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Focus: Australia has lifted certain sanctions on Iran

18 February 2016

In brief: In response to recent confirmation that Iran has met its international nuclear commitments, the Australian Government has lifted all nuclear-related economic and financial sanctions against that country. Partner Rachel Nicolson (view CV), Managing Associate Hilary Birks (view CV) and Associate Sarah Jenkins report on what has changed and the potential opportunities for Australian businesses.

 
 

How does it affect you?

  • The lifting of sanctions potentially allows Australian businesses to take advantage of a range of new opportunities in Iran, particularly in the oil, gas, petrochemical and financial sectors.
  • Some restrictions continue to apply. Australian businesses should ensure that their proposed activities do not violate the remaining Australian sanctions, or anti-money laundering or other restrictions, and do not inadvertently fall within the broad reach of the United States' sanctions regime, or the sanctions regimes of the European Union or other jurisdictions. 

Iran's nuclear deal

For the past decade, Iran has been subject to a range of nuclear-related sanctions imposed by the United Nations Security Council (UNSC), the US, the EU, Australia and other nations. On 14 July 2015 (with effect from 18 October 2015), diplomatic efforts to resolve the Iranian nuclear issue culminated in Iran, the EU, Germany and the five permanent members of the UNSC (China, France, Russia, the UK and the US) entering into the Joint Comprehensive Plan of Action nuclear deal (JCPA), an agreement committing Iran to scale back its nuclear program. On 20 July 2015, the UNSC adopted Resolution 2231 (2015), which endorsed the JCPA and outlined the steps for the eventual removal of UNSC sanctions against Iran, subject to Iran meeting its commitments under the agreement.

On 16 January 2016, the UNSC received a report from the International Atomic Energy Agency confirming that Iran has taken a series of nuclear-related actions required under the JCPA. This marked 'Implementation Day', which triggered the lifting of the UNSC's nuclear-related sanctions against Iran. The EU, the US and Australia followed suit in lifting many of their sanctions against Iran. If Iran was to breach the JCPA, the UNSC sanctions will be automatically reinstated under Resolution 2231 (2015).

What has changed in Australia?

Australia's sanctions regime is comprised of UN sanctions (reflecting Australia's obligation, as a UN member state, to implement sanctions imposed by the UNSC) and autonomous sanctions (imposed and implemented by Australia as a matter of foreign policy). Australia has had a range of both UN sanctions and autonomous sanctions in place in relation to Iran during the past decade. In light of 'Implementation Day', the Australian Government moved to lift relevant UN sanctions, as well as certain autonomous sanctions, with the aim of ensuring that Australian businesses are not disadvantaged in pursuing the new opportunities emerging in Iran.1

In brief, sanctions on the following activities have been suspended:

  • The export to Iran of:
    • goods mentioned in the Australia Group Common Control Lists (these lists relate to chemical and biological weapons);
    • certain equipment and technology for the oil, gas or petrochemical industry;
    • newly printed/minted or unissued Iranian denominated bank notes/coinage;
    • certain naval equipment or naval technology;
    • vessels designed for the transport or storage of oil, gas or other petrochemical products; and
    • gold, precious metals or diamonds for supply to the Government of Iran or a public body, corporation or agency of the Government of Iran.
  • The import from Iran of:
    • certain crude oil, petroleum, petrochemical or natural gas products; and
    • gold, precious metals or diamonds from the Government of Iran or a public body, corporation or agency of the Government of Iran.
  • The provision of certain services, including certain services in respect of an Iranian oil tanker or cargo vessel.
  • Participation in certain commercial activities (including acquisitions, sales, joint ventures and provision of credit) in respect of Iranian entities engaged in certain activities in the petrochemical, oil and gas industries.
  • Participation in certain commercial activities (including acquisitions, sales, and opening of branches or subsidiaries in Australia) in respect of Iranian financial institutions.

A more detailed summary of the sanctions that have been suspended is available on DFAT's website

What remains the same? The restrictions that are still in place under Australian law

A number of foreign companies in the oil industry and across a range of other sectors appear to already be seeking to take advantage of new deals in Iran.2 However, Australian businesses and individuals should be aware that not all of Australia's sanctions have been lifted. For example, restrictions remain in force under Australian law in relation to:

  • arms or related matériel (including dual use goods);3
  • certain metals (being specified kinds of graphite, steel, nickel, aluminium and other base metals);4
  • certain software (being enterprise resource planning software designed specifically for use in nuclear and military industries);5 and
  • certain designated persons and entities (others have been revoked).6

If applicable conditions are satisfied, a sanctions permit can be obtained from the Minister for Foreign Affairs (or the Minister's delegate) to engage in dealings that would otherwise be subject to Australian sanctions.

The requirement to obtain authorisation from DFAT for transactions to or from Iran worth $20,000 or more under Australian anti-money laundering laws continues to apply7 and certain activities that are no longer sanctioned could nevertheless be subject to restrictions under Australia's general export and import control regimes.

Iran sanctions imposed by other jurisdictions

Numerous other countries had imposed sanctions against Iran as a result of the actions of the UNSC and on an autonomous basis over the past decade. A number of these regimes are being amended following Implementation Day.

