nuclear, missile, chemical and biological weapons development; and designation of 98 entities and 12 individuals, which entails financial and travel restrictions.

Along with Turkey, Brazil was the only other UNSC member to vote against the sanctions, and both countries have advocated a more diplomatic approach towards Iran. Brazilian officials had already said they would observe the sanctions imposed on Iran, regardless of their opposition to them.

Canada announced its own series of steps. These measures included a ban on any new Canadian investment in Iran's oil and gas sector, and restrictions on exporting goods that could be used in nuclear programs. Iranian banks are also barred from opening branches in Canada and Canadian banks will not be able to operate in Iran. This is set out in the Special Economic Measures (Iran) Act which took effect on 26 July 2010.

Informal enquiries of the Chinese authorities have indicated that they have been notifying financial institutions and other stakeholders that they should be complying with the UN Sanctions, albeit, their interpretation of the meaning and effect of the sanctions is far narrower than that of, for example, the US authorities. They also note that it was as a result of Chinese lobbying that the effect of the sanctions was limited.

France supported UNSCR 1929 and the recent EU sanctions and has been in the news more recently in August urging the European Union to threaten Iran with new sanctions over the case of a woman sentenced to death by stoning. Foreign Minister Bernard Kouchner wrote to European Union foreign policy chief Catherine Ashton to call for all 27 member states to warn Tehran not to execute 43-year-old Sakineh Mohammadi-Ashtiani.

Japan announced its implementation of UNSCR 1929, which included an asset freeze on 40 entities and one individual, as well as a prohibition on Iranian investment in Japanese companies with access to nuclear and ballistic missile technology. But Japan did not impose any restrictions on oil from the country, which accounts for 10 percent of its crude imports, making it the fourth-biggest supplier to Japan after Saudi Arabia, United Arab Emirates and Qatar.

Norway announced it would adhere to the EU measures.

Pakistan's Ministry of Foreign Affairs has told its customs and other departments to ensure compliance with UN sanctions on Iran. A letter was issued to all relevant government departments, SRO.742(I)/2010 has been issued in compliance with United Nations Security Council's Resolution 1929 pertaining to sanctions against Iran.

Russia adopted voted in favour of resolution 1929 (2010) on Iran, but branded EU sanctions against Iran as "unacceptable", saying they undermine international efforts to rein in Tehran's nuclear ambitions. According to the Financial Times and other sources Russia signed a $1bn contract with Iran in 1995 to complete a nuclear plant reactor at Bushehr and 82 tonnes of nuclear fuel supplied by Russia should make it operational later this year. This reactor has sharply divided opinion but is not covered by the UN resolution. Switzerland has approved sanctions in line with the UN resolution, and therefore substantially milder than those adopted by the EU. Since the end of June, Switzerland has denied visas to 36 Iranian citizens and frozen the accounts of 40 Iranian companies in Swiss banks.

Turkey declined to follow the tougher EU and US sanctions, saying it would abide by the UN's rules. Turkey is concerned that the UN Security Council resolution will detract from the opportunity presented by the Tehran Joint Declaration of 17 May 2010 for solving the problem on Iran's nuclear programme by peaceful means through diplomacy.

Lloyd's; UK P&I Club

On 9 July, Lloyds of London announced that it would not insure or reinsure petroleum shipments going into Iran. In early August, Lloyds announced that it had created a clause ensuring underwriters do not breach sanctions.

In July, the UK P&I Club said that its directors could terminate the insurance of members, comprising ship owners and operators, "in respect of any ships where the member has exposed or will expose the club to a material risk of sanction."

Recent Developments in the News

In response the Iranian Foreign Ministry spokesman said any country that imposes sanctions on Iran will create problems for their companies, waste their national interests and pass on business opportunities to their rivals.

The US is still applying pressure to the UAE the Financial Times reported. Stuart Levey, under-secretary for terrorism and financial intelligence at the US Treasury met UAE financiers last month during a trip to the Middle East to brief them on strategies to comply with tougher United Nations sanctions. But one banker at the meeting said the UAE financiers had reacted angrily to calls for tighter adherence to sanctions. Merchants in emirates such as Dubai, Fujairah and Ras al-Khaimah fear that interference will damage business prospects amid the continued economic downturn. The UAE trade with Iran is estimated at $12bn in 2009.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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