Dealing with Iran has never been simple from a sanctions perspective, but recent events involving the Grace 1 oil tanker (now renamed Adrian Darya 1), highlight the continued divergence between the approach of the United States, on the one hand, and the EU, on the other, in their respective diplomatic relations with Iran.

The current sanctions landscape: divergent and complex

In May 2018, President Donald Trump announced the United States’ withdrawal from the Joint Comprehensive Plan of Action (JCPOA). In August of last year, the US reimposed a series of Iranian sanctions and later, in November, a second tranche of suspended US sanctions came back into force. Through these changes, the US: (i) tightened its primary sanctions regime, which applies to US persons and foreign entities owned or controlled by US persons; and (ii) reinstated secondary sanctions, which can be imposed on foreign persons otherwise outside of the US’ jurisdiction.

The EU responded by dusting off Council Regulation (EC) No. 2271/96 and adding Iran. This so-called ‘blocking statute’ was drafted in response to US sanctions against Cuba in the mid-1990s, and broadly prohibits EU operators from complying with certain US sanctions. Specifically, the recent amendments update and extend the scope of the US sanctions caught by the blocking statute and include US statutes and regulations that set forth the US’ primary sanctions targeting Iran as well as those which authorise the US president to impose secondary sanctions on individuals and entities that do business with Iran. The Iran legislation listed in the blocking statute annex is: the Iran Sanctions Act of 1996, the Iran Freedom and Counter-Proliferation Act of 2012, the National Defense Authorization Act for Fiscal Year 2012, the Iran Threat Reduction and Syria Human Rights Act of 2012 and the Iranian Transactions and Sanctions Regulations.

Oct-Dec 2019 issue

Kirkland & Ellis International LLP