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 Reporter March 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Legal

Italian Pleads Guilty to Marine-hose Price-fixing in US

A former executive of Parker ITR Srl pleaded guilty on Thursday to conspiring to rig bids for marine hose and was sentenced to two years in prison, the U.S. Justice Department said on Thursday.

Court: Japan's Mitsui Paid to Release Ship

China Supreme Court says Mitsui pays about $29 mln; Ship released about 0030 GMT Thursday. Ship was seized over dispute dating back to 1930s. Advisor to plaintiffs says will likely demand more money.

Lawyer: Korea Ferry Owners Accept Responsibilities

The family that has a major stake in companies that control the shipping operator whose ferry sank last week, likely to have killed hundreds, will take social and

News

Port Launches Emergency Landing Craft

Port of Long Beach officials welcomed a new addition to their small fleet of boats this week with the delivery of a refurbished and retrofitted landing craft that

Reps. Byrne and Palazzo Visit Ingalls Shipbuilding

Reps. Bradley Byrne, R-Ala., and Steven Palazzo, R-Miss., visited Huntington Ingalls Industries' (HII) Ingalls Shipbuilding division Wednesday. The congressmen,

19th Century Shipwreck Found off Golden Gate Bridge

NOAA announced it has found the underwater wreck of the passenger steamer City of Chester, which sank in 1888 in a collision in dense fog near where the Golden Gate Bridge stands today.

Government Update

Reps. Byrne and Palazzo Visit Ingalls Shipbuilding

Reps. Bradley Byrne, R-Ala., and Steven Palazzo, R-Miss., visited Huntington Ingalls Industries' (HII) Ingalls Shipbuilding division Wednesday. The congressmen,

Offshore O&G: Cuts, Delays in Norway as Costs Soar

More oil and gas projects in Norway could be put on hold because of rising costs, adding to a growing list of developments that have been delayed or called off,

Court: Japan's Mitsui Paid to Release Ship

China Supreme Court says Mitsui pays about $29 mln; Ship released about 0030 GMT Thursday. Ship was seized over dispute dating back to 1930s. Advisor to plaintiffs says will likely demand more money.

Logistics

Imperial: Decision on Canadian LNG Project Distant

Imperial Oil Ltd said on Thursday it is not yet close to deciding on whether it will go ahead with a Canadian liquefied natural gas export plant it is exploring

No Lift for Konecranes as Q1 2014 Profit Slips

Finnish crane maker Konecranes on Thursday reported a 32-percent fall in its core quarterly operating profit amid slow demand and tight competition. January-March 2014 operating profit,

GAO: Limited Commercial Arctic Development Foreseen

Decreasing seasonal sea ice has opened up Arctic waters for longer periods with resulting potential economic opportunities in commercial shipping, cruises, commercial fishing, oil, and mining.

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Maritime Standards Navigation Pipelines Pod Propulsion Salvage Ship Repair Sonar
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: 0.1968 sec (5 req/sec)