On 01 July 2010 US President Obama has signed The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 ( “CISAD”) HR 2194 which was introduced on 30 April 2009. The CISAD takes immediate effect.
These sanctions are created to impose restrictions on any party involved in selling, financing or shipping refined petroleum products to Iran. The enacted sanction has a wide gap exposing insurers to possible blockings of US$ transactions and threats of freezing any assets in the United States. CISAD in concentrating on the Petroleum trade and resources imposes sanctions on any person who indulges in a direct investment of $20 million or more, or any combination of investments of at least $5 million which in the aggregate equals or exceeds $20 million in any 12-month period. The Sanctions are also imposed on any person who indulges in selling, purchasing and/or providing any petroleum related product which exceeds US$ 200,000. The definition of "person" includes a financial institution, insurer, underwriter, guarantor, and any other business organization including a foreign subsidiary, parent, or affiliate, or a governmental entity acting as an export credit agency. CISAD provides that “refined petroleum products means diesel, gasoline, jet fuel (including naptha-type and kerosene-type jet fuel), and aviation gasoline”.
The following additional economic sanctions have been levied as and by way of deterrent effect on the Iran’s alleged ongoing clandestine nuclear program:
(1) Prohibition of imports into the United States (exempts information materials);
(2) Prohibition of exports to Iran (exempts humanitarian assistance, agricultural commodities, food, medicine, and goods or services for commercial aircraft, the International Atomic Energy Agency (IAEA), and for democracy promotion);
(3) Freezing of assets of certain individuals; and
(4) Prohibition of U.S. government contracts.
This aspect will affect the trading industry which has entered into long term contracts and also on the shipping industry that may have entered into long term charter-parties. P&I Clubs will be required to consider these restrictions for their member vessels who are involved in shipments of refined petroleum products to Iran. Section 102 (c) of CISAD does provide an exception for the underwriters and insurance providers exercising due diligence, however, it is not clear to the extent of due diligence required to be taken by the underwriter.
The market will take some time to accept these sanctions and may look into alternative modes to conduct business; one of such alternatives may lead to trading in different currency to avoid violating the United States laws. Islamic Republic of Iranian Shipping Lines (IRISL), being the most affected shipping line in the US-Iran hullabaloo, has already moved their assets offshore and other tanker operators may also look into such alternatives.
For further information please contact: ravi.jawani@fichtelegal.com
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