Iran – from axis of evil to centre of attention, but caution needed before we rush into trade deals
Uncategorised
Friday, 18 March 2016
IN the early 21st century, Iran has been something of an international pariah, writes Andrew Hudson.
It was named part of the ‘axis of evil’, and also was branded part of the ‘axis of terror’, ‘the axis of terror and hate’, the ‘axis of diesel’ and the ‘authoritarian axis’.
That status arose from a number of concerns, mostly around Iran’s involvement with terrorism and involvement in a uranium enrichment program.
Following its refusal to suspend its uranium enrichment program, Iran was subject to a number of years of ‘nuclear’ and economic sanctions from the UN and the US, EU and Australia among other nations.
The Australian sanctions were imposed pursuant to its autonomous sanctions regime, allowing us to impose our own sanctions in addition those imposed by the UN.
In July 2015 Iran entered into an agreement with six countries (US, UK, France, China, Russia and Germany), committing them to release Iran from sanctions subject to a receipt of a report by the UN Security Council that it had observed the agreement.
That report was released on 16 January 2016 and confirmed Iran had “carried out all measures required under the [July] deal to enable Implementation Day [of the nuclear deal and the formal lifting of sanctions on Iran] to occur” under the “Joint Comprehensive Plan of Action” (JCPOA).
There were some immediate international responses:
- The UN lifted some sanctions. For example, Iran is again able to sell oil on world markets and Iran’s banks are permitted to operate globally. Further, business with entities previously specified in the UN list of prohibited entities are no longer prohibited.
- The US suspended general economic sanctions to release banking, steel and shipping routes to Iran, all of which had been barred for five years. However, the US subsequently imposed new sanctions to prevent 11 entities and individuals from using the US banking system following those parties being involved in Iran’s ballistic missile program last year.
-The EU moved to lift sanctions on trade, shipping and insurance.
- China and Iran agreed on a deal to expand bilateral ties and increase trade to US$600 billion in the next 10 years, as part of a 25-year comprehensive arrangement. This involved signing 17 accords including co-operation on nuclear power and a revival of the ancient Silk Road trade route known in China as One belt, One Road.
Australian responses
It should be remembered that 20 years ago, Iran was Australia’s biggest export destination in the Middle East and that a certain level of bilateral trade was maintained despite the sanctions. As soon as the sanctions were released, Australia also moved to adjust its sanctions regime.
This has included:
• Amendments to the Australian autonomous sanctions regime by way of passage of the ‘2016 Specification’ (as it is known in short hand). This ‘suspended’ certain existing sanctions until legislation could be passed to amend them more formally. The effect has been to reduce the categories of goods and services subject to sanctions for which trade would either be banned altogether or require DFAT approval. The changes have been significant.
• Repeal of the requirement for authorisation from DFAT for financial transactions of A$20,000 or more which has previously been imposed by Anti -Money Laundering and Counter-Terrorism Financing Legislation. The combination of these reforms is already having a significant impact, with many exporters looking at new business to Iran including clients of mine for whom we have recently secured confirmation that its proposed export deals would not be subject to sanctions.
However, even among the euphoria of the relaxed trading environment there still needs to be caution on trading with Iran.
There are still some goods and services subject to UN and Australian sanctions and new sanctions could be imposed if Iran breaches agreements under the JCPOA:
• There are still prohibitions on dealing with certain persons and entities as on the ‘Consolidated list’. • Certain financial transactions will still be subject to control by the Anti-Money Laundering and Counter-Terrorism Financing Legislation.
• Even for transactions now released from the previous financial control under the Anti-Money Laundering and Counter-Terrorism Financing Legislation, the relevant reporting entity (the financial institution) will need to comply with enhanced due diligence requirements under Australian law in relation to transactions to or from Iran as these continue under the new regulations. This could limit the availability of finance.
• Overseas sanctions could still apply to Australian transactions. For example, transactions by entities with US operations or using USD could still be subject to the US sanctions regime which has extra-territorial effect and comes with the threat of large US penalties and the risk of extradition of individuals to the US to face actions with possible jail time if found guilty of breach of US sanctions.
Accordingly, those trading with Iran, which includes service providers in the supply chain and companies providing air and sea freight that are also subject to the sanctions regime, need to exercise significant caution especially in the early stages of increased trade under the new sanctions regime.
Legal advice and DFAT consultations are still recommended.
- Andrew Hudson, Partner, Gadens Melbourne. E: This email address is being protected from spambots. You need JavaScript enabled to view it.
