End to sanctions against Iran in sight
After negotiating for decades, the five permanent members of the United Nations Security Council with veto power and Germany reached a deal with Iran on 14 July 2015, which has already been described as “historic”. The long-awaited basis for the lifting of the embargo on Iran has therefore probably been created. The deal on the one hand prohibits Iran from developing nuclear weapons and only allows the civilian use of nuclear technology. On the other hand, the gradual lifting of the embargo, which from a business point of view is long overdue, was also agreed in the deal.
The first group of sanctions is to be lifted when the International Atomic Energy Agency (IAEA) confirms than Iran has met certain points of the deal. This is, however, expected at the beginning of 2016 at the earliest. This first group of sanctions includes many restrictions which have strictly limited and still limit business with Iran across all sectors, such as:
- Restrictions on capital and payment transactions relating to export financing. Listed Iranian persons are, however, still excluded from using SWIFT;
- restrictions on the transport sector, with the exception of those relating to the transport of arms;
- the listing of some important persons and institutions, such as many banks and the Iranian Central Bank;
- restrictions on the oil, gas and petrochemicals sector; and
- restrictions on trade in gold, precious metals, diamonds and cash.
The remaining sanctions will be lifted in a second phase. This will also require verification by the IAEA that all nuclear materials in Iran are only being used for peaceful activities. These sanctions in particular include the embargo on nuclear goods and technology which could be used for proliferation purposes, as well as corresponding investments and services relating to arms. At this point, further persons and institutions will also be removed from the blacklist.
The deal has five important consequences for companies:
All current sanctions are still in force. Until the relevant EU Regulation is repealed, it is to be expected that compliance will be monitored strictly by the authorities, making rigorous implementation essential.
The extensive lifting of restrictions on capital and payment transactions in the first phase will make doing business with Iran much easier.
German companies are currently receiving offers which at the moment still breach the embargo (for example: investment in listed companies). Even in light of sanctions being lifted, relevant contracts must be made subject to the condition that the embargo regulations which have to be observed are cancelled.
The repealing of the U.S. embargo regulations, which are also significant for many European companies, is a much more complicated process. The smooth resumption of trade with Iran will also depend on when the USA revokes these measures.
Any questions? Please contact: Bärbel Sachs or Mansur Pour Rafsendjani
Practice Group: International Trade