This update aims to provide a brief overview of key developments which have occurred in Iran during the past month and to highlight areas of future interest. In particular, the update covers notable developments in both the political arena and key economic sectors.
US adds 25 persons to sanctions list and puts Iran "on notice" following missile test
According to reports, on 3 February 2017, the US Office of Foreign Assets Control ("OFAC") added 25 persons to its List of Specially Designated Nationals and Blocked Persons (the "SDN List") for providing "support to Iran's ballistic missile program and to the Islamic Revolutionary Guard Corps’ Quds Force." The 25 persons reportedly include 13 individuals and 12 companies from countries such as China, Lebanon, Iran and the UAE. As a result, US persons (including US citizens, permanent residents, US companies and their foreign branches, and any person or entity located in the United States) are now prohibited from engaging in transactions with these persons. The new additions are also subject to secondary sanctions, which restrict non-US persons from interacting with those on the SDN List. This follows a statement from the White House at the beginning of the month that Iran was "on notice" as a result of its recent ballistic missile test, which was described by the White House as a "provocative" breach of a UN Security Council resolution.
Developments in key economic sectors
Iran announces discovery of major shale oil reserves
Iran has reportedly announced that it has discovered shale oil reserves totalling two billion barrels in the western province of Lorestan. According to the deputy director of the Exploration Department of the National Iranian Oil Company, other research for shale gas reserves in the region is expected to be completed in October this year.
Iran and Iraq sign oil export MOU
According to reports, Iran and Iraq have signed a memorandum of understanding ("MOU") in relation to the potential construction of a pipeline to export crude oil from the northern Iraqi fields of Kirkuk via Iran. This will result in approximately 150,000 barrels of oil per day being shipped through Iran from fields in northern Iraq. The MOU also reportedly calls for a commission to be established with the purpose of resolving disputes related to joint oilfields and the possible transportation of Iraqi crude oil to Iran’s Abadan refinery. Furthermore, the two countries have also agreed to cooperate on policies related to OPEC.
Iran to invest US$3 billion of renewable energy
Iran's Energy Minister, Hamid Chitchian, has reportedly stated that the Finance Ministry has approved foreign investments in the country's renewable energy industry worth US$3 billion. Chitchian is quoted as saying that Iran "intends to launch a large-scale project to construct renewable energy power plants over the sixth Five-Year Development Plan to generate 5,000 megawatts of energy in the country".
Iran postpones unification of two exchange rates
According to reports, the Central Bank of Iran (the "CBI") has indicated that despite its previous plans, it will not be able to unify the country's official and open market exchange rates by the end of the Iranian fiscal year on 20 March 2017. Reports suggest that unifying the exchange rates has been one of the key policy goals of the Rouhani government as the gap between the rates has helped to increase corruption and hindered cross-border trade. A senior official at the CBI has been quoted as saying that the likely postponement of the unification of the rates is due to the "continued lack of links between Iranian banks and their overseas counterparts."
Iran plans to establish bank in Azerbaijan
The Governor of the CBI has reportedly stated that Iran plans to open a 100% Iranian-owned bank in Azerbaijan. This will reportedly involve turning a branch of Bank Melli Iran in Azerbaijan into an independent Azerbaijani bank. The Governor has also been quoted as saying that the CBI and Azerbaijan "plan to create accounts in national currencies to simplify the trade" between the two countries.
Iran agrees banking cooperation agreement with Japan
The CBI has reportedly reached an agreement with Japan's Financial Services Agency, which is intended to facilitate the supervision and sound functioning of banking organisations in Iran and Japan. Reports state that the agreement provides that, among other things, the authorities will exchange information regarding supervisory concerns (please see further details related to Japanese and Iranian relations below).
Amazon admits to possible breach of Iran sanctions
Amazon has reportedly disclosed business ties to Iran that may have breached US sanctions and has warned that it may have to pay a fine once a regulatory review of its activities has been completed. According to reports, Amazon announced that from 2012 to 2016 it "processed and delivered orders of consumer products for certain individuals and entities located outside Iran covered by the Iran Threat Reduction and Syria Human Rights Act (ITRA)". The company has stated that it has reported the transactions to OFAC and that it will cooperate with the regulatory review of its conduct.
Iran announces finance deal for new planes
Iran's Ministry of Roads and Urban Development ("MRUD") has reportedly announced that Iran has agreed a deal with a foreign leasing company to finance Iran's acquisition of 77 new planes from Boeing and Airbus. Whilst the MRUD has not identified the lessor or specified when the deal was agreed, it did announce that similar discussions were underway for Iran to purchase 17 Airbus aircrafts, as well as six Boeing jets and eight ATR turboprop planes. It also announced that there are ongoing discussions with the German airline TUI to lease three Boeing 737 planes, to be provided to Iran Aseman Airlines, for three years.
Iran ready for joint investment with Sweden
According to reports, during a meeting in Tehran with Swedish Prime Minister Stefan Lovren, President Rouhani stated that Iran is willing to make joint products with Sweden for exports to regional and international markets. President Rouhani indicated that Iran can make use of Sweden’s experience in various areas such as nuclear safety, developing safety equipment for power plants and waste management. Both countries also reportedly signed MOUs on various issues, such as academic and scientific cooperation, road construction, and telecommunication, as well as women and family.
Japan donates US$6.9 million to Iranian projects
The Japanese government has reportedly donated US$6.9 million which will go to various projects in Iran in the next five years, including:
- United Nations Development Programme: US$1 million towards the restoration of Lake Urmia;
- United Nations High Commissioner for Refugees: approximately US$2 million for the protection and humanitarian assistance for Afghan refugees in Iran;
- United Nations Office on Drugs and Crime: approximately US$1.9 million for border control, capacity development on investigation and regional and international cooperation on drugs and illicit chemicals, customs cooperation, anti-money laundering and countering the financing of terrorism in line with UN standards and norms, and the recommendations of the Financial Action Task Force (FATF Recommendations);
- United Nations Industrial Development Organization: US$0.5 million to promote the integration of industries in Chabahar into global/regional markets through upgrading and market access promotion; and
- International Committee of the Red Cross: US$1.5 million for emergency activities in Iran.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2021