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New sanctions imposed by Australian Government targeting Iran’s oil and gas sector

Deloitte | Jon GreenawayNew Australian Government sanctions targeting Iran’s oil and gas industry will come into effect on 1 July 2012.  The Iranian oil and gas industry is seen to be supporting the country’s nuclear programme, and the trade in rare metals, gold and diamonds with Iranian government agencies will also be prohibited for the same reason. Similar sanctions are also being implemented by the U.S. and the European Union.

The new prohibitions may directly affect Australian oil and gas operators as well as industries that provide services to the oil and gas sector or trade in rare metals and gems.  They will also affect financial services, tertiary institutions, recruitment agencies, and technical services and logistics providers.

The sanctions and what they mean

Following Department of Foreign Affairs and Trade (DFAT) consultations on the sanction amendments in May, the newly prohibited activities as mandated by DFAT1  are as follows:

  • The import, purchase or transport of specified Iranian crude oil, petroleum or petrochemical products
  • The provision of financial assistance or a financial service related to the import, purchase or transport of such products
  • The acquisition, extension, or participation in a joint venture with, or the granting of a loan or credit to an entity in Iran that is engaged in the petrochemical, oil or gas industry in Iran, or an Iranian entity involved in such industries outside Iran
  • The sale of an interest in a commercial activity in Australia that is related to the oil and gas industry to the Iranian Government or an Iranian company or citizen
  • The direct or indirect sale, purchase, transportation or brokerage of gold, diamonds or precious metals to Iranian public bodies
  • The opening in Australia of a branch, or some other form of a financial institution that is operated by or on behalf of the Iranian Government, an Iranian company or citizen
  • The establishment of a representative office or subsidiary in Iran, or the opening of a bank account in Iran, by a financial institution
  • The delivery of newly printed or unissued Iranian denominated bank notes or newly minted or unissued Iranian denominated coinage to or for the Central Bank of Iran.

No activities prohibited by the sanctions can be initiated from 1 July 2012 and covered organisations will need to end pre-existing activity prohibited by the new measures by 31 December 2012.
Organisations can apply to the Minister of Foreign Affairs for an extension to pre-existing activity, and it is expected that grounds for the granting of an extension may include national interest or that discontinuing the activity would cause unreasonable hardship.

The new prohibitions will also extend to foreign-owned Australian-based companies that engage in activities now prohibited under the new sanctions.

The tertiary sector will be affected, with Iranian students and their fields of study to be scrutinised. While clear statements from DFAT regarding what is and is not permissible are not expected, guidance provided during the consultation process is for institutions to consider the relationship between the content of the course an individual is enrolled in - and the background of the individual concerned - to the goods, services and parties that are the subject of the sanctions. For example, a PhD student from Iran whose tuition and expenses are funded by an Iranian oil and gas company would not be allowed under the sanctions, but a self-funded student may not be in contravention of the new rules.

Similarly, training by energy companies or energy service companies may be prohibited. For example, secondees from an Iranian oil group participating in training or familiarisation courses in Australia or in a third country by an affiliate of an Australian company would be prohibited, but training of migrants from Iran would not.

DFAT is hoping that peak industry bodies in the affected sectors will incorporate the new autonomous sanctions into guidance for their industry that will then be incorporated by organisations into their codes of conduct and business practices.

Enforcement

Enforcement of the sanctions will be intelligence-led, with Immigration and Customs at the forefront of providing information that may lead to companies being asked to show they are compliant.

It is not expected that covered organisations and individuals will be in breach if, unbeknownst to them, their product or service is provided to a proscribed party or used in a prohibited activity by a customer or other third party, as long as the arrangement was not established with the intention of violating the sanctions.
It is expected, however, that affected individuals and organisations will take reasonable steps to ensure that existing or potential arrangements and transactions involving Iranian organisations and individuals will not violate the new sanctions.

While no specific guidance on necessary due diligence on counter parties to determine links to Iranian organisations and persons engaged in prohibited activity is expected, organisations should conduct thorough due diligence and obtain certain undertakings from counterparties if their profile indicates a possible connection or involvement in prohibited activities.

Recent developments in Syria have also resulted in DFAT giving consideration to prohibiting engagement with government bodies in Syria.

Guidance given during the consultation process is that any action by DFAT will depend on action taken at the UN Security Council level. As far as Syria is concerned, it is a case of “watch this space”.

 

Author

Jon Greenaway | Account Director Forensic

 

1 http://www.dfat.gov.au/un/unsc_sanctions/iran_autonomous_sanctions.html 

 

 

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