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On 10 January 2020, the president of the United States of America, Donald J. Trump, and the Treasury’s Office of Foreign Assets Control (OFAC) took action against the Iranian government following the destabilizing events that have occurred in recent days.
President Trump issued a new Executive Order targeting the construction, mining, manufacturing, and textiles sectors of the Iranian economy. Within the targeted sectors, the Executive Order authorises the imposition of sanctions on persons facilitating significant transactions in Iran, including financial institutions processing such transactions. Specifically, sanctions may be imposed for (i) operating in the construction, mining, manufacturing, or textiles sectors of the Iranian economy; (ii) knowingly having engaged in a significant transaction for the sale, supply, or transfer to or from Iran of significant goods or services used in connection with a targeted sector; (iii) having materially assisted, sponsored, or provided support for, or goods or services to, any person whose property and interests in property are blocked; and (iv) being owned or controlled by, or to have acted for any person whose property and interests in property are blocked. The Executive Order does not define “significant” or “materially” and so far, OFAC has not issued any guidance hereon.
In addition, the Executive Order authorises the designation of Iranian and other entities operating in the targeted sectors (the designation of certain Iranian officials by OFAC is described below) and includes specific restrictions applicable to foreign financial institutions.
The sanctions set out in the new Executive Order are capable of being imposed in relation to activities that have no U.S. nexus, including on non-U.S. persons acting entirely outside the United States (secondary sanctions). The Executive Order is immediately effective, and no wind-down window is announced at this time.
The Executive Order exempts activities involving provision of agricultural commodities, food, medicine, or medical devices to Iran.
This latest round of sanctions against Iran comes only months after the Trump Administration in the spring of 2019 imposed sanctions against Iran’s iron, steel, aluminium and copper sectors (Executive Order 13871 of May 8, 2019).
Also on 10 January 2020, OFAC designated eight senior Iranian regime officials believed to have taken part in the missile attacks last week as well as 17 Iranian metals producers and mining companies, including the 13 largest steel, aluminium, copper, and iron manufacturers in Iran (pursuant to Executive Order 13871 of May 8, 2019 referenced above).
The sanctions imposed by the new Executive Order seem largely directed at deterring non-U.S. persons from engaging in business with Iran. In line with the objectives, the new sanctions apply to any foreign person (irrespective of domicile) breaching the sanctions. As a result, the latest sanctions present additional exposure risk for non-U.S. companies doing business in the construction, mining, manufacturing, and textile sectors of Iran – even when there is no U.S. jurisdictional link.
Insofar that Danish persons or companies infringe the Executive Order, they may become subject to U.S. secondary sanctions and their property or interest in property may be blocked. Therefore, Danish businesses dealing with Iran should take steps to ensure that they are not met with U.S. secondary sanctions, for instance by updating their sanctions compliance programs and sanctions screening processes. Any sanctions compliance programs relating to Iran should also take into account the EU Blocking Regulation (Commission Delegated Regulation (EU) 2018/1100).
It is also noteworthy that on 14 January 2020, France, the United Kingdom and Germany in a joint statement expressed concern that Iran is not meeting its commitments under the Joint Comprehensive Plan of Action (the “JCPOA”). As a result, the three European states announced that they have elected to trigger the dispute resolution mechanism under the JCPOA. This may ultimately result in the re-imposition of EU sanctions against Iran.
Gorrissen Federspiel is closely following developments in the field of economic sanctions, and can assist with the implementation of measures designed to prevent sanctions violations. If you have any questions, please contact a member of our CSR and Compliance team.