Iran Trade Sanctions
Iran trade sanctions are getting tougher.
Non-US companies that thought they understood US trade sanctions for engaging in energy-related transactions with Iran must now revisit them.
A new sanctions measure passed by Congress on January 1 and signed by President Obama the next day puts the energy, shipping and shipbuilding sectors generally off limits. US companies are already barred from trading with Iran. Thus, the new sanctions are aimed at companies outside the United States. Non-US companies that violate the sanctions and financial institutions that facilitate trading risk being locked out of the US economy.
Turkey complained that 20% of its natural gas comes from Iran, so that any sanctions against trade in natural gas would fall disproportionately on Turkish consumers. The new sanctions allow trade in Iranian natural gas to continue, but the money owed Iran would have to be credited to an account in a bank headquartered in the customer country.
The new sanctions apply to sales of Iranian oil and petroleum products, but only during periods when there is a large enough supply of oil and other such products available in global markets at prices that allow substitution for Iranian oil without undue hardship.
The new sanctions also bar trade with Iran in coal, precious metals, graphite, raw or semi-finished metals such as aluminum and steel, and computer software for integrating industrial processes.
They will not take effect until July 1, 2013, giving companies time to wind down existing trade.
They come on top of other measures the US enacted last August that will require public companies to disclose in filings with the US Securities and Exchange Commission, starting February 6, 2013, any business activities that they or their affiliates have knowingly engaged in with Iran. The SEC does not have a clear definition of affiliate.
Also beginning February 6, buyers of Iranian oil will no longer be able to pay for the oil in cash. A “buy-local” provision requires that any money Iran is owed will have to be locked up inside an account in a bank in the customer country and used by Iran in that country to buy goods from the local economy. Most countries that buy Iranian oil are running trade deficits with Iran. The new measures should help reverse the deficits.
by Keith Martin