Sanctions

Sanctions implications of talks in Geneva between Iran and P5+1

The Joint Plan of Action dated 24 November 2013

 

The Joint Plan of Action states that the goal for the negotiations is to reach a mutually-agreed long-term comprehensive solution. The “initial measures” that have now been agreed last for a duration of 6 months, and are renewable by mutual consent. 

 

In return for certain limitations imposed on the Iranian nuclear programme, the P5+1 have agreed to:

 

  • Suspend the EU and US sanctions on associated insurance and transportation services for oil sales
  • Suspend US and EU sanctions on Iran’s petrochemical exports and gold and precious metals, as well as sanctions on “associated services”, which is defined as any service, such as insurance, transportation, or financial services.
  • Suspend US sanctions on Iran’s automotive industry and licence the supply and installation of spare parts for Iranian civil aviation
  • No new nuclear-related UN Security Council sanctions
  • No new EU nuclear-related sanctions
  • The US “will refrain” from imposing new nuclear-related sanctions
  • A financial channel will be established to facilitate humanitarian trade for Iran’s domestic needs using Iranian oil revenues held abroad
  • The thresholds before non-sanction trade requires authorisation from the EU will be increased to an amount still to be agreed.

 

The measures are only “initial measures”. The intention appears to be to negotiate a long-term comprehensive solution. The “comprehensive solution” would produce the comprehensive lifting of all UN Security Council sanctions, as well as multilateral and nation sanctions related to Iran’s nuclear programme. The P5+1 and Iran “aim” to conclude negotiating a “comprehensive solution” and commence implementing it no more than one year after the adopt of the “interim measures”.

 

This time-scale reads to us as more of a statement of intent rather than a binding commitment, the Joint Plan of Action states that the “comprehensive solution” would comprehensively lift UN Security Council, multilateral and national nuclear-related sanctions, including steps on access in areas of trade, technology, finance and energy, on a schedule “to be agreed upon”.

 

However, it does appear that the lifting of sanctions on insurance and transportation of Iranian oil and petrochemical sales has been agreed and, if that is confirmed when the EU sanctions regulations are updated, it should make it possible for future business of this sort to be conducted with fewer difficulties. What is not clear, however, is whether any individual designations are to be lifted. Nor is it clear to what extent the western banks will now permit payments to/from Iran.

 

Footnote 5

 

Footnote 5 on page 3 is difficult to understand, as the drafting is somewhat tortuous. It appears to apply only to petrochemical exports, and not to imports of such cargoes or to exports or imports of any other sorts of cargoes. In relation to petrochemical exports we think it has the following meaning:

 

  1. where it is desired to make a permitted transaction (i.e. one now permitted as a consequence of the suspension of certain sanctions); and
  2. where the permitted transaction needs to be accompanied by ancillary transactions (such as the provision of insurance, transport or financing); then
  3. the ancillary (or “associated”) transactions are also freed from the effect of the sanctions.

 

So, for example, if an Iranian seller of petrochemicals needs to insure the cargo (eg a CIF sale as opposed to a FOB one) and to arrange transport, then the sanctions prohibiting the insurance and transportation of Iranian petrochemical exports are also suspended, thus enabling in theory at least the Iranian exporter to buy insurance from EU or even US insurers and to arrange transportation with EU or US flagged vessels. The final sentence does, however, signal a limit to the suspension of sanctions, as it states that these associated services “could  involve any non-designated Iranian entities” (our emphasis), which implies that the provision of associated services cannot involve designated Iranian entities.

 

Associated services more generally

 

Suspension of sanctions against “associated services” is also mentioned in relation to:

  • oil sales
  • gold and precious metals
  • auto industry
  • civil aviation

 

In respect of the first category, oil sales, associated services means “insurance and transportation” services. In respect of the other 3 categories, no explanation is given.

 

Designation

 

As mentioned above, footnote 5 appears to signal that there will be no change in the designation of currently targeted Iranian entities and natural persons. However, this might be reading too much into the words used in the last sentence of the footnote. We will have to wait for the EU and US governments to publish detailed sanctions updates.

 

CSC will continue to monitor changes in the UK/EU sanctions law, and will advise you of changes as and when they occur.