by Grant Eldred
Of the numerous domestic and international sanctions regimes currently in place all over the world, you will not be surprised to hear that, over the last few months, it is the regimes relating to Iran and Russia that have occupied us most. With Iran it is traders and businesses rather optimistically asking when they will be able to take advantage of the pent up demand and, with Russia it is banks trying to work out what is a “new loan” and how the capital restrictions affect their trade and LC facilities.
Iran – If the EU’s intention was to ensure the sanctions regime in relation to Iran was sufficiently opaque so as to impose a trade ban in all but name, it can congratulate itself on achieving this. The subsequent EU sanctions relief extended now by the Joint Plan of Action to 30th June 2015, although broader than the current US reliefs, can still be withdrawn at any time and the UK government retains its position of not encouraging trade with Iran. In the US the sanctions relief principally only applies to non US citizens plus humanitarian and aviation activities. In fact, US Republicans (who take control of Congress next year) continue to call for an increase in the Iranian sanctions to accompany the ongoing talks.
Russia – The imposition in the US and then the EU of the capital markets restrictions (targeting state banks, selected energy companies and defence companies) created a new type of sanction and new type sanctions list (i.e. entities not subject to an assets freeze just a capital restriction – “SSIs” in the USA). The introduction of this new type of sanction (combined with assets freezes and selected industry sanctions) has introduced the corporate and capital markets departments of banks to the sanctions problems the trade and private client bankers have been struggling for some time. Initially, by targeting transferable securities or money market instruments with maturity exceeding 90 days, the trade and syndications market were not so hard hit. This ended in the EU, however, after 12th September 2014 with the addition of “new loans” and credit exceeding 30 days. It is this restriction and its impact on international trade, corporate and syndicated facilities as well as issuing confirming and advising banks under LC structures, which continues to be the source of many of the Russian sanctions enquires we are asked to address