Secondary Sanctions: a disguised restriction on Market Accessibility
The case of Iran
Published by Valeria Minasi. .MENA Planning Internationalisation Emerging markets Export Market Accessibility
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In the global framework of the international markets, there are many types of barriers. Some of them are clearly visible and only need a bit of experience (duties, safeguard measures, tariff quotas, registrations, etc.); the others are, instead, “hidden” and may be risky even for market leaders.
It is the case of sanctions, those obstacles to trade toward a given country which often, as for the US secondary sanctions, affect all the partners who want to have business with that country as well as the country itself.
There are two types of Sanctions: Primary and Secondary. Primary sanctions apply to the US persons, any individual located on US territory, any US citizen or permanent residents independently from where they are, any US entity, and products of US origin or products containing at least 10% US controlled product or based on certain US technology. Secondary sanctions, instead, apply to every person or entity carrying out a particular transaction, independently from its nationality or domicile, therefore they have extraterritorial effects. There are currently secondary sanctions against anyone engaging in certain transactions with Iran, North Korea, Cuba, Russia and Venezuela.
About Iran, currently the USA apply secondary sanctions even to non-US entities carrying out transactions with Iranian entities listed in the List of Specially Designated Nationals and Blocked Persons (SDN List), published by the Office of Foreign Assets Control (OFAC) of the United States Department of Treasury.
It is important to recall that the US rules and sanctions policy applied in breach of the commitments accepted in the JCPOA (Joint Comprehensive Plan of Action)1, are considered as unlawful and inapplicable within the EU and towards European entities, people and organizations, within the meaning of Regulation (EC) n.2271/962.
Furthermore, after the precautionary measure of the Court of Justice in the Hague on 3rd October 20183, trading with Iran of foodstuff, agricultural products, medicines and medical devices, as well as products for civil aviation safety, remains free from sanctions and, equally, the related banking transactions may not be subject to sanctions, even the secondary ones.
This approach, already supported by OFAC under what is known as the “Humanitarian Exception”, has also been implemented by some European banks that continue providing assistance for the recovery of claims from Iran through the correspondent banking relationships with those local banks which are not subject to secondary sanctions, although included in the SDN List since 5th November 2018.