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New US Economic Sanctions on Iran Will Impact U.S. Banks, Energy Companies, and Government Contractors, among others

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Tuesday, 22 June 2010 13:18

The House Foreign Affairs Committee Chairman Howard Berman (D-Calif.) and Senate Banking Committee Sen. Christopher Dodd (D-Conn.) issued a joint statement that an agreement had been reached on new measures targeting Iran's energy sector with new economic sanctions:

“A month ago, we announced our intention to develop a powerful package of new sanctions against Iran that would substantially augment ongoing multilateral efforts by the U.N. Security Council and the European Union. Our agreement does just that ... If applied forcefully by the President, this act will bring strong new pressure to bear on Tehran in order to combat its proliferation of weapons of mass destruction, support for international terrorism, and gross human rights abuses.”

Among other things, the measure establishes three new sanctions, in addition to the menu of six sanctions that already exists under the Iran Sanctions Act (ISA), including: (1) a prohibition on access to foreign exchange in the U.S.; (2) a prohibition on access to the U.S. banking system; and (3) a prohibition on property transactions in the U.S. The law would require that the President to impose at least three of the possible now-nine sanctions on an entity in violation of ISA.

In addition to restricting new types of financial and energy sector transactions, if approved by the Congress and signed into law the act would codify longstanding executive orders and limit goods exempted from the embargo. The measure will also hold U.S. financial institutions accountable for actions by their foreign subsidiaries. According to Congressional documents released this week, other major highlights of the measure include provisions to:

  1. Expand the scope of sanctions authorized under ISA by imposing sanctions on foreign companies -- including insurance, financing and shipping companies -- that sell Iran goods, services, or know-how that assist it in developing its energy sector;
  2. Ban U.S. banks from engaging in financial transactions with foreign banks doing business with the Iranian Revolutionary Guard Corps or facilitating Iran’s illicit nuclear program or its support for terrorism
  3. Ban U.S. government procurement contracts for any foreign company that exports to Iran technology used to restrict the free flow of information or to disrupt, monitor, or otherwise restrict freedom of speech and require a certification from a company bidding on a U.S. government procurement contract that it is not engaged in sanctionable conduct.
  4. Provide a legal framework by which U.S. states, local governments, and certain other investors can divest their portfolios of foreign companies involved in Iran’s energy sector. Strengthen efforts to stop black-market diversion of sensitive technologies to Iran.
  5. Increase substantially the criminal penalties for sanctions violations by U.S. entities.

The text of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 is available here (pdf).

 

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