For example, while the US has lifted its nuclear-related economic and financial sanctions against Iran in response to 'Implementation Day', it has maintained other sanctions relating to Iran's alleged human rights violations, support of terrorism and ballistic missile program. The day after lifting its nuclear-related sanctions, the US also moved to impose new sanctions on 11 specified entities and individuals involved in Iran's ballistic missile program.8 This regime has a broad extraterritorial reach. In recent years, US authorities have imposed significant fines on several European banks for their alleged dealings with Iran and other countries in violation of US sanction and money laundering laws.9

The EU, like the US, has lifted its nuclear-related economic and financial sanctions against Iran in response to 'Implementation Day' while maintaining other sanctions relating to Iran's alleged human rights violations, support of terrorism and ballistic missile program. An arms embargo remains in place, activities involving certain goods and technology require prior authorisation to be granted on a case-by-case basis by the relevant Member State, and dealings with certain entities and individuals continue to be prohibited.10 The EU sanctions regime also has extraterritorial reach.

Companies and individuals should take appropriate steps to ensure that any of their activities involving Iran do not inadvertently fall within the reach of the sanctions regimes of Australia, but also of other jurisdictions that may apply to the transaction or activity in question.

Final comments

Iran has recently scaled up its oil output, at a time when it is reportedly drowning in excess supply, in order to take advantage of the lifting of international sanctions that have stifled its economy for the past decade. It is reported that the country could increase its oil output by 500,000 barrels per day.11 While this presents new opportunities for Australian business, Iran's freedom to sell the output of its extensive oil reserves may have a negative impact on already low oil prices, and may also flow on to affect Australia's LNG export prices and commodity prices in general.12 At present, the relevant Australian autonomous sanctions measures have been 'suspended',13 with the legislative process to formally amend the regulations to remove those measures expected to occur 'as swiftly as possible',14 while the relevant Australian UN sanctions regulations are to be 'read down' in light of UNSC Resolution 2231 until such time as those regulations are formally amended.15 While this 'reading down' may import a degree of uncertainty, those interested can make enquiries with DFAT as to whether a sanctions permit is required for specified activities. DFAT has updated its consolidated list of designated persons and entities to reflect the recent developments.

We will continue to monitor relevant developments and report on further information as it becomes available.

Footnotes
  1. See Minister for Foreign Affairs The Hon Julie Bishop MP, 'Iran to Receive Sanctions Relief After Meeting Nuclear Commitments' (Media Release, 17 January 2016). Australian Government Department of Foreign Affairs and Trade, Iran sanctions changes frequently asked questions (accessed on 27 January 2016).
  2. Sam Wilkin and Bozorgmehr Sharafedin, 'Iran sanctions lift offers opportunities', The Australian, 20 January 2016.
  3. See Autonomous Sanctions Regulations 2011 (Cth) regulation 4; Autonomous Sanctions (Suspension of Sanctions – Iran) Instrument 2016 (Cth).
  4. See Autonomous Sanctions (Export Sanctioned Goods – Iran) Specification 2013 (Cth); Autonomous Sanctions (Export Sanctioned Goods – Iran) Amendment Specification 2016 (Cth).
  5. Ibid.
  6. See Autonomous Sanctions (Designated Persons and Entities and Declared Persons – Iran) List  2012 (Cth); Autonomous Sanctions (Designated Persons and Entities and Declared Persons – Iran) Amendment List 2016 (No. 1) (Cth); Autonomous Sanctions (Designated Persons and Entities and Declared Persons – Iran) Amendment List 2016 (No. 2) (Cth).
  7. See Anti-Money Laundering and Counter-Terrorism Financing (Iran Countermeasures) Regulation 2014 (Cth).
  8. See US President Barack Obama, 'Statement by the President on Iran' (Speech, 17 January 2016).
  9. See, eg, Karen Freifeld and Lindsay Dunsmuir, 'Commerzbank to pay $1.45 billion to resolve probes on Iran, Olympus', Reuters (Washington), 12 March 2015. 
  10. See Information Note on EU sanctions to be lifted under the Joint Comprehensive Plan of Action (JCPOA) (23 January 2016). 
  11. Sam Wilkin and Bozorgmehr Sharafedin, 'Iran sanctions lift offers opportunities', The Australian, 20 January 2016.
  12. 'Iran deal welcome but bad for LNG', The Australian Financial Review, 17 January 2016.
  13. See Australian Government Department of Foreign Affairs and Trade, Iran sanctions changes frequently asked questions (accessed on 27 January 2016); Autonomous Sanctions Regulations 2011 (Cth) regulations 4, 5D, 6(1); Autonomous Sanctions (Suspension of Sanctions – Iran) Instrument 2016 (Cth) and Explanatory Statement; Autonomous Sanctions (Export Sanctioned Goods – Iran) Amendment Specification 2016 (Cth); Autonomous Sanctions (Designated Persons and Entities and Declared Persons – Iran) Amendment List 2016 (No. 1) (Cth); Autonomous Sanctions (Designated Persons and Entities and Declared Persons – Iran) Amendment List 2016 (No. 2) (Cth).
  14. Australian Government Department of Foreign Affairs and Trade, Iran sanctions changes frequently asked questions (accessed on 27 January 2016). 
  15. Ibid. The list of specified entities in the Charter of the United Nations (Sanctions – Iran) (Specified Entities) List 2010 (Cth) was repealed in its entirety with effect from 10 February 2016: Charter of the United Nations (Sanctions – Iran) (Specified Entities) List Instrument of Repeal 2016 (Cth). The list of specified documents in the Charter of the United Nations (Sanctions –Iran) Document List 2014 (Cth) was amended with effect from 18 February 2016: Charter of the United Nations (Sanctions – Iran) Document List Amendment 2016 (Cth). The remainder of the Australian UN sanction regulations for Iran have not yet been formally amended.

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