International Trade Update

President Obama Signs New Iran Sanctions Law Targeting the Petroleum and Financial Sectors

On July 1, 2010, President Obama signed into law the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, H.R. 2194 (the “Act”). The Act, which follows recent United Nations sanctions against Iran, further extends the scope of the comprehensive U.S. embargo against Iran and comes in response to Iran’s rejection of diplomatic efforts to address its nuclear program.

The Act imposes a wide range of sanctions measures, but is aimed particularly at restricting the activities of companies that support the Iranian petroleum industry and companies that provide financial services to Iran. To that end, the Act targets not only U.S. companies, but also foreign companies, involved in these sectors. In light of the significant changes under this new law, it is important that all companies with dealings in Iran, especially those in the energy and financial industries, carefully examine the Act and any subsequent implementing regulations or Presidential directives in considering how their operations may be affected.

I. New Sanctions Impacting the Petroleum Industry

The Act amends the Iran Sanctions Act of 1996 (the “ISA”), which authorized the President to sanction foreign companies that make large investments in the Iranian petroleum industry. The Act strengthens the sanctions provided for under the ISA in several key ways:

First, the Act significantly expands the activities that are subject to sanctions under the ISA to now include:

• knowingly making “investments” of $20 million or more (or making separate “investments” of $5 million or more that total $20 million or more over twelve months) that directly and significantly contribute to Iran’s ability to develop “petroleum resources,” including petroleum, refined petroleum products, oil or liquefied natural gas. Moreover, the term “investment” now includes the entry into, performance of, or financing of a contract to sell or purchase goods, services, or technology;
  
• knowingly providing Iran with goods, services, technology or other support valued at $1 million or more (or with an aggregate value of $5 million or more over twelve months) that could directly and significantly facilitate the maintenance or expansion of Iran’s production of “refined petroleum.” The term “refined petroleum” includes diesel, gasoline, jet fuel and aviation gasoline; and
  
• knowingly providing Iran with “refined petroleum” products or any goods, services, technology or other support that could enhance its ability to import “refined petroleum” products. This sanction applies to any activities valued at $1 million or more or with an aggregate value of $5 million or more over twelve months.

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