International Regulatory Enforcement (PHIRE)
U.S. Increases Sanctions on Iran as Tensions Escalate
January 13, 2020
Scott Flicker, Lauren-Kelly Greenbacker, Kelsey Sullivan, Talya Hutchison
On Friday, January 10, the Trump Administration increased the stakes for non-U.S. companies seeking to do business with Iran, as tensions between the two countries escalate.
The recent action consists of two parts:
(1) The Treasury Department’s Office of Foreign Assets Control (“OFAC”), acting pursuant to existing executive orders, and in consultation with the State Department, imposed blocking sanctions against (a) eight senior officials in the Iranian regime, pursuant to existing Executive Order 13876 and (b) almost two dozen steel, aluminum, copper and iron manufacturers in Iran, a key Chinese-based distributor and three vessels, pursuant to existing Executive Order 13871;and
(2) The President issued a new Iran sanctions Executive Order (“New E.O.”), as well as Seehttps://www.whitehouse.gov/presidential-actions/executive-order-imposing-sanctions-respect-additional-sectors-iran/. The New E.O. expands sanctions to cover the construction, mining, manufacturing, and textiles sectors of the Iranian economy (the “Targeted Sectors”).
As under other executive orders targeting sectors of the Iranian economy, the new sectoral sanctions would authorize the United States to designate as sanctioned “any person,” including any non-U.S. person, determined:
To operate in the Targeted Sectors; or
To have, after the date of the New E.O., knowingly engaged in a significant transaction for the sale, supply or transfer to or from Iran of significant goods or services used in connection with a Targeted Sector.
In addition, the New E.O. authorizes sanctions against any person (i) found to have materially assisted, sponsored, or provided financial, material or technological support for, or goods or services to or in support of, any person blocked under the New E.O.; or (ii) to be owned or controlled by, or acting on behalf of, any person blocked under the New E.O.
The New E.O. also targets foreign financial institutions (“FFIs”), authorizing the U.S. Government to sanction any FFI for knowingly conducting or facilitating any “significant financial transaction” involving the sale, supply, or transfer to or from Iran of significant goods or services used in connection with Targeted Sectors or a person blocked pursuant to the New E.O.
These moves expand the already-hazardous sanctions landscape for non-U.S. companies engaged in otherwise lawful business with Iran. Companies are well advised to evaluate any ongoing business with Iran involving the Targeted Sectors or newly designated individuals. Given the current geopolitical climate, we expect that the U.S. government will continue to focus its enforcement efforts on activities viewed to support the Iranian regime and Iranian economy.