EU Foreign Policy Chief Catherine Ashton 311 (R).
(photo credit: Francois Lenoir / Reuters)
ZURICH/BRUSSELS - The EU is banning not only imports of Iranian oil but also crude purchased by European companies, including Total and Royal Dutch Shell, for sale to non-EU destinations, lawyers and officials familiar with the terms of the sanctions told Reuters.
The European Union on Monday embargoed imports of oil from Iran and imposed a number of other economic sanctions, joining the United States in a new round of measures aimed at slowing Tehran's nuclear development program.
Israel to United Nations: Take action against Iran
Prosor slams UN’s 'Solidarity with Palestinians'
European oil companies will be forced to sever all dealings in Iran crude by July.
"It is a complete prohibition," said a senior EU official, who added that oil firms' global sales were deliberately targeted. A European diplomatic source told Reuters that the sanctions were part of a push to cut the country's oil revenues by 50 percent.
Three lawyers specializing in trade and sanctions said the sanctions would also make it illegal for EU firms to deal in Iranian oil regardless of the port of destination.
"EU sanctions rules apply to EU citizens and companies registered in the EU, wherever they do business," said Ross Denton, partner at law firm Baker & McKenzie.
JPOST VIDEOS THAT MIGHT INTEREST YOU:
Article 3a of the new EU sanctions states: "The import, purchase or transport of Iranian crude oil and petroleum products should be prohibited."
The robust wording of the sanctions, which came as a surprise to many industry sources, means that the EU measures could force Iran to seek other outlets for more than the 600,000 barrels a day currently imported by EU members.
That is because the embargo also prevents Total and Shell, both significant buyers of Iranian crude, from taking delivery for non-EU destinations.
Shell and Total both declined to comment in detail. Both said they comply with international law.
Oil trading sources said Shell has a contract to lift at least 100,000 bpd of Iranian oil, although it is not clear how much of it is processed in Europe.
In 2010, Total bought around 120,000 barrels per day (bpd) of crude oil from Iran, which was about 40,000 bpd more than its European imports.
Matthew Parish, Geneva-based partner at law firm Holman Fenwick Willan , said that any firm with an ongoing Iranian oil contract would have to declare force majeure on its contract in July, when the sanctions come into effect.
"It would not have a choice. A contract would be deemed automatically frustrated if its performance would become illegal under the relevant law," he said, adding the sanctions might also apply to EU citizens who own non-EU firms and to vessels flying EU flags owned by non-EU entities.Switzerland could prove a loophole against sanctions
One factor that could influence the effectiveness of the EU sanctions is whether Switzerland follows suit and how quickly.
Switzerland is not an importer of Iranian oil, but if Berne stalls on a decision, there could be an extended or even permanent grace period for Swiss-based oil trading companies.
Trading giants Gunvor and Vitol and Total's trading division Totsa are based in Switzerland.
The traditionally neutral country is only legally bound to enforce UN Security Council decisions on a national level, although in recent years it has tended to copy EU sanctions to harmonize its laws with those of its main trading partners.
But it has been historically quicker to copy the EU on sanctions against individuals than it has to impose trade sanctions, prompting talk that a Swiss loophole could emerge.
"In the case of Iran, Switzerland is likely to be even more prudent than usual and to try to keep a low profile. Oil is a very vital part of Iran's economy, so this is not the same as symbolic sanctions, for example on human rights," said Mohammad-Reza Djalili, Iran expert at Geneva's Graduate Institute of International and Development Studies.
The Swiss Secretariat for Economics (SECO), a department of government involved in sanctions policy, declined to comment on its position.
Urs Rybi, in charge of commodities at Swiss non-governmental organization (NGO) Berne Declaration, said he expected a considerable gap before EU sanctions on Iran are adopted in Swiss law.
"What we have seen during the Arab Spring is that Switzerland normally follows such embargoes but with a certain lag in time. I could well imagine that this will also be the case in the case of Iran."
Join Jerusalem Post Premium Plus now for just $5 and upgrade your experience with an ads-free website and exclusive content. Click here>>