Legal Alerts/19 Feb 2016

Updated Legal Alert – Implementation Day Opens New Business Opportunities for EU Companies

Update 19 February 2016: SWIFT confirms reconnection of Iranian banks

Following the historic relaxation of sanctions against Iran, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) confirmed yesterday that certain non-sanctioned banks have already been reconnected. Other Iranian banks are having their reconnection applications processed and are expected to rejoin shortly. This landmark development brings to an end Iran’s four year exclusion from SWIFT following disconnection in 2012 as part of EU sanctions against Iran. This reconnection of banks will facilitate payments and transfers involving Iran and is expected to lead to a significant upturn in business and trade.


Legal Alert, 3 February 2016: 16 January 2016, Implementation Day, saw a landmark lifting of sanctions against Iran leading to fresh trade opportunities with the Middle East’s second largest economy which is embarking on an ambitious rebuilding process. Certain important restrictions will continue to apply, however, meaning that careful due diligence and professional advice are recommended to obtain maximum benefit from this development.

Iran’s rebuilding process is already underway

After many years of crippling economic sanctions Iran’s President has called upon international investors to participate in its economy highlighting the need for investment and technology. Iran’s oil and gas fields are in desperate need of infrastructure upgrades and industry experts estimate that Iran could spend up to $100 billion in rebuilding its natural gas pipelines. Iran’s fleet of commercial aircraft is another area of expected growth with Iran Air expected to place substantial orders for a new fleet of planes. A further area of huge demand is commercial vehicles, especially trucks, and contracts with leading automobile manufacturers are expected to be concluded in the near future. Furthermore, there is an avid demand amongst Iran’s relatively youthful population for Western goods. The above means that there are obvious opportunities for businesses looking to participate in the Iranian market provided they can successfully navigate the remaining sanction restrictions.

What sanctions have been lifted?

In the EU most of the economic and financial nuclear-related sanctions have been lifted.

In terms of the US sanctions the majority of the secondary sanctions, targeted at non-US persons and foreign entities owned or controlled by US persons, have also been removed.

What sanctions continue to apply?

In relation to both the EU and US restrictions remain relating to the supply of certain goods related to the military and nuclear industries.

Significantly the US’s primary sanctions targeted at US persons and companies remain largely unaffected and continue to apply. Furthermore, OFAC guidelines have specified that US financial institutions are not permitted to clear US dollar payments for transactions involving Iran.

In addition certain listed Iranian entities and individuals remain subject to restrictions such as asset freezes.

What opportunities for EU businesses does the lifting of sanctions present?

The combination of the lifting of many of the US’s extra-territorial sanctions which penalized international banks for doing business with Iran, along with the broad lifting of sanctions at EU level have cleared the way for significant new trade opportunities which include the following:

  • Shipbuilding – the design, construction and maintenance of vessels as well as the supply of naval equipment and technology
  • Shipping services – the provision of bunkering and other ship supply services
  • Trade imports – most significantly the purchase of resources such as crude oil, gas and petroleum
  • Trade exports – in summary exporting to Iran is broadly permitted subject to restrictions predominately relating to  potential military and nuclear use

In conclusion this landmark relaxation of sanctions offers great opportunities for EU companies to conduct business with Iran with only restricted competition from the US. Despite these recent developments the situation is complex and thorough due diligence and comprehensive advice remain of paramount importance to gain the most from these new opportunities. Key points include:

  • Considering the level of involvement of any US persons or entities and whether any transactions will be made in US dollars
  • Carrying out thorough due diligence in relation to all Iranian counterparties
  • Ensuring that the banks and insurance providers involved support the transaction and that it will not violate any warranties or restrictions entered into previously

Furthermore, the issue is politically very sensitive and may be subject changes meaning diligent monitoring of the position and careful drafting of agreements to try and cover potential future changes is very important.

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Additional information

Markus Kokko