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December 07, 2015 

Update on Iran and Other OFAC Sanctions Programs

By Glen Kelley, Doug Jacobson and Michael Burton, Jacobson Burton Kelley PLLC

During the past few weeks there have been a number of important developments in varoius US economic sanctions programs adminsitered by the US Treasury Department's Office of Foreign Assets Control (OFAC). The following is a summary of some of the key developments and links to the relevant documents. 

A. Timing of Iran Sanctions Relief Under Iran Nuclear Agreement 

There is widespread interest in the timing of the implementation of the sanctions relief called for under the July 2015 multilateral agreement with Iran. This agreement, the Joint Comprehensive Plan of Action (JCPOA), is commonly referred to as the Iran nuclear agreement. 

As discussed in our previous update, on October 18, 2015 the United States and the EU marked “Adoption Day” of the JCPOA. On that day Iran formally began to implement its extensive obligations to dismantle significant portions of its nuclear program.

When Iran has completed these obligations, as verified by the IAEA, the “Implementation Day” milestone will be reached under the JCPOA, and the JCPOA sanctions relief will take place. There is widespread speculation as to when Implementation Day will occur. Numerous Iranian government officials and some EU government officials have suggested that sanctions relief will take place as early as January 2016. In our view January 2016 is optimistic, given the numerous steps that Iran must implement to comply with the JCPOA and since everything related to the JCPOA has taken much longer than anticipated. 

As we have previously noted, after Implementation Day there will be very few changes in the broadest US sanctions on Iran that are applicable to US persons, companies and US-origin products. Rather, the changes will primarily involve the easing of US secondary (extraterritorial) sanctions on Iran, and the lifting of primary sanctions on Iran imposed by the EU and other countries.

B. US Treasury Department Statement and Guidance on Iran Business Activities

Reacting to the interest in Iran-related business expressed by many companies, on November 25, 2015 the US Treasury Department spokesperson for the Office of Terrorism and Financial Intelligence issued a statement on sanctions relief under the JCPOA, which noted:
“non-U.S. companies and individuals will not be subject to U.S. sanctions if they engage in initial discussions about potential business opportunities or travel to Iran to examine the possibilities of business relationships after sanctions are lifted. However, entering into contracts involving Iran prior to Implementation Day may be sanctionable. For this reason, we recommend the companies seek expert guidance before executing any contract or beginning a formal business relationship involving Iran prior to Implementation Day.”
The Treasury spokesperson also referred to OFAC guidance released on Adoption Day stating that before JCPOA implementation, a non-US person may be penalized under US sanctions if they enter into a contract involving Iran or its government, even if the contract is made contingent on the JCPOA sanctions relief. As always, whether US primary or secondary (extraterritorial) sanctions apply to a non-US person depends upon a number of factors involving the parties and activities involved.

This statement appears to strike a balance between encouraging non-US companies to consider the possibility of re-engaging with Iran in certain areas, after the JCPOA sanctions relief is implemented, and reminding companies that primary and secondary sanctions are still in place. 

C. Belarus Sanctions Temporarily Suspended

On October 30, 2015 the United States temporarily suspended its sanctions targeting certain Belarusian companies and the EU suspended most, but not all, of its sanctions against Belarus the following day. These measures are particularly significant for petroleum and petrochemical companies, which had been unable to engage in many transactions in Belarus due to the pervasive and non-transparent roles the sanctioned entities play, particularly Belneftekhim (the Belarusian State Concern for Oil and Chemistry).
The suspension of US sanctions on these entities should mitigate this compliance challenge, though certain transactions may still be prohibited if they involve President Lukashenko or any other person who remains on OFAC's List of Specially Designated Nationals (“SDN list”). However, companies should bear in mind that it is possible the US or EU will not renew the respective sanctions suspensions when they expire in April and February 2016. 

Our detailed explanation of the US and EU suspension of the Belarus sanctions is available here.

D. Cuba Payments Guidance

The US government has signaled that it will continue to try to clear the way for US companies and financial institutions to engage in the transactions relating to Cuba that are now authorized under the recent amendments to US sanctions, although most transactions remain prohibited. We summarized the last major round of Cuba sanctions relief and related guidance in our September 21,2015 update.

In a further small step in this direction, on November 25, 2015 OFAC added a new item to its frequently asked questions guidance for the Cuba, available here. This new guidance is intended to assist US financial institutions in becoming more comfortable in processing payments related to authorized travel to and from Cuba. It reads in part as follows:
52. Is a financial institution required to independently verify that an individual’s travel is authorized when processing Cuba travel-related transactions?
No. A financial institution may rely on U.S. travelers to provide their certifications of authorized travel directly to the person providing travel or carrier services when processing Cuba travel-related transactions, unless the financial institution knows or has reason to know that the travel is not authorized by a general or specific license.
E. US Sanctions Relating to Conflicts in Africa

There have been a number of recent developments in US sanctions relating to various African conflicts.

First, on November 12, 2015, President Obama issued Executive Order 13710 terminating the OFAC sanctions program targeting former Liberian President Charles Taylor and other persons. President George W. Bush had originally established this program in 2004. Along with the lifting of the Liberia sanctions program, a number of individuals now playing significant roles in Liberia’s companies and political scene were removed from the SDN list.

Separately, on November 23, 2015, President Obama issued Executive Order 13712 creating a US sanctions program for specified individuals in Burundi. Four individuals were immediately designated under the order, two being senior Burundi government officials and two being two senior opposition figures that earlier this year had led a failed coup seeking to overthrow the current government. Additional individuals may be designated for contributing to instability, undermining democratic processes, violating human rights or committing acts of violence in Burundi.

The United States, in many cases acting alongside the UN or EU, has recently imposed or updated targeted sanctions on individuals and entities involved in several other conflicts in African countries. These include the sanctions programs for the Central African Republic (established in 2014), Cote-d’Ivoire (2006), the Democratic Republic of the Congo (2006), Somalia (2010), South Sudan (2014) and Zimbabwe (2003).

F. US Sanctions Network Providing Support to Syrian Government and Facilitating Oil Purchases from ISIL

On November 25, 2015, the US Treasury Department added four individuals and six entities to the SDN List for allegedly providing support to the Government of Syria, acting pursuant to Executive Order 13582 of 2011. All assets of the designated persons that are located in the US or that are in the control of US persons must be blocked (frozen) and US persons are generally prohibited from engaging in transactions with the designated persons.

As explained in the Treasury Department’s statement, the designations were made for various reasons, including facilitation of oil purchases by the Syrian Government from the Islamic State of Iraq and the Levant (ISIL or ISIS). One of the designated individuals is a Russian national who has served for many years as president of the World Chess Federation (FIDE). OFAC also added to the SDN List a Syrian engineering company, a Russian bank, a trading company and several other companies owned by the individuals that were designated.

G. OFAC Updates List of Medical Supplies Eligibile to be Exported to Iran Under a General License

OFAC recently
 published an updated list of medical supplies that are eligible to be exported to Iran under the general license contained in OFAC’s Iranian Transactions and Sanctions Regulations (ITSR). 

Items that are included on OFAC’s list of medical supplies do not require a specific license to be obtained from OFAC prior to being exported or reexported to Iran, but can be exported to permissible customers in Iran under the authority of the general license.  

The updated list includes a number of new cardiology, radiology and other medical products, including CPAP systems and contraceptives. 

To reflect that this list now contains a broader category of items than basic medical supplies, OFAC also changed the name of the list to “List of Medical Supplies” from “List of Basic Medical Supplies”. 

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