Temporary Easing of Iran Sanctions in Effect Jan. 20, 2014

By Jonathan M. Epstein
Tuesday, January 14, 2014

The accord reached between Iran and the five permanent members of the United Nations Security Council (the United States, China, Russia, Great Britain and France) and Germany (the P5+1) in November 2013, becomes effective Jan. 20, 2014, for a six-month interim period. The accord provides limited sanctions relief for Iran in exchange for a halt to Iran's nuclear development program. While some of the details regarding the specific scope of sanctions relief are not yet public, this alert provides initial information about the scope and impact of these measures.

Negotiations Centered Around IAEA Inspection and Oversight

On Nov. 24, 2013, the P5+1 reached an interim accord with Iran called the Joint Plan of Action. This accord is intended to provide an interim compromise to give negotiators an opportunity to conclude a more permanent agreement. For the past two months, the parties have been negotiating over the technical details with a particular focus on the inspection and oversight of Iran's nuclear facilities by the International Atomic Energy Agency (IAEA). On Jan.12, both sides signaled that these details were ironed out, thus enabling the accord to take effect on the agreed date of Jan. 20, 2014.

Under the accord, Iran will (i) cease enriching uranium beyond 5 percent; (ii) begin diluting or converting to oxide existing weapons-grade fuel; (iii) cease installing new centrifuges; and (iv) accept enhanced monitoring of its nuclear facilities by the IAEA. 
Summary of Limited Sanctions Relief

The P5+1 member states and the European Union (EU) will take several steps to provide temporary and limited sanctions relief for certain sections of Iran's struggling economy. The major relaxations include:

  •     suspending U.S. and EU sanctions on Iran's petrochemical exports as well as "Associated Services," which are the insurance, transportation and finance services of third parties necessary to carry out the transactions
  •     suspending U.S. and EU sanctions on Iran's trade in gold and other precious metals and on Associated Services
  •     suspending U.S. sanctions on Iran's automobile industry (e.g., suspending sanctions on the importation of goods to Iran for use in the production of cars, trucks, motorcycles and other vehicles)
  •     increasing the EU prior authorization thresholds for transactions in non-sanctioned trade
  •     easing U.S. sanctions on Iran's civil aviation sector, including Iran Air, by allowing the expediting of the licensing process for the supply of spare parts to Iran, and for safety-related inspections and repairs in Iran
  •     establishing a financial channel to facilitate humanitarian trade using Iran's oil revenues held abroad 
  •     allowing Iran to repatriate approximately $4.2 billion in revenue from oil exports, currently frozen in foreign accounts, on a monthly schedule over the next six months (i.e., approximately $700 million per month)
  •     waiving requirements for further reductions in oil imports from Iran from those countries currently importing oil from Iran under waiver (i.e., China, India, South Korea, Taiwan and Turkey), and expressly authorizing Associated Services for these exports

Internal Politics May Derail the Process

On the Iranian side, it is unclear whether the government of Iran will live up to its commitments to open its facilities to inspections. Further, while the goal of these negotiations has been focused on preventing Iran from developing nuclear weapons, the U.S. remains very concerned about the flow of weapons and support from Iran to terrorist groups, such as Hezbollah in Syria and Lebanon.

In Washington, D.C., notwithstanding express threats of a presidential veto, the U.S. Congress may move forward with new sanctions legislation. In particular, 58 senators have signed on as co-sponsors of the Nuclear Weapons Free Iran Act of 2013 introduced in December 2013. This act would impose additional sanctions on Iran and almost certainly derail the current rapprochement.

Tips for Compliance

While the details of relaxations are not yet published, companies contemplating or being asked to participate in transactions falling within the relaxation should consider:

  •     These are interim measures that expire July 19, 2014, unless reauthorized. Therefore, any contract should be of limited duration and have express provisions protecting a company in the event sanctions are re-imposed.
  •     Given the tentative nature of these relaxations, do not expect that all banks and counterparties will change their policies, which in some cases generally prohibit dealings with Iran.
  •     Companies that are publicly traded in U.S. financial markets will continue to have reporting obligations relating to business transactions with Iran, even where such conduct does not breach sanctions.

