On May 23, 2011, President Barack Obama issued Executive Order 13574, entitled Authorizing the Implementation of Certain Sanctions as Set Forth in the Iran Sanctions Act of 1996, as Amended (the “Order”). The Order’s prohibitions apply to all U.S. persons. A U.S. person is defined as “any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.”

By way of the Order, President Obama delegated to the Secretary of the Treasury the authority to take certain actions to implement sanctions imposed by the President or Secretary of State against any party for engaging in activities related to, or investment in Iran’s refined petroleum and energy sectors pursuant to the Iran Sanctions Act of 1996 (the “ISA”) as amended by the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (“CISADA”). This delegation of enforcement authority to the Secretary of the Treasury serves to implement certain ISA sanctions, specifically those regulating the conduct of the private sector.

The Order provides that, once the President or Secretary of State has decided to impose sanctions under the ISA against any person or entity, the Secretary of the Treasury shall:

• Prohibit any U.S. financial institution from making loans or providing credits to the sanctioned party;
• Prohibit any foreign exchange transactions in which the sanctioned party has an interest;
• Prohibit any transfers of credit or payments by, through, or to any financial institution if such transfers involve any interest of the sanctioned party;
• Block all transfers, payments, exportation, withdrawal, or dealings in property and interests in property of any sanctioned party if such property is in or comes within the U.S., or is in or comes within the possession or control of any U.S. person. This includes an overseas branch of the sanctioned party;
• Restrict or prohibit imports of goods, technology, or services, directly or indirectly into the U.S. from the sanctioned party.

U.S. persons may be subject to sanctions not only for violating the prohibitions set forth in the ISA, CISADA, and the Order, but also for attempting to evade or avoid the prohibitions, or for engaging in a conspiracy to violate the prohibitions as set forth.

Entities Added to the Specially Designated Nationals (“SDN”) List

On May 24, 2011, the Office of Foreign Assets Control (“OFAC”) part of the Treasury Department announced that certain entities were added to the SDN List, a list of individuals and entities with whom U.S. persons may not do business. These entities include:

• Associated Shipbrokering
• Royal Oyster Group
• Speedy Ship FZC

Foreign Entities Sanctioned by Department of State under CISADA

Secretary of State Hillary Rodham Clinton also imposed sanctions under CISADA on May 24, to be implemented and enforced by the Treasury Department, on seven foreign companies that are suppliers or transporters of refined petroleum products, including gasoline, to Iran. These companies are:

• Petrochemical Commercial Company International (Jersey)
• Royal Oyster Group (United Arab Emirates)
• Speedy Ship (United Arab Emirates and Iran)
• Tanker Pacific (Singapore)
• Ofer Brothers Group (Israel)
• Associated Shipbrokering (Monaco)
• Petróleos de Venezuela (Venezuela)

These companies are being subjected to the first severe sanctions issued under CISADA and the first sanctions imposed on participants in the shipping industry.

Provision of Goods and Services to Entities That Ship Refined Petroleum to Iran

On May 23, 2011, the State Department also released guidelines for the provision of goods and services, including insurance, to entities that ship refined petroleum products to Iran under CISADA. The State Department provided illustrative examples of activities that may be considered sanctionable under CISADA, including:

• Use of a ship, controlled by ownership or charter agreement, to provide shipping services to supply Iran with gasoline, diesel, jet fuel, or aviation gasoline;
• Charter of a ship to another company that is using the ship to supply Iran with gasoline, diesel, jet fuel, or aviation gasoline. The ship owner may still have engaged in sanctionable activity even if it does not have full control of the ship under the charter agreement;
• Facilitation (e.g. brokering) of the provision of the ship, either by sale or charter, to a company for the transportation of refined petroleum products to Iran. Brokers are considered to be facilitating or “providing” the goods or services that they have sourced for clients. In the case of a ship sale or provision of insurance, the broker is considered to have provided the entire value of the goods and services;
• Provision of insurance to a company for the transportation of refined petroleum products to Iran, if the insurance premiums are above threshold amounts. Insurance can include cargo insurance, P&I insurance, hull insurance, and contract frustration insurance;
• Facilitation (e.g., by brokering) of the provision of insurance for the transportation of refined petroleum products to Iran;
• Use of a ship, controlled by ownership or charter agreement, to provide shipping services for the purpose of supplying goods to be used to maintain or expand Iran’s refineries, such as refinery equipment;
• Facilitation (e.g. by brokering) of the provision of cargo or insurance to a company for the purpose of supplying goods or to facilitate the transportation of goods to maintain or expand Iran’s refineries;
• Provision of insurance to a company for the transportation of goods to maintain or expand Iran’s refineries.

If you have any questions or concerns about U.S. sanctions against Iran, please contact Bruce G. Paulsen (212-574-1533).