In the early hours of Tuesday, 7 August 2018, and as foreshadowed by President Trump’s announcement on 8 May 2018, the United States reimposed certain secondary sanctions on Iran, being those which apply to non-U.S. persons. The imposition of these sanctions follows the conclusion of a 90-day wind-down period and, as mentioned in our previous blog post, will impact (among other things) trade in graphite, raw or semi-finished metals and the Iranian automotive sector. Importantly, the new Iran sanctions permit the U.S. government to impose sanctions on non-U.S. persons who provide significant support to those acting in violation of the sanctions. Note that a second wind-down period expires in early November, at which time further secondary sanctions will be reimposed, affecting, among other things, shipping, the petroleum and petrochemical industry, and insurance.
The new Executive Order signed by the President, however, makes clear that the sanctions do not apply to any person conducting or facilitating a transaction for the provision or sale of agricultural commodities, food, medicine, or medical devices to Iran. Additionally, the Frequently Asked Questions published by the Office of Foreign Assets Control reiterate that the sale of agricultural commodities, food, medicine and medical devices is not sanctionable provided no designated parties are involved.
Just hours after the sanctions came into effect, President Trump tweeted that “[a]nyone doing business with Iran will NOT be doing business with United States.” We therefore expect the United States to actively enforce violations of these sanctions.
In response, the EU has now activated its so called ‘blocking’ Regulation, with a view to supporting the continuation of the Joint Comprehensive Plan of Action. The EU is seeking to ensure that Iran adheres to its nuclear-related obligations under that agreement and to encourage EU companies to continue to do business in Iran. One of the key aspects of this legislation is that it makes it a breach of EU law to stop doing business with Iran if you take that step in order to comply with the U.S. secondary sanctions.
The potential result is that EU companies, including shipping companies, banks, trading houses and others, may be faced with a choice of continuing to do certain business in Iran at the risk of breaching U.S. law, or refraining from doing such business at the risk of breaching EU law.
The Reed Smith sanctions team, with lawyers experienced in advising on both the U.S. and EU positions, are on hand to help you navigate these potentially mutually exclusive obligations.