EU and UN sanctions on Iran lifted
On 16 January 2016 the EU and UN nuclear-related economic and financial sanctions against Iran were terminated in line with the Joint Comprehensive Plan of Action (JCPOA) agreed between Iran, the EU, and the “P5+1” (permanent UN Security Council members France, China, Russia, the UK and the US ‘plus’ Germany) in July 2015.
This included the delisting of many UN and EU entities and individuals. US secondary legislation imposing nuclear-related economic sanctions have also been suspended.
What does this mean for you?
Now that these sanctions have been lifted EU entities may begin trading and working with Iranian entities as the majority of EU sanctions and most of the US extra-territorial sanctions will be lifted. Some EU restrictive measures remain in place (but these relate largely to military goods; weapons; and, items that might be used for internal repression) and some entities and individuals remain listed, however, this “opening up” presents a wealth of opportunities for, amongst others, those keen to take advantage of opportunities in Iran’s oil, gas, shipping, trade and aviation sectors.
The major sectors that will be affected by this initial phase of sanctions relief include:
> Financial, Banking and Insurance
> Oil, Gas and Petrochemicals
> Shipping, Shipbuilding and Transport
The US angle
While the lifting of UN and EU sanctions represents a huge step forward, a number of challenges to doing business in Iran will remain. In particular, those looking to commence or recommence business with Iran need to bear in mind that many US primary sanctions i.e. those which affect US persons and entities will not be lifted. Should a business have a US nexus, it may still not be able to trade with Iran. In addition, parties need to be aware of the restrictions relating to US origin goods. US Dollar transactions with Iran will still be prohibited and some entities will still be listed as Specially Designated Nationals.
“Snap back” provisions
For those who have determined that they are able to trade with Iran and are keen to sign contracts, it is also important to bear in mind that the JCPOA contains “snap back” provisions which will re-introduce restrictions if Iran breaches its side of the deal. It may therefore be worthwhile including clauses in any contracts that are signed that take this risk into account.
Continued need for vigilance
As we have said, some entities and individuals are still subject to US designations and/or remain subject to EU restrictions and certain other restrictive measures remain in place. As such, those considering conducting business with Iran should remain vigilant and continue to carry out appropriate due diligence on proposed counterparties and seek legal advice in order to ensure that they comply with any remaining restrictions and to ensure that their contracts provide the necessary protections. They should also ensure that there are no restrictions in their insurance or finance arrangements that preclude conducting business in or with Iran or Iranian entities.
Anti-corruption and bribery
Finally, although the lifting of sanctions offers huge potential for EU businesses, it is also worth bearing in mind that Iran is not an easy place to do business and it scores high on the Corruption Perception Index. There is therefore a high risk of bribery and corruption. It is important therefore to ensure that, as well as ensuring sanctions compliance, suitable anti-bribery and corruption policies are put in place to help to mitigate those risks.
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