Archive for the ‘Iran Sanctions’ Category


Nov

12

Sanctions Hit Surveys in Sanctioned Countries


Posted by at 10:20 pm on November 12, 2013
Category: Iran SanctionsOFAC

By Hansueli Krapf (User:Simisa) (Own work) [CC-BY-SA-2.5 (http://creativecommons.org/licenses/by-sa/2.5)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AIran_012.jpgThe Pew Research Center just released the results of polls taken in several Middle Eastern countries that reveal that large numbers of Muslims are concerned by Sunnia-Shia tensions in their country, with particular concern being expressed, not surprisingly, by Muslims in Lebanon. The most interesting part of the survey comes near the end:

Surveying in Iran presents special challenges, owing in part to U.S. government restrictions on the import and export of goods and services to and from the country. In conducting its survey of Iranian public opinion, Pew Research fully complied with the requirements mandated by the U.S. Government’s Office of Foreign Assets Control (OFAC).

If you are wondering how Pew complied with those requirements (I certainly am) then you’re not going to find it in the linked report from Pew. You’re just going to have to take their word that they complied somehow or other.

The problem is that OFAC has already said that conducting surveys in Iran constitutes the export of services to Iran and that it would not grant the required licenses for such surveys. And judging by the recent release of General License E creating a general license for certain limited types of surveys, OFAC still believes that conducting surveys in Iran constitutes an export of services to Iran requiring a license. Under General License E, the only surveys authorized are “surveys relating to human rights and democracy building.” I’m not quite sure how a survey in Iran that seeks to determine, inter alia, the extent to which Sunni and Shia believe in visiting shrines of Muslim saints can be said to relate to human rights or democracy building.

Since General License E does not seem to cover this survey,  a specific license would be required instead.  So I assume Pew must have applied for and received a license here, but I’m puzzled as to why they didn’t come out and say that directly rather than just provide a general assertion that they complied with all requirements.

Let me be clear, however, on one thing. I think it is silly for OFAC to say that conducting a survey in Iran for a report published in the United States constitutes an export of a service to Iran. Like most people, I am contacted frequently by people conducting surveys, generally when I’m sitting down to dinner and generally to ask me my views on some polarizing political topic. Frankly, I don’t see how they are providing any services to me by making these calls. Instead, the only service that they could normally provide is to leave me the heck alone and let me finish my dinner in peace. I tend to think that asking people on the streets of Tehran about their political and religious views is not any more of a service to them.

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Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Nov

5

Be Careful What You Say on LinkedIn


Posted by at 6:08 pm on November 5, 2013
Category: BISCriminal PenaltiesIran Sanctions

Nicholas Kaiga http://www.linkedin.com/in/nkaiga [Fair Use]
ABOVE: Nicholas Kaiga


According to a recently unsealed criminal complaint, a Belgian citizen, Nicholas Kaiga, has been charged with attempted unlicensed exports of export controlled aluminum tubing to Malaysia. The story recounted by the complaint begins with an order placed with a U.S. company for 7075 aluminum to be exported to a company in the UAE. Because 7075 aluminum is covered by ECCN 1C202, an export license application was filed with the Bureau of Industry and Security (“BIS”). When BIS sent an employee to the company address in the UAE, it discovered that the address actually belonged to a different company. Worse, it belonged to a different Iranian company, so BIS denied the license.

Undeterred, the UAE company instructed that the aluminum be shipped to Belgium instead given that a license is not required to send 7075 aluminum to Belgium. Enter Mr. Kaiga and his company Industrial Metals and Commodities, which he apparently was running from his house in a residential area of Brussels. Mr. Kaiga went so far as to fill out a BIS Form 711 stating that the aluminum was destined to be resold in Belgium In cahoots with federal investigators, the U.S. company then shipped what purported to be 7075 aluminum (but was in fact a lower grade EAR99 aluminum)  to Kaiga, who then promptly shipped it to a company in Malaysia related to the Iranian company that ordered the 7075 aluminum in the first place. The shipment would have required a license both for export to Malaysia and, obviously, Iran, neither of which had been obtained.

