Since about 2007, both the United Nations Security Council and
the United Nations General Assembly have placed sanctions on Iran
because of the country's continued refusal to comply with
international obligations regarding its nuclear programme. In 2010 the United Nations Security Council strengthened the
already existing sanctions on Iran. The various resolutions restate
the UN's longstanding demand that Iran suspend its nuclear
enrichment programme and other proscribed nuclear activities. The sanctions placed on Iran are, however, not considered to be
"full sanctions" as not all trade with Iran is sanctioned
under the various UN resolutions. Rather, the sanctions placed on
Iran are in relation to members of the UN supplying, selling,
transferring directly or indirectly from their territories, or by
their nationals or using their flag vessels or aircraft to, or for
the use in or benefit of, Iran, which could contribute to
Iran's enrichment-related reprocessing or heavy water-related
activities, or to the development of nuclear weapon delivery
systems. In addition to the sanctions of trade against Iran, the UN
Security Council requested that all member states prohibit new
banking relationships, including the opening of any new branches of
Iranian banks, joint ventures and correspondent banking
relationships if there is a suspected link to proliferation. Member
states were also requested to prohibit their own financial
institutions from opening branches in Iran should there be a
suspected link to proliferation. And member states are further
requested that should the final receiver of any funds in this
regard be an Iranian entity, irrespective who the initial
beneficiary of the funds are, those funds are not to be transferred
to that entity. South Africa, as a member state of the United Nations, is
obliged to ensure that it complies with the resolutions passed in
order to fulfil its obligations to the organisation. The question, however, is whether a South African entity may
contract with an Iranian entity having regard to the UN
sanctions. The simple answer would be that provided the dealings with the
Iranian entity do not breach any of the sanctions placed on Iran by
the United Nations, a South African entity is entitled to and not
prohibited from concluding agreements with an Iranian entity.
However, the answer is not that simple. In addition to the UN sanctions, the United States of America
and the European Union (EU) have their own sanction measures in
place, which go beyond the United Nation sanctions. Even though it
is the South African government's policy only to enforce the UN
sanctions, the US and the EU sanctions are directly relevant on
both a legal and political level. The extent of the US and the EU sanctions will be discussed
separately. In theory, there is no reason for a South African entity not to
contract with an Iranian entity provided that the UN resolutions
are not breached. Having said this, however, it is important to note that most
members of the UN tend to follow the trends and trajectories of the
EU and US sanctions as these are the countries that draft the UN
Security Council resolutions. Even though the South African government has not placed any of
its own sanctions against Iran, many South African financial
institutions refuse to take part in any business in Iran. The
reason for this is that the parameters of the EU and US sanctions
are not clear and are constantly shifting; as such, financial
institutions with assets or interests in the US and EU do not want
to breach the sanctions imposed on Iran by them. This has the potential of a South African entity being placed in
breach of any potential agreement between it and the Iranian entity
and would expose it to possible litigation or arbitration. In addition, and should a financial institution agree to
transfer funds due by a South African entity to an Iranian entity,
South Africa does not have any banking agreements or relations with
Iran. There have been reported situations where South African
companies lose money as neither the Iranian nor the South African
bank can clear the money flowing into or out of Iran, as the case
may be. In conclusion, a South African entity wanting to contract with
an Iranian entity should not conclude any agreement lightly. Should
the South African entity have any assets within the US and/or the
EU, it must be remembered that a breach of either the US or EU
sanctions could result in the freezing of the South African
entity's assets in those countries. Furthermore, the South
African entity could expose itself to possible litigation as it may
not be able to perform its obligations fully under the
agreement. On a political level, by concluding agreements and conducting
business in Iran, the South African entity may be isolating itself
from doing business in the EU and the US as those countries will,
in all likelihood, refuse to permit business to be conducted with
an entity involved in Iran. This article was written prior to the agreement reached
between Iran and six world powers in Geneva. In exchange for a curb
on Iran's nuclear programme, some sanctions would be lifted.
However, there seems to be some confusion as to what was agreed.
Watch this space. 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.The US Sanctions
1.1..1 Sanctions which are applicable to US Persons only; and
1.1..2 Sanctions applicable to non-US Persons.The EU Sanctions
1.1..1 any transactions carried out, in part or in whole, in the EU
irrespective of whether the parties are EU Persons or not;
and
1.1..2 transactions carried out world-wide, if one or more of the
parties are EU Persons.What does this mean for South Africa?
ARTICLE
2 January 2014
I-Ran Away: Commercial Reasons For Turning Away From Involvements With Iran
Since about 2007, both the United Nations Security Council and the United Nations General Assembly have placed sanctions on Iran because of the country's continued refusal to comply with international obligations regarding its nuclear programme.