Two weeks after the reintroduction of all extraterritorial U.S. sanctions against Iran, a situation of considerable uncertainty for all Italian and European operators remains. The U.S. sanctions legal framework affects, among others, the oil & gas and petrochemical sectors as well as a considerable number of (Iranian and non-Iranian) persons and entities designated as SDN on the OFAC list and subject to ‘secondary sanctions’ (i.e. sanctions with extraterritorial application).
From a U.S. Law perspective, any significant transaction with a SDN – Subject to Secondary Sanctions entails the exposure for the operator to U.S. secondary sanctions, including the possibility of being added to the SDN list. This creates a serious risk for the business entities concerned, even though they may not have a direct commercial interest in the U.S.
Most of the U.S. measures, including the designations on 5 November 2018, are considered unlawful by the Italian and the EU legal systems and expose the entities complying with such rules to administrative sanctions and/or actions for damages according to (EC) Regulation No. 2271/1996 (Blocking Regulation). It must be remembered, however, that the scope of the Blocking Regulation does not encompass operational decisions based on other reasons unrelated to the abidance by the U.S. legislation on Iran.
In this complex yet quite uncertain scenario, the Special Purpose Account for crude oil imports has not become operational yet. Such a mechanism will function within the limits of the Special Reduction Exception of 180 days (granted to Italy on crude oil imports from Iran) by using funds credited as the price for oil imports to settle the price due for exporting operations to Iran by Italian firms, provided that the underlying transactions do not fall within the scope of sectorial sanctions and there is no involvement of SDNs. Similarly, the initiatives anticipated by the European Union, including the creation of a Special Purpose Vehicle (SPV), have currently not been implemented.
We are at your full disposal for any further clarification needed. Please find at the link below the .pdf presentation prepared for our recent conference in Bologna on this topic at Confidustria Emilia Area Centro on 9 November.