Sanctions Against Iran
Economic sanctions against Iran were first imposed in 1979 by US Presidential Executive Order No. 12170, as a response to a significant threat to the national security, economy, and foreign policy of the United States emanating from Iran. The order, signed by President Jimmy Carter, froze all Iranian government assets and those of its controlled entities within US jurisdiction. This decision was made under the International Emergency Economic Powers Act (IEEPA) and the National Emergencies Act (NEA), highlighting the seriousness of the US intentions. Since then, sanctions against Iran have been actively expanded to include a previously agreed list, forming a complex regulatory framework consisting of 31 CFR Part 535 – IACR; 31 CFR Part 560 – ITSR; 31 CFR Part 561 – IFSR; and 31 CFR Part 562 – IHRASR. Today, strict control is enforced for non-compliance with OFAC sanctions. Therefore, all entities considering economic negotiations with Iran must take into account the current restrictions to avoid breaching international agreements.
US Sanctions on Iran
The initial Iran sanctions imposed by the US had one primary objective – to sever the region’s ability to receive financial and economic resources from abroad. Over time, the government decided to expand this list with new US Iran sanctions that touched on various sectors: from military to scientific research. For instance, in the autumn of 2019, President Trump decided to add the Iranian Space Agency, the Astronautics Research Institute, and the Space Research Centre to the existing Iran sanctions.
The enforcement of Iran sanctions has been entrusted to OFAC, which has directed its efforts towards altering the country’s policy and establishing a regime. As a result, American companies have been given a very restricted list regarding the scope of business they are allowed to conduct in Iran. For instance, Boeing is completely banned in Iran, while Microsoft and Apple have limited access for users from this country. OFAC issues special licences – permissions for conducting business, providing exceptions from the rules.
In 2024, the US warned Iran that it would impose another round of new sanctions against Iran due to Iran’s attack on Israel. Moreover, the new restrictions aim to reduce the country’s ability to export oil.
Due to the extraterritorial effect of US sanctions, both individuals and legal entities from other countries that deliberately ignore OFAC’s sanctions against Iran become targets of secondary sanctions from OFAC.
JCPOA Sanctions
The Iranian deal, or the Joint Comprehensive Plan of Action (JCPOA), is an agreement that was signed between Iran and the countries known as the P5+1. This agreement pertains to Iran’s nuclear programme. The initial negotiations regarding this agreement began back in 2005. They were aimed at persuading Iran to abandon its own nuclear weapons development. Tehran was granted the right to pursue peaceful nuclear activities.
The countries managed to reach an agreement and ease the sanctions against Iran. In return, the Iranian government was required to allow IAEA inspectors access to its nuclear facilities. As inspections were carried out, Western countries were to gradually lift the existing OFAC Iran sanctions.
In the autumn of 2017, Trump took the initial steps to cancel the agreement, noting that it did not align with the interests of the USA. A year later, the USA officially withdrew from the JCPOA, as Trump announced there was evidence that Iran was ignoring the agreement and continuing to develop nuclear weapons despite their promises. Consequently, that same year, it was announced that all sanctions against Iran by OFAC would be reinstated.
Legal Basis for OFAC Sanctions Against Iran
The legal foundation of OFAC sanctions against Iran is a comprehensive system of international obligations and American legislation. National regulations include 31 CFR Part 535 (Iranian Assets Control Regulations), 31 CFR Part 560 (Iranian Transactions and Sanctions Regulations), 31 CFR Part 561 (Iranian Financial Sanctions Regulations), and 31 CFR Part 562 (Iranian Human Rights Abuses Sanctions Regulations). These acts cover financial transactions, trade, and human rights. The legislative framework is based on the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA), Countering America’s Adversaries Through Sanctions Act (CAATSA), Iran Freedom and Counter-Proliferation Act of 2012 (IFCA), and the Iran Sanctions Act of 1996, introducing stringent measures against financial and trade operations with Iran.
The executive branch operates under the International Emergency Economic Powers Act (IEEPA) and the National Emergencies Act (NEA), which grant the president broad powers in times of national emergency. The Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) and Section 1245 of the National Defense Authorization Act for Fiscal Year 2012 complement this body of legislation, regulating trade and finance. Additionally, international obligations come into play, such as United Nations Security Council Resolution 2231, which in 2015 endorsed the aforementioned JCPOA. Despite this, US sanctions remain in effect.