Some time later, Mr. Kaiga made an improvident trip to New York and met with an undercover agent, whom he allegedly told that the aluminum was always intended to go to Malaysia. For good measure, Kaiga allegedly bragged to the agent about his ability to get around export controls. Then they arrested him.

An interesting footnote to all this is Mr. Kaiga’s expansive LinkedIn biography where he explains:

My overall experiences have taught me to become very flexible and adaptable to different manners of … working.

Maybe flexibility is not always such a good thing.  He also claims that one of his “specialties” is “managing high risk operations.” Not so much given the outcome of his trip to New York. He might want to change that when he gets access to a computer again in several years.

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Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Oct

22

Iran’s Newest Diplomacy Tool with the West: PowerPoint


Posted by at 11:51 pm on October 22, 2013
Category: Economic SanctionsIran SanctionsSanctions

By Max Talbot-Minkin (Flickr: Iran's Ambassador to the UN) [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AMohammad_Javad_Zarif.jpg
ABOVE: Mohammad Javad Zarif

According to press reports last week, Iranian Foreign Minister Mohammad Javad Zarif used a Microsoft PowerPoint presentation last week in Geneva to explain to U.S. and EU diplomats what Iran may do to address their concerns with Iran’s nuclear activities. Putting aside the permissibility under U.S. law of how Mr. Zarif obtained PowerPoint, the bigger story is that Iran’s amicable overtures may be working. The New York Times reported on Friday that the Obama Administration is considering a plan that would unfreeze some portion of blocked Iranian assets in exchange for Iranian government commitments with respect to its nuclear program.

While even such a proposed plan is significant given U.S. foreign relations with Iran over the past few decades, there may be some obstacles to loosening sanctions on Iran. Members of Congress quickly responded to news of the Geneva talks with proposals for tighter sanctions on Iran

The United States is not, however, the only one on Iran’s dance card. How the EU responds, for example, to actions by a new Iranian government is a critical component to how effective U.S. sanctions are. Although some U.S. politicians would like to believe Iran’s current pains from sanctions are felt exclusively because of increased U.S. sanctions, the success of sanctions is not properly evaluated without considering the increase of other sanctions, principally those of the EU and Switzerland, within the last few years.

Using PowerPoint should not be underestimated as a calculated gesture by Iran even if it may have required a U.S. export license. Gestures are important aspects of diplomacy and can lead to significant developments in foreign relations. Just ask Reagan and Gorbachev about their walk along Lake Geneva almost thirty years ago. Congress and the Obama Administration need to find some common ground before talks with Iran resume in Geneva next month in order for the United States to take part in meaningful discussions. If not, the United States may not be part of any lakeside strolls, which can be especially cold when alone in Geneva this time of year.

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Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Oct

7

An Iranian Skyscraper in NYC Shows a Juicy Side of Sanctions Enforcement


Posted by at 5:08 pm on October 7, 2013
Category: Criminal PenaltiesEconomic SanctionsIran SanctionsOFAC

Source http://650Fifth.com [Fair Use]

In an 82-page opinion issued last month, U.S. District Judge Katherine Forrest granted forfeiture of 650 Fifth Avenue, a 36-story building in midtown Manhattan which houses, among other posh tenants, the flagship store for Juicy Couture. The impending problems for 650 Fifth started when the former Iranian Shah Pahlavi formed a U.S. non-profit, which borrowed $42 million from Bank Melli in 1975 to retire a loan on the property at 650 Fifth and construct the building itself. (Bank Melli is wholly owned and controlled by the Iranian government.) What followed in 1979, of course, was the Iranian Revolution and, over the next decade, the Iranian government developed an ownership structure of the property and building at 650 Fifth, which resulted in, among other things, creation of U.S. entities controlled by the Iranian government to transfer rental income from 650 Fifth to Bank Melli.

