Washington’s withdrawal from the international nuclear deal on Iran, the JCPOA, and imposition of new sanctions against a host of Russian subjects are the leading developments in the latest edition of Alaco’s Guide to Sanctions, which helps businesses navigate the rising number of trade and investment restrictions affecting jurisdictions around the world.
Updated quarterly, the guide provides an overview of all the sanctions programmes operated by the EU, the US, the UN and Switzerland, including detail on restrictions in place, implementation timelines and links to the underlying official documentation.
The guide distils the raft of often dense sanctions-related trade regulations and legal documents into concise notes that enable readers quickly to assess the risks of doing business in developing world markets.
In addition to the Iran and Russia developments, the latest sanctions guide details the expanded scope of US sanctions against Venezuela and North Korea and the removal of measures targeting Sudan.
US president Donald Trump’s decision in May to end America’s involvement in the JCPOA came as no surprise. He has long threatened to do so, describing the agreement as “the worse deal ever”. The president signalled his intentions last October when he told Congress that the JCPOA was no longer in the country’s national security interest. Trump’s objection to the nuclear deal centres on what he sees as its failure to stem Iran’s ballistic missile programme and destabilising influence across the Middle East.
In June the US revoked two General Licences, introduced as part of the JCPOA, exempting two types of transactions from the agreement: certain US exports of commercial aircraft and business conducted by non-US firms owned or controlled by American citizens or companies. These exemptions will end in August and November respectively, after which the US will formerly introduce tighter sanctions.
The US withdrawal from the JCPOA was a blow to Europe which has been keen to maintain the agreement, notwithstanding its shortcomings. Washington, intent on maximising economic pressure on Iran, rejected an appeal from the Europeans for financial, healthcare and energy industries to be exempted from the impending US sanctions.
Undeterred, the EU has been working on ways of countering the American move, in order to continue what it sees as vital engagement with Tehran. These include non-dollar denominated finance lines, possible direct payments for oil shipments to Iran’s central bank, and updating a 1996 stature forbidding European companies from complying with historic US restrictions on Iran, Libya and Cuba. The statute stopped EU courts enforcing American sanctions judgments and allowed companies to recover damages arising from such measures.
Nonetheless, many European companies are likely to stop doing business with Iran due to the threat of US action. The Iranian economy is likely to be hit badly, although it should be noted that pre-existing American sanctions related to non-nuclear issues had deterred foreign investors even before Trump decided to exit the JCPOA.
A month before his decision, the US issued a series of sanctions against 24 Russian nationals and 14 Russian companies. It bans American citizens doing business with them and freezes their US assets. The measures, punishment for Moscow’s alleged interference in the 2016 presidential elections and other “malign activity”, are part of the Countering America’s Adversaries Through Sanctions Act, which was introduced last year.
The new batch of sanctions sent a shockwave through the international business community for two reasons: the apparent randomness of the list of sanctioned individuals, with several, such as Victor Vekselberg, not deemed to be close allies of President Vladimir Putin; and the fact that since some of the companies associated with targeted Russians, such as Oleg Deripaska’s Rusal, have such a strong economic presence in America there would inevitably be some domestic blowback.
Since April, some of the sanctions deadlines and restrictions have been reviewed and somewhat softened, especially for Russian holdings with a big international profile, like Rusal. At the same time, Washington has threatened to impose more measures in order to keep up the pressure on Moscow. For instance, this month it warned that companies working in the Russian energy export pipeline sector were exposing themselves to potential sanctions risk.
Moscow says the sanctions have had little overall impact on its economy which currently enjoys healthy oil revenues. Politically, the growing divide between Russia and the West has enabled Putin to consolidate support at home amongst the Russian elite and the electorate by portraying the country as unbowed and resilient in the face of Western pressure. The recently concluded bilateral meeting in Helsinki will have served Putin’s domestic agenda particularly well.
For further information on how to subscribe to Alaco’s sanctions guide, please contact Alaco’s Research Director James Birkett, jbirkett@alaco.com
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