European Union: EU-Export Compliance – Loosening Of Iran Trade Restrictions

1. Trade restrictions currently in force

In order to prevent Iran from developing a nuclear programme for the construction of weapons of mass destruction ("WMD"), the UN Security Council from July 2006 onwards passed a series of resolutions by which several foreign trade restrictions were imposed on Iran.1 Consequently, the EU too enacted a series of restrictive measures against Iran through which the UN resolutions have been implemented and materially amended. The EU has imposed additional sanctions against Iran due to human rights infringements and internal repression in Iran. Currently, the following EU trade restrictions are in place:

  • Regulation 267/2012 concerning restrictive measure against Iran2 (as amended) in order to prevent proliferation of nuclear WMD;
  • Regulation 359/2011 concerning restrictive measures directed against certain persons, entities and bodies (as amended) imposing trade restrictions due to human rights violations in Iran;3
  • Council Decision 2010/413/CFSP concerning restrictive measures against Iran (as amended) implementing inter alia the UN Security Council resolutions with regard to Iran's nuclear programme4;
  • Council Decision 2011/235/CFSP concerning restrictive measures against certain persons and entities due to violations of human rights in Iran;5

Regulation 267/2012 comprises inter alia restrictions on trade in dual-use goods and technology, key equipment and technology that could be used in the petrochemical industry, a ban on the import of Iranian crude oil, petroleum products and petrochemical products,6 the prohibition of investment in the country's petrochemical industry,7 restrictions on trade in gold, precious metals and diamonds with the Government of Iran8, as well as restrictions pertaining to financial services and monetary transfers9  and the freezing of funds and economic resources of certain individuals10.

2. Implementation Plan for the termination of restrictive measures

Following a June 2015 meeting in Vienna of the E3+3 states11 and Iran, in which an agreement on the future of Iran's nuclear program was reached, the UN Security Council adopted the Resolution 2231/201512 (the "Resolution"), including a Joint Comprehensive Plan of Action (the "JCPOA") as Annex A.

Annex V icw Annex II JCPOA provides for a stepwise lifting of the restrictive measures imposed on Iran and certain individuals according to an implementation plan and on the condition that Iran decommissions its nuclear program as set forth in the Resolution. The main steps of the implementation plan are:

  • On Finalisation Day (the day on which the negotiations between Iran and the E3+3 states were concluded, namely 14 July 2015), the UN adopted the Resolution and Iran was required to start developing necessary arrangements to implement all transparency measures necessary to oversee Iran's compliance with its obligations under the Resolution.13
  • Adoption Day will occur 90 days after endorsement of the UN Resolution (ie 20 October 2015); the JCPOA comes into effect on this day. Iran will start to implement the measures concerning the decommissioning of its nuclear program as set forth in the Resolution (eg decommissioning of nuclear enrichment facilities). The EU will adopt measures to terminate certain provisions which implement economic and financial sanctions related to Iran's nuclear programme. However, the termination of the sanctions will not enter into force before Implementation Day.14
  • Implementation Day is expected to occur around the first quarter of 201615. On Implementation Day, the IAEA shall verify (and confirm) the full implementation of the agreed nuclear-related measures. In case the IAEA confirms full transposition of these measures, the termination of certain restrictions will enter into force. Such termination would in particular lift those economic sanctions that are not directly connected to the proliferation of WMD (eg restrictions on the import of petrochemical substances, the export of key-equipment for the petrochemical industry, trade in gold and precious metals, export financing, export of vessel equipment, etc), as well as restrictions against individuals, especially those in the energy- and finance sectors.16
  • Transition Day will occur 8 years after Adoption Day or upon the IAEA reporting that all nuclear material in Iran is being used for peaceful purposes. On Transition Day, the EU will terminate the remaining, non-proliferation-related restrictive measures as set forth in Regulation 267/2012 and Council Decision 2012/413/CFSP.

However, the JCPOA also provides for snapback mechanisms through which sanctions would re-enter into force if Iran infringes its obligations under the Resolution and the JCPOA.17 In addition, those restrictive measures imposed due to human rights violations as set forth under Regulation 359/2011 and Council Decision 2011/235/CFSP are not affected by the JCPOA and will remain in force.

3. Amendments of the Regulation 267/2012

In order to enable Iran to transpose the JCPOA, Regulation 2015/132718 entered into force on 2 Aug 2015, thus amending Regulation 267/2012.

Under the new Art 43b Regulation 267/2012, national authorities may now license the export to Iran of items, materials, equipment, goods and technology, and the provision of any related technical assistance, training, financial assistance, investment, brokering or other services that is related to the modification and modernization of two Iranian nuclear facilities (Fordow and Arak) and the export of the country's enriched uranium in excess of 300 kilograms in return for natural uranium.

Under Art 43c Regulation 267/2012, national authorities may authorize, on a case-by- case basis, transfers and activities to Iran that are inter alia directly related to the implementation of the JCPOA or required for the preparation of its implementation.

4. Conclusion

UN-Resolution 2231/2015 does not provide for an immediate termination of restrictive measures against Iran; instead, the lifting of sanctions is dependent on the de facto decommissioning of Iran's nuclear program for WMD. Therefore, currently European exporters are still bound by the sanctions foreseen in the respective Regulation and Council Decision. Infringing these sanctions or concluding agreements that are not in line with the EU sanctions mechanism may result in the imposition of severe administrative fines.

Even after the restrictive measures with regard to Iran's nuclear program have been lifted, exporters are well advised to keep an eye on those restrictions that are not affected by the Resolution, namely those which have been imposed due to human rights infringements.

1 Starting with UN Security Council Resolution 1696, passed on 31 July 2006.

2 OJ 24.3.2012, L 88/1.

3 OJ 14.4.2011, L 100/1.

4 OJ 27.7.2010, L 195/39

5 OJ 14.4.2011, L 100/51.

6 Cf Art 2 et sequ and Annex I and II Regulation 267/2012.

7 Cf Art 17 et sequ Regulation 267/2012.

8 Cf Art 15 icw Annex VII Regulation 267/2012.

9 Cf Art 30 et sequ Regulation 267/2012.

10 Cf Art 23 et sequ Regulation 267/2012.

11 France, UK, Germany, Russia, China and USA.

12 S/RES/2231(2015) adopted by the Security Council at its 7488th meeting, on 20 July 2015.

13 Cf Annex V pt A JCPOA.

14 Cf Annex V pt B JCPOA.

15 Cf BAFA, Merkblatt zu den Entwicklungen des Iran Embargos.

16 Cf JCPOA Annex V/C. Implementation Day, pt 15 icw Annex II.

17 Cf Pt 36 et sequ Resolution.

18 OJ 31.7.2015, L 206/18.

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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