The case is without question one-of-a-kind and, as such, grabbed news headlines when forfeiture was granted. It should be noted, however, that the issue of whether 650 Fifth was ever blocked property was not brought before the court even though Bank Melli’s property or interests in property in the United States were blocked beginning in 2007. Instead, the United States commenced a forfeiture action in 2008. 650 Fifth became, in effect, a blocked property via forfeiture on the grounds that, as Judge Forrest explained under U.S. forfeiture law, 650 Fifth Avenue is property that “bear[s] a substantial connection” to violations of IEEPA, namely violations of Iranian sanctions in which U.S. entities controlled by the Iranian government provided services to the Iranian government by way of the entities’ ownership and management of 650 Fifth, including collecting rental income from the building and remitting it to the Iranian government via Bank Melli.

In the case of 650 Fifth, forfeiture is quite a costly penalty with the building itself reportedly valued between $500 and $700 million, and the opinion stating that at least $75 million had been reinvested in the building by the Iranian government. Forfeiture of the building itself makes it one of the largest U.S. sanctions penalties ever.

The upshot of this decision for other circumstances that don’t include a Manhattan skyscraper owned and controlled by the Iranian government is a reminder that any violation of IEEPA-based sanctions carries with it a potentially hefty penalty in the form of forfeiture that won’t be found in OFAC’s regulations except their reference that sanctions violations “may also be subject to … other applicable law.” When considering what is at stake in a sanctions violation, property connected to the violation has to be part of the calculus, especially in circumstances where the government pursues a criminal violation and seeks a monetary penalty that requires forfeiture of such property to meet it. In an egregious case like 650 Fifth, the building itself fit the bill.

Clif adds: It is important to understand that the defendants in the case were found by the judge to have concealed the interest of Bank Melli and to have concealed the payment of the rent collected by the U.S. owners to Bank Melli.  This is why Juicy Couture, or the other tenants in the building, are unlikely to receive nastygrams from OFAC alleging that they violated the Iran sanctions through payment of their rent.   Also, because Bank Melli was not the owner of the building, but was simply receiving income from the building, the building itself would not be blocked.  Hence, forfeiture was the more viable option for the U.S. Government.  Plus, of course, the USG now owns the building and receives the rental income.  If it had been blocked, the current owners would still “own” the building while all rental income would sit in blocked accounts.

 

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Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)

Sep

10

General License F Is a Grand Slam for OFAC


Posted by at 10:55 pm on September 10, 2013
Category: Iran SanctionsOFAC

Arthur Ashe Stadium, photo by Clif Burns

I don’t normally talk about cases that I have been involved in on this blog, but I’m going to make a rare exception today to talk about OFAC, tennis and the new General License F announced today. The new general license permits the importation of Iranian origin services into the United States in connection with “professional and amateur sporting activities . . . including, but not limited to, activities related to exhibition matches and events, the sponsorship of players, coaching, refereeing, and training.”

The story begins with an email I received several weeks ago from Adel Borghei, a respected tennis referee from Iran who had been invited to referee at this year’s U.S. Open in New York, but the invitation had been withdrawn after he arrived in the United States due to U.S. sanctions on Iran. Section 560.505 of the Iran Transaction Regulations limits U.S. employment of persons ordinarily resident in Iran to those holding certain visas and, in the case of Mr. Borghei, appeared to preclude his being a referee at the Open.

I easily convinced Bryan Cave to take on Mr. Borghei as a pro bono client, and we filed a license application with OFAC requesting permission for him to referee in this year’s Open. And, believe it or not, we got a license in record time on the Friday before the Labor Day Weekend. Mr. Borghei, as a result, was able to referee at the Open after all. This article in the New York Times tells the story in more detail, with a great picture of Mr. Borghei arriving at the Open to get started.

Clearly the U.S. sanctions on Iran were never meant to prohibit the participation of Iranians in athletic events. Cultural and athletic interchanges involving ordinary citizens of both countries may do as much or more to further U.S. diplomatic goals as prohibitions placed on those involved in proliferation activities. And I’d like to think that the license application filed for Mr. Borghei caused OFAC to realize the good that could be accomplished by issuing General License F.

Last week I went up to the Open to watch Mr. Borghei act as a line ref for a tennis match. Regular readers have probably surmised that I enjoy what I do, but I have to admit that this one little success made all the poring over OFAC, BIS and DDTC regulations worth it. Mr. Borghei is a good guy who has always wanted to work the Open, and there he was on the line doing what he enjoyed most.

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Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)