Import and export of goods to/from Iran
Importing and exporting goods to/from Iran is akin to playing with fire, especially if you’re adhering to OFAC regulations. The Code of Federal Regulations (31 CFR Part 560) makes it clear: no transactions with Iran are allowed. It all starts with 31 CFR § 560.204(a), which states that the export and re-export of goods, technology, or services from the US to Iran are strictly prohibited. Importantly, this prohibition includes not only direct shipments but also any schemes involving re-export through third countries. Furthermore, 31 CFR § 560.204(b) adds that even goods and technologies intended for use in production are banned if the end goal is shipment to Iran. 31 CFR § 560.205 intensifies the ban by including services related to export: transportation, insurance, logistics – all off-limits. Importing from Iran is also out of the question: 31 CFR § 560.201 bans any goods and services produced in Iran, except for licensed humanitarian shipments (see 31 CFR § 560.530). Energy is a separate saga: 31 CFR § 560.211(a) prohibits any export related to the extraction or processing of oil and gas in Iran, even if it occurs through third countries (31 CFR § 560.211(b)). Of course, there are exceptions for humanitarian aid, but even here one must obtain a license and strictly adhere to all OFAC conditions.
Trade operations with Iran
Trading with Iran is a complex area where every move needs to be meticulously planned. 31 CFR § 560.210 prohibits transactions involving the transfer of funds, payment for goods or services, if they are related to Iran. Even if the transaction goes through American banks or US dollar accounts, it can be blocked. For instance, if a foreign bank attempts to process such a transaction through a correspondent account in the US, it immediately becomes problematic. Looking for loopholes? Forget about it. 31 CFR § 560.211 explicitly forbids any schemes involving intermediaries, shell companies, or complex financial arrangements. The Office of Foreign Assets Control (OFAC) closely monitors such attempts, and the consequences can be severe. Even humanitarian operations require licenses and strict adherence to all regulations, as stated in 31 CFR § 560.530.
Restrictions on transactions between foreign nationals and Iran
When it comes to transactions between foreign entities and Iran, the Office of Foreign Assets Control (OFAC) finds a way to impose its restrictions even beyond the jurisdiction of the US. And while it might seem that this is solely the concern of American citizens and companies, foreign individuals and organisations that find themselves in the wrong place at the wrong time can suddenly become the focus of attention. The Code of Federal Regulations (CFR) serves as the primary legal basis, covering almost all possible loopholes.
The first thing to bear in mind is 31 CFR § 560.215. This section outlines the rules pertaining to transactions between foreign entities and Iran, particularly when such transactions involve American persons or property under US jurisdiction. Even if you consider yourself to be a fully independent international organisation, if you interact with assets under US jurisdiction or engage in transactions directly or indirectly linked to the US, you are subject to these restrictions. This rule encompasses not only tangible assets but also intangible ones, such as intellectual property or financial instruments, under US control.
31 CFR § 560.205 adds another layer of protection by prohibiting assistance or support for transactions that directly or indirectly aid Iran in circumventing sanctions. This could include providing goods, services, or technology that assist Iranian individuals or organisations in engaging in international trade or sustaining their economy. It’s crucial to understand that OFAC considers any support for transactions with Iran as a potential violation of the OFAC Iran sanctions, even if it comes from a foreign individual.
Also, pay attention to 31 CFR § 560.208, which imposes a ban on the re-export of goods, technology, or services produced in the USA or using American components if the final destination is Iran. Even if a foreign entity attempts to resell or re-export an item that at first glance appears to be unrelated to the USA, it could face serious consequences if the item contains American components or technology.
Another crucial aspect is the “primary sanctions” rule, reflected in 31 CFR § 560.211, which imposes a ban on any transactions aimed at circumventing sanctions or transferring assets under sanctions. This rule applies to any attempts by foreign individuals to bypass sanction regimes using schemes that may include setting up shell companies, utilising complex financial instruments, or other methods to conceal the true nature of the transaction.
Our sanctions solicitors provide legal services within the framework of OFAC sanctions regarding Iran:
- Providing advice regarding the freezing/unfreezing of assets that have fallen under OFAC sanctions.
- Submitting petitions to remove citizens from the OFAC SDN List and other sanctions lists.
