The US sanctions on Iran will be strongly felt by international shipping companies – but a bright spot for Iran’s shipping industry is that one port has been exempted from them.
There are implications for the container shipping industry’s business with Iran as the 180-day wind-down period related to shipping ended on 4 November 2018 – meaning all US-related sanctions lifted under the Joint Comprehensive Plan of Action in January 2016 have been re-imposed.
Seward & Kissel LLP partner in the maritime practice Bruce Paulsen, who specialises in complex commercial and maritime disputes, pointed out the impact of non-US companies conducting business with Iran following the re-imposition of sanctions. “OFAC has great power over the dollar and it can stop dollars flowing to these companies. This is the hammer proposed to be used with foreign companies, to shut them out of doing business in the US. As the dollar is the reserve currency of shipping, to be shut out of the dollar is a big thing.”
Mr Paulsen explained it was important to note that re-imposed sanctions largely did not impact US businesses as they have not been permitted to do business with Iran since 1979. However, a general licence issued by OFAC that permitted activities in Iran by non-US subsidiaries of US companies has now been revoked. CISADA was imposed in the US in 2010, aimed at prohibiting non-US companies doing business with Iran. This was lifted in January 2016, only to be re-imposed again this year.
He singled out what could be an important contrast to the sanctions that have been re-imposed this year versus when they were introduced in 2010. “CISADA was not enforced all that vigorously. Under President Trump there could be more vigorous enforcement.”
Mr Paulsen highlighted one bright spot for Iran’s maritime sector. The Iranian-Indian port of Chabahar has been exempted from the sanctions. “This was built by Indian interests, with the aim of the port to help the Afghan economy, so it is not part of the sanctions.” He singled out how this was in contrast to other Iranian port operators, such as Tidewater Middle East Company, a major port operator in Iran, which was specifically sanctioned under the Obama administration.
He summed up “It will be very hard for shipping operators who regularly call on Iran to avoid risk. If their businesses are not wound down there could be penalisation.”
Furthermore, if container ship operators are carrying any cargo related to refineries, they could be at greater risk of penalisation.