Thursday, March 29, 2012

Update: sanctions to Iran, EU Council Regulation 267/2012 and varies

I take the long overdue oppounity to post again on this blog after new EU regulations have amended existing sanctions against the Islamic Republic of Iran.

This post may be of interest for the business people that follow this matter or businesses that used to have trade with Iran.

On March 23, new regulations have been enacted to close off existing loopholes in previous regulations and therefore additional verbiage has been included to define:

  • transfer of funds;
  • brokerage services;
  • new rules to authorize payments to and from an Iranian entity or individual.

As of the new regulations (EU 267/2012):

1. Transfer of funds: the definition now includes "non-electronic transfers" to avoid any attempt of circumvention by using cash based systems. The definition stands as follows: "any transaction carried out on behalf of a payer through a payment service provider by electronic means, with the view to making funds available to a payee at a payment service provider, irrespective of whether the payer and the payee are the same person. The term payer, payee and payment service provider have the same meaning as in Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market; any transaction by non-electronic means such as in cash, cheques or accountancy orders, with the view of making funds available to a payee irrespective of whether the payer and the payee are the same person.

2. Brokerage services: the definition stands as, "the negotiation or arrangement of transactions for the purchase, sale or supply of goods and technology or of financial and technical services including from a third country to any other third country. The selling or buying of goods and technology or of financial and technical services, including where they are located in third countries for their transfer to another third country".

3. Payment authorizations: payments involving foodstuff, medical equipment or for humanitarian purposes don't require previous authorization if below 40,000 euros in value, although transfers above or equivalent to 10,000 euros require written previous notification to the competent authorities. Transfers above 40,000 euros require previous authorization from competent authorities. Transfers related to all other types of goods require previous authorization from competent authorities. Please note that multiple transfers by similar parties linked to the same legal contract are bound to be cumulative in value and therefore subject to previously outlined parameters.

Additional pertinent information about these amendments:

  • oil contracts: any permitted dealings in crude oil contracts prior of July 2, 2012 must be notified in writing to the authorities of the competent Member state 20 working days in advance;
  • additional restrictions have been imposed with regards to: gold, diamonds, precious metals and specific petrochemical equipment and materials;
  • some derogations included in the amendments: freezing of the assets of the Central Bank of Iran, some adjustments on insurance provisions and derogations concerning transfers to diplomatic, consular and international organizations.

Further information related to the Iran sanctions but unrelated to the EU provisions:

  • SWIFT: the Society for World Interbank Financial Transaction has disconnected last week 30 Iranian banks, including the Iranian Central Bank, from the system making it de facto almost impossible to carry out large financial transactions. We are bound to see a large increase in barter transactions or compensation based transactions.
  • The USA has exempted the EU and Japan from sanctions since both parties have substantially reduced their dependence on Iranian oil. Although pressure is mounting on India and China to follow suit or face issues.
  • Oil revenue for Iran: sources estimates that Iran is currently selling its oil at a 10-15% discount. If targeted countries are going to follow up with their purchases reduction of Iranian oil the economy is currently facing approximately $24B in lost revenue.
  • Oil repercussions: any further tension in the Gulf is bound to raise crude prices to above $150USD per barrel. Such increases for prolonged periods is bound to create a recession worth 1% in the EU this year; further IATA warned that high cost of fuel can send few airline operators into bankruptcy if sustained over a few months.
  • Trading: in the face of mounting sanctions the Iran government is trying to accumulate as much food commodities as possible. Sources have mentioned that Iran have bought 2M tons of wheat from Geermany, Canada and Russia over the last few months and paid in currencies other than Euros and USD.