- We assist in obtaining an OFAC licence for conducting transactions to/from Iran.
- We guarantee support and OFAC representation during legal proceedings.
Our team of professionals employs a uniquely individual approach to each client in their work, with the aim of tackling even the most complex legal challenges.
Prohibited investments in Iran
You must bear in mind that any investments by American citizens or companies, whether directly or indirectly related to Iran, are strictly prohibited. This isn’t merely a formality but a set of stringent measures enforced by OFAC, detailed in 31 CFR Part 560. The rules are clear: the moment it concerns assets owned or controlled by the Iranian government, you automatically enter a risk zone. Take, for example, 31 CFR § 560.207, which states in black and white that investments in property directly or indirectly linked to Iran are categorically forbidden. It doesn’t matter where the asset is located—be it in Iran or elsewhere—if it’s under the control of the Iranian government, you cannot invest a single penny into it. And this isn’t just words on paper: according to 31 CFR § 560.211, any attempts to circumvent this prohibition, for instance through third parties or intermediaries, automatically place you in violation of the law.
But let’s delve deeper. Collaborating with Iranian banks isn’t just a risk; it’s practically a guaranteed violation. Why? Because, according to 31 CFR § 560.314, the government of Iran includes not only the official state structures but also financial institutions under its control. Opening a deposit in an Iranian bank essentially means you’re investing in the Iranian government. Moreover, 31 CFR § 560.315 broadens this definition to encompass all financial institutions registered in Iran. And as we know, OFAC is not fond of compromises: they clearly state that even deposits that seem attractive due to high interest rates are banned as a form of supporting the Iranian economy, which directly violates OFAC’s sanctions regime.
If you think you can somehow circumvent these restrictions, you might want to think again. 31 CFR § 560.206 clearly states: any transactions that lead to the support of the Iranian economy are prohibited. And it doesn’t matter how you do it — directly or through third parties — you’ll still be in OFAC’s sights, and the consequences will be severe. Fines, sanctions, and reputational damage are just the tip of the iceberg. Therefore, when it comes to Iran, the only prudent move is to have the guidance of an experienced OFAC sanctions attorney.
The Impact of Sanctions on Iran
Iran is a country that has been under sanctions for over 40 years. As a result, its contemporary development model is based on a resistance economy. Despite all efforts to rectify the situation and alleviate conditions, there has been a significant reduction in Iran’s income from oil exports, with inflation rates reaching 50% per annum.
Several EU countries have openly expressed their dissatisfaction with the new package of OFAC Iran sanctions following the US withdrawal from the nuclear deal. Brussels, without wasting time, decided to create a mechanism that could protect European companies from Washington’s pressure. Thus, the Special Purpose Vehicle (SPV) was born, later registered as INSTEX. The idea is simple: to support trade with Iran bypassing American sanctions, especially in sectors where transactions are not prohibited, such as medical goods and foodstuffs.
INSTEX was conceived as a tool to circumvent dollar transactions and ensure the security of financial operations between the EU and Iran. Despite its ambitions, its implementation faced significant difficulties. France, Germany, and the United Kingdom became shareholders, but INSTEX never became a fully-fledged alternative channel. Its capabilities were limited by political and legal obstacles, as well as a lack of genuine willingness among most European companies to risk American sanctions.
INSTEX, for all its intentions, remained more of a symbolic gesture than a powerful financial tool. This project was more of a statement of intent by the EU rather than a genuine challenge to American sanctions. Europe made an attempt, but the real power in this game still lies with Washington.
Looking for a Lawyer Specialising in OFAC Sanctions?
If you need to obtain a general OFAC licence for conducting legitimate financial transactions under sanctions against Iran, or if you’ve encountered legal difficulties with international transactions, our OFAC lawyer Iran are ready to offer you comprehensive legal support. Our sanctions lawyers specialise in developing strategies that ensure full compliance with OFAC requirements and other regulatory bodies, protecting your interests and adhering to all legislative standards. Our team has significant experience in dealing with sanction legislation, obtaining necessary permits, and managing foreign economic activities, including trade relations with Iranian companies. We can help you overcome any legal obstacles and minimise the risks associated with OFAC sanctions.
Contact us today to receive expert advice and ensure the success of your business under OFAC sanctions regimes.