Iran – from axis of evil to centre of attention, but caution needed before we rush into trade deals
Uncategorised
Friday, 18 March 2016
IN the early 21st century, Iran has been something of an international pariah, writes Andrew Hudson.
It was named part of the ‘axis of evil’, and also was branded part of the ‘axis of terror’, ‘the axis of terror and hate’, the ‘axis of diesel’ and the ‘authoritarian axis’.
That status arose from a number of concerns, mostly around Iran’s involvement with terrorism and involvement in a uranium enrichment program.
Following its refusal to suspend its uranium enrichment program, Iran was subject to a number of years of ‘nuclear’ and economic sanctions from the UN and the US, EU and Australia among other nations.
The Australian sanctions were imposed pursuant to its autonomous sanctions regime, allowing us to impose our own sanctions in addition those imposed by the UN.
In July 2015 Iran entered into an agreement with six countries (US, UK, France, China, Russia and Germany), committing them to release Iran from sanctions subject to a receipt of a report by the UN Security Council that it had observed the agreement.
That report was released on 16 January 2016 and confirmed Iran had “carried out all measures required under the [July] deal to enable Implementation Day [of the nuclear deal and the formal lifting of sanctions on Iran] to occur” under the “Joint Comprehensive Plan of Action” (JCPOA).
There were some immediate international responses:
- The UN lifted some sanctions. For example, Iran is again able to sell oil on world markets and Iran’s banks are permitted to operate globally. Further, business with entities previously specified in the UN list of prohibited entities are no longer prohibited.
- The US suspended general economic sanctions to release banking, steel and shipping routes to Iran, all of which had been barred for five years. However, the US subsequently imposed new sanctions to prevent 11 entities and individuals from using the US banking system following those parties being involved in Iran’s ballistic missile program last year.
-The EU moved to lift sanctions on trade, shipping and insurance.
- China and Iran agreed on a deal to expand bilateral ties and increase trade to US$600 billion in the next 10 years, as part of a 25-year comprehensive arrangement. This involved signing 17 accords including co-operation on nuclear power and a revival of the ancient Silk Road trade route known in China as One belt, One Road.
Australian responses
It should be remembered that 20 years ago, Iran was Australia’s biggest export destination in the Middle East and that a certain level of bilateral trade was maintained despite the sanctions. As soon as the sanctions were released, Australia also moved to adjust its sanctions regime.
This has included:
• Amendments to the Australian autonomous sanctions regime by way of passage of the ‘2016 Specification’ (as it is known in short hand). This ‘suspended’ certain existing sanctions until legislation could be passed to amend them more formally. The effect has been to reduce the categories of goods and services subject to sanctions for which trade would either be banned altogether or require DFAT approval. The changes have been significant.
• Repeal of the requirement for authorisation from DFAT for financial transactions of A$20,000 or more which has previously been imposed by Anti -Money Laundering and Counter-Terrorism Financing Legislation. The combination of these reforms is already having a significant impact, with many exporters looking at new business to Iran including clients of mine for whom we have recently secured confirmation that its proposed export deals would not be subject to sanctions.
However, even among the euphoria of the relaxed trading environment there still needs to be caution on trading with Iran.
There are still some goods and services subject to UN and Australian sanctions and new sanctions could be imposed if Iran breaches agreements under the JCPOA:
• There are still prohibitions on dealing with certain persons and entities as on the ‘Consolidated list’. • Certain financial transactions will still be subject to control by the Anti-Money Laundering and Counter-Terrorism Financing Legislation.
• Even for transactions now released from the previous financial control under the Anti-Money Laundering and Counter-Terrorism Financing Legislation, the relevant reporting entity (the financial institution) will need to comply with enhanced due diligence requirements under Australian law in relation to transactions to or from Iran as these continue under the new regulations. This could limit the availability of finance.
• Overseas sanctions could still apply to Australian transactions. For example, transactions by entities with US operations or using USD could still be subject to the US sanctions regime which has extra-territorial effect and comes with the threat of large US penalties and the risk of extradition of individuals to the US to face actions with possible jail time if found guilty of breach of US sanctions.
Accordingly, those trading with Iran, which includes service providers in the supply chain and companies providing air and sea freight that are also subject to the sanctions regime, need to exercise significant caution especially in the early stages of increased trade under the new sanctions regime.
Legal advice and DFAT consultations are still recommended.
- Andrew Hudson, Partner, Gadens Melbourne. E: This email address is being protected from spambots. You need JavaScript enabled to view it.
Following its refusal to suspend its uranium enrichment program, Iran was subject to a number of years of ‘nuclear’ and economic sanctions from the UN and the US, EU and Australia among other nations. 
