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On July 31, 2012, a new Executive Order signed by President
Obama tightens U.S. sanctions against Iran to the most significant
levels to date. On the same date, the U.S. Department of the
Treasury imposed sanctions specifically against two banks in China
and Iraq, respectively, for providing financial services to
sanctioned Iranian banks. The increasing focus on financial
institutions reflects the U.S. Government's attempts to
eliminate payment options and mechanisms for the purchase of
Iranian petroleum and petroleum and petrochemical
products.
Background
The U.S. now has in place a number of sanctions programs
targeting Iran and specifically the Iranian petroleum and
petrochemical industries. This latest Executive Order expands upon previously
imposed sanctions contained in section 1245 of the 2012 National
Defense Authorization Act ("NDAA"). Among other things,
this Executive Order is designed to deter Iran or other countries
from establishing financing or payment mechanisms relating to the
purchase of Iranian oil to avoid the NDAA sanctions. There are also
specific sanctionable activities relating to the provision of
material support and involvement in significant financial
transactions involving the National Iranian Oil Company and
Naftiran Intertrade Company. Any persons that participate in one of
the sanctionable activities listed in the NDAA, as supplemented by
this latest Executive Order, face substantial risk of being denied
access to the U.S. financial sector, including access to credit or
payments through financial institutions or transactions in foreign
exchange subject to U.S. jurisdiction.
Also on July 31, 2012 the U.S. Department of the Treasury
imposed sanctions against the Chinese bank named Bank of Kunlun and
the Iraqi bank named Elaf Islamic Bank for knowingly facilitating
significant transactions or providing significant financial
services to certain previously-designated Iranian banks. These
newest sanctions by the Treasury Department were imposed pursuant
to the Comprehensive Iran Sanctions, Accountability and Divestment
Act of 2010 ("CISADA") and the result is that the Bank of
Kunlun and the Elaf Islamic Bank are essentially cutoff from direct
access to the U.S. financial system, representing likely
difficulties for any entities or individuals doing business with
those banks.
Advice
With each passing month the risks grow dramatically for entities
and individuals in the maritime industry, the financial industry
and indeed many other international industries that may have direct
or indirect dealings with the Iranian oil industry or any of the
designated Iranian entities. As always, due diligence and
comprehensive compliance programs are critical to minimizing the
risks for international companies and their managements and
employees.
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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