Impact of Iran Sanctions Relief

Outside of Iran, the broadest impact will likely be for non-U.S. companies involved directly or indirectly in shipping oil, petrochemicals and auto parts, as the relief reopens major areas of trade with Iran. Further, implementing orders should clarify which Associated Services are allowed, giving some comfort to non-U.S. marine carriers, insurers and banks that may be asked to participate in such transactions. In contrast, other than relaxations relating to civil aviation parts and repairs, there is little change for U.S. companies and their foreign subsidiaries.

The U.S. has had positive results in using the measured relaxation of sanctions as an effective policy tool in Libya and Burma. Hence, the concept that these limited measures with Iran could serve as the basis for a more comprehensive and permanent accord has some recent precedent. Further, while there is a risk this process will be derailed by internal politics within the U.S. or Iran, failure of this process likely means not only new crippling sanctions on Iran, but also the real possibility of military action against Iran.

Maritime Today

The Maritime Industry's original and most viewed E-News Service

Maritime Reporter November 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds


Euroseas Sells C/V Marinos

Euroseas Ltd.  an owner and operator of drybulk and container carrier vessels and provider of seaborne transportation for drybulk and containerized cargoes,

Plans to Create Rio Doce Fund

Vale and BHP Billiton announced today plans to work together, with Samarco, to establish a voluntary, non-profit fund to support the rescue and recuperation of the Rio Doce river system,

Canada to Aid Developing Nations Fight Climate Change

Canada will provide aid to developing countries to combat climate change, Prime Minister Justin Trudeau announced on Friday ahead of talks on global warming,


Euroseas Sells C/V Marinos

Euroseas Ltd.  an owner and operator of drybulk and container carrier vessels and provider of seaborne transportation for drybulk and containerized cargoes,

Bill on Danish Maritime Planning Submitted

The bill is to form the basis of a maritime planning act intended to promote economic growth and development of sea areas. The Danish Maritime Authority is to head the work.

Plans to Create Rio Doce Fund

Vale and BHP Billiton announced today plans to work together, with Samarco, to establish a voluntary, non-profit fund to support the rescue and recuperation of the Rio Doce river system,

Government Update

SSA Welcomes Decision To Extend BEO

The Singapore Shipping Association (SSA) has welcomed the decision by Singapore’s Minister for Trade and Industry to extend the Competition (Block Exemption

Moore Stephens Highlights Potential Tax Issues for Shipping

As part of the Government’s drive to encourage voluntary compliance with the tax rules, it will legislate to introduce a new requirement that large businesses

U.S. Ups Philippines Aid as South China Sea Turmoil Builds

The United States has raised its military aid to the Philippines this year to $79 million, the U.S. ambassador said on Wednesday, as tension rises in the region


DP World, SCA Pact for Ain Sokhna Port Development

Suez Canal Authority (SCA) and the Red Sea Ports Authority signed an agreement with Dubai Ports World (DP World) and Sonker Bunkering Company for the development of Egypt’s Ain Sokhna seaport,

SCCT Prepares to Boost Vessel Traffic with 24-hour Access

A formal signing ceremony will now enable vessels to transit to Port Said East through a new side channel to be constructed bypassing the Suez Canal’s main entrance.

Evergreen Line Orders Ten 2,800 teu Ships

Taiwanese shipping company Evergreen is ordering ten 2,800 TEU container ships from Japanese shipbuilder Imabari Shipbuilding Co.,Ltd and compatriot CSBC Corporation.

Maritime Careers / Shipboard Positions Maritime Security Naval Architecture Navigation Pipelines Pod Propulsion Port Authority Ship Simulators Sonar Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1335 sec (7 req/sec)