Iran Sanctions: What is Prohibited or Licensable for EU Businesses?

Despite the easing of sanctions on Iran on 16 January 1 under the Joint Comprehensive Programme of Action (JCPOA), some prohibitions and licensing requirements continue to apply to EU businesses. These are summarised below, together with an outline of the work of the ‘Procurement Channel’ established to consider certain proposed transfers.

This does not address the remaining restrictions on non-U.S. persons imposed by the U.S. authorities, which EU businesses must continue to take into account.

What remains prohibited?

• All military goods and technology, 2 and related assistance and services (including technical assistance, brokering, financial and insurance services): their sale, supply, transfer, export and import to or from any Iranian person or entity, or for use in Iran, remains embargoed until ‘Transition Day’ (18 October 2023, but possibly earlier).
• All missile-related dual use items, 3 and related assistance and services: these are subject to the same embargo as military items.
• All items which might be used for internal repression, 4 and related assistance and services: the embargo on their sale, supply, transfer or export remains in place, under the provisions relating to the human rights situation in Iran which are not affected by the JCPOA.
• Investment in Iranian entities manufacturing or using military or missile-related dual use items.
• Making funds or other economic resources available to listed persons and entities that remain subject to an EU asset freeze, or entities owned or controlled by them.

What requires a licence subject to UN authorisation via the Procurement Channel?

• All sale, supply, transfer, export and import of items on the Nuclear Suppliers Group List, 5 and related assistance and services. This list includes both items specially designed for use in the nuclear fuel cycle (the ‘Trigger List’) and other items which may have nuclear-related uses. It should be noted that these include many items with, in particular, petrochemical and aerospace applications, and their related shipping, finance and insurance services.
• Any other items if a Member State considers that they could contribute to nuclear-related activities inconsistent with JCPOA.
• Any financial arrangements with Iranian persons or entities which would enable them to participate or increase their participation in the production or use of Trigger List nuclear items, or in uranium mining.

What is the Procurement Channel?

The JCPOA stipulates requires that the sale, supply, transfer or export of the items listed above, or the receipt of Iranian funds as described above, require prior authorisation by the UN Security Council. This is to ensure as far as possible that they will not be diverted for any nuclear weapons programme in Iran.

Exporters of such items will submit licence applications to their national licensing authorities in the same way as for other dual use goods. The national authorities will consider each application to ensure that it meets the requirements of the JCPOA and the Nuclear Suppliers Group guidelines, and that Iran has granted rights to verify effectively the end-use of the supplied item.

National authorities will then seek authorisation through the Procurement Working Group which in turn will make recommendations to the UN Security Council on each application. The Procurement Working Group is administered by the European External Action Service and has seven participating states: China, France, Germany, Iran, Russia, UK and US. It has 20 days to consider each application and to reach the consensus required for approval. Each participating government is likely to review each referral as if it was an application for a national export licence before informing the Working Group of its views.

Once a decision is reached, the national licensing authority will be informed. It will then issue (or refuse) the appropriate licence and inform the UN and the International Atomic Energy Agency when the export goes ahead.

What requires a licence subject to national authorisation?

• The sale, supply, transfer, export or import of a range of other items that could be used in the nuclear fuel cycle, 6 and related assistance and services. A licence will not be granted if the licensing authority has reasonable grounds to determine that the actions concerned would contribute to nuclear-related activities inconsistent with the JCPOA or if it is unable to secure rights from Iran to verify the end-use of the supplied items.
• Enterprise Resource Planning software designed for use in nuclear and military industries, 7 and related assistance and services: sale, supply, transfer or export requires a licence, which will be refused if there are reasonable grounds for suspecting that it is intended for use in military or nuclear industries, or by the Iranian Revolutionary Guard Corps.
• Semi-finished metals and graphite, 8 and related assistance and services: the same restrictions apply as to the software above.
• Items, 9 and related assistance and services, which might be used for the monitoring or interception of internet or telephone communications: sale, supply, transfer or export requires a licence. This will be refused if there are reasonable grounds to determine that the item would be used for such monitoring or interception by Iran’s government, public bodies, corporations and agencies or any person or entity acting on their behalf or at their direction.
• All Dual Use items 10 not already covered above: all exports from the EU, previously prohibited by sanctions, now require a licence as they would to any other destination.
• End-Use Controls: the sale, supply, transfer or export of any item requires a licence to Iran (as it does to any other destination) if the exporter has been informed, is aware or has reasonable grounds to suspect that it might be used for WMD or military purposes.
• All marine vessels and aircraft, and their components, software and technology: in most EU Member States, their sale, supply, transfer or export remains controlled under national regulations. 11

Proceeding with caution

As made clear in our previous briefing notes, both U.S. and non-U.S. companies should continue to exercise caution with respect to any dealings involving Iran and ensure that any Iran-related activities are conducted in a manner fully consistent with all sanctions measures now in place.

Dechert’s International Trade team, based primarily in London and Washington D.C., stands ready to advise on all aspects of sanctions risk and compliance in this changing legal environment. Further updates will continue to follow as developments occur.

Footnotes

_{1) The changes to UN, US, EU and other sanctions on Implementation Day were reported in our legal update issued on 16 January.
2) All items in the EU Common Military List.
3) Listed in Annex III of Council Regulation 267/2012. This contains the full list of controlled items established by the Missile Technology Control Regime.
4) Listed in Annex III of Council Regulation 264/2012.
5) The Nuclear Suppliers Group list of controlled items is reproduced in full in Annex I of Council Regulation 267/2012.
6) Listed in Annex II of Council Regulation 267/2012.
7) Listed in Annex VIIA of Council Regulation 267/2012.
8) Listed in Annex VIIB of Council Regulation 267/2012.
9) Listed in Annex IV of Council Regulation 264/2012. The licensing requirement also applies to any other, unlisted item if there are reasonable grounds to determine that an item would be used for such monitoring or interception by Iran’s government, public bodies, corporations and agencies or any person or entity acting on their behalf or at their direction.
10) Listed in Annex I of Council Regulation 428/2009.
11) In the UK, exports of marine vessels and aircraft to Iran are controlled under the Export Order 2008, Schedule 3, under control entries PL9008 and PL9009. There is also a UK control on tropospheric scatter communication equipment and technology under PL9005.}