Iran Sanction Proposal Targets Oil Companies, Tanker Fleet

A U.S. proposal to sanction Iran’s state-owned oil company and its main tanker fleet may ensnare any person or business in the world involved in purchasing or shipping Iranian oil, according to a report from Bloomberg. Pressure is mounting on Iran’s nuclear program, as the prospect of an attack from Israel grows beyond rhetoric. In turn, the pressure is rising to force Iran to back down.

The Senate Banking Committee unanimously adopted a measure Feb. 2 to compel the administration to investigate links between Iran’s crude-oil supply chain and its powerful Islamic Revolutionary Guard Corps, an elite military unit that the U.S. has sanctioned for weapons proliferation, terrorism support and human-rights abuses. The move would essentially “black list” Iranian oil.

The Senate’s move would give the U.S. Treasury Department 60 days to investigate whether the Revolutionary Guard owns or controls the National Iranian Oil Co., or NIOC, and the National Iranian Tanker Co., or NITC. The provision, along with a House bill filed Jan. 31, would empower the president to penalize foreign institutions by cutting them off from the U.S. banking system if they deal with the two companies. The proposals allow waivers based on oil market conditions or “significant” reductions in Iranian-oil purchases.

NIOC is owned by the government of Iran and is the world’s second-largest oil company by volume produced, after the Saudi Arabian Oil Co. NITC, a former subsidiary of NIOC that was privatized 12 years ago, has the world’s fourth-largest fleet of supertankers, according to Clarkson Research Services Ltd., a unit of the world’s largest shipbroker. If the measure is adopted, it is very likely that Iran’s tankers would be shunned at international port facilities in support of the sanctions.

In the Bloomberg report, which included interviews with NITC executives, the company contents that NITC income has never been part of the state budget, and the sole beneficiaries of NITC’s revenue are its shareholders, 7 million Iranian retired pension-fund owners.

 

The U.S. has already sanctioned Iran’s national maritime carrier, the Islamic Republic of Iran Shipping Lines, for involvement in missile programs and transporting military cargoes. A report last month by the Stockholm International Peace Research Institute concluded the carrier had renamed 90 of its 123 ships since 2008 and reflagged some of its fleet in an effort to circumvent sanctions, according to the Bloomberg report.

 

What’s in the Proposal?

On February 2, 2012, the U.S. Senate Banking Committee approved Chairman Tim Johnson’s (D-SD) and Ranking Member Richard Shelby’s (R-AL) Iran Sanctions, Accountability and Human Rights Act.  “With these new sanctions we are giving Iran’s leaders a clear choice,” said Chairman Johnson.  “Iran can end its suppression of its own people, come clean on its nuclear program, suspend enrichment, and stop supporting terrorist activities around the globe.  Or it can continue to face sustained, intensifying multilateral economic and diplomatic pressure deepening its international isolation.”

The Senate Banking Committee has jurisdiction over sanctions legislation.  In 2010, the Committee passed sanctions legislation which became law and provided the President with powerful new tools to counter the Iranian threat.  These new sanctions together with other international efforts have prompted many foreign firms to withdraw from Iran, and slowed Iran’s illicit nuclear program. 

 

- Extends US sanctions to Iranian Energy Joint Ventures: For the first time, extends US sanctions under the Iran Sanctions Act (ISA) to firms engaged in new energy-related joint ventures anywhere in the world in which Iran’s government is a substantial partner or investor, or by which Iran could otherwise receive critical advanced energy sector technology or know-how not previously available to its government.

 

- Codifies and Expands US Sanctions on Suppliers to Iran’s Energy and Petrochemical Sectors: Codifies the President’s decision to extend US sanctions to Iran’s petrochemical sector, adopting the standards, monetary thresholds ($250,000 per transaction, or multiple transactions aggregating to $1 million in a 12-month period) and specific petrochemicals list contained in the November 21, 2011 Executive Order 13590.  Extends US sanctions to all suppliers who knowingly provide goods, services and technologies valued at $1 million or more, or $5 million annually, to a person or firm involved in Iran’s energy sector, including petroleum resource projects and domestic production of refined petroleum products (primarily gasoline) in Iran.

 

- Mandatory Sanctions on Shippers of WMD/Terror Materials:  Requires the blocking of assets of, and other sanctions on shippers, insurers, and reinsurers who knowingly provide ships or insure vessels used in the shipment of materials contributing to Iran’s WMD program or its terrorism-related activities.  Also applies to parent firms if they knew or should have known of the shipments, and to subsidiaries of violators if they knowingly participated in the activity.

 

For full details of the measure, click here.

 

(Source: Bloomberg & Staff Reports)