A Look at the EU's Sactions Against Iran

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Andrew Picken, partner at McGrigors LLP's Business Crime & Commercial Fraud Team, discusses the legal ramifications of the EU sanctions against Iran, in particular how they relate to the oil industry.

Describe the new sanctions that the EU recently announced against Iran.

The EU, in adopting the UN Security Council Resolution in 1929, passed an EU Council Decision on July 29, 2010. The decision condemned Iran’s continuing efforts to develop its nuclear and ballistic weapons programs.

How do these new sanctions differ from the recent UN sanctions against Iran?

The decision went further than UNSCR 1929 by applying enhanced sanctions specifically in respect of Iran’s Oil and Natural Gas industry, but domestic and foreign. In so doing, it identified the following, broad “key sectors”:

• Refining;
• Liquefied natural gas (LNG);
• Exploration; and
• Production.

The decision also prohibits the sale, supply, or transfer of “key equipment and technology” for use in the key sectors yet, as of today, “key equipment and technology” is not defined. The UK government “anticipates that a list of key products will be agreed across the EU and the export of any product that features on that list will be banned…”

These sanctions go further than previous sanctions from the UN and are the most comprehensive the EU has taken against a single country. Why do you think the EU is taking such firm measures now? What will be the ramifications?

Iran is the world’s fourth largest producer of oil, but has wholly inadequate refining capacity for its domestic demand. The UK’s Financial Times, on August 12, 2010, reported Iran’s petrol imports had halved in the month since CISADA was passed, and it was paying a 25 percent premium to market levels on the imports it could secure.

The Iranian Oil Minister reported the country produced 44.5 million liters of refined petroleum every day and imported 20 million liters. By switching petrochemical product production into high-octane fuel, it could produce another 14.5 million liters.

There are already reports that China and, to a lesser degree, Turkey, are prepared to supply Iran. In the case of Turkey, that could affect its aspiration to join the EU.

What are some of the penalties for violating these sanctions?

Under UK law, criminal penalties are:

• A maximum of two years’ imprisonment and/or an unlimited fine.
• If the violation is committed by a Company, with the consent or connivance of an officer of the Company, or is attributable to any neglect on his part, the officer is also guilty of the offence and liable to criminal proceedings and punishment.

How affective do you think the sanctions will be?

The effect can be seen by the unwillingness of non-Iranian companies to support Iran’s oil and natural gas industry. This includes shipping lines and marine insurers. 

Interview by Jessica Livingston