Iran Sanctions – Buyers must hold payments for Iran oil starting Feb 6
14 Dec 2012
Starting February 6, U.S. law will prevent Iran from repatriating earnings it gets from its oil export trade. The latest financial sanction will “lock up” a substantial amount of payments to Iran ramping up the U.S. Treasury’s use of financial sanctions to pressure Tehran into ceasing its nuclear weapon development.
This has significant consequences for foreign banks handling transactions related to Iranian oil sales. From February, banks must ensure that payments for Iranian oil are held in an account within the importing country, and are used only for permissible trade between that country and Iran. If banks transfer Iran’s oil earnings beyond their borders, they will risk losing access to the U.S. banking system.
Over the past two years a number of developments relating to Iran sanctions have occurred that are particularly applicable to banks, and the flurry of activity understandably has resulted in some confusion.
In 2011, the U.S. Congress passed a law requiring buyers of Iranian oil to make significant cuts to their oil purchases, or risk being cut off from the U.S. financial system. Several waivers followed and many are up for renewal, leaving the landscape less than clear.
In a similar vein, the EU also placed an embargo on Iranian oil and went further by banning the provision of crucial EU-linked insurance cover for any ship carrying Iranian oil, regardless of destination.
A third package of sanctions announced this month, if passed into law will impose similar restrictions on payments for Iran’s natural gas exports, and ban the sale or transfer of precious metals to Iran.
It is vital when dealing with Iranian individuals and entities with links to sensitive industries to screen business transactions and partners for unwitting Iran sanction risk and conduct comprehensive due diligence to establish ultimate ownership and provenance of goods and funds.
To learn more about Iran Sanctions risk read Rear Admiral Chris Parry’s Opinion Article on Sanctions Against Iran – The Reputational Risk For Law-Abiding And Well-Meaning Companies.
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