The reinstatement of U.S. sanctions against Iran was undoubtedly the development in the sanctions field which garnered most attention in 2018. As President Trump tweeted on November 2, “Sanctions are coming,” and indeed by November 5 the secondary sanctions (sanctions which target the behavior of non-U.S. persons) against Iran had been fully re-imposed by the U.S.
Behind the headlines and the tweets there were a number of general trends which have impacted insurers and the shipping sector, all of which have led to companies needing to allocate further resources and incur more costs to ensure that they do not inadvertently breach sanctions. In some cases, they have needed to change their trading patterns.
The first trend is simply the growth of sanctions as the “go to” tool when a state or organization such as the U.N. or E.U. wishes to change or influence behavior or send a firm message of disapproval. It is fair to say that this is a trend that has been developing for a number of years. There are now around three times as many U.S. sanctions programs as there were in 2000. It is not just the number of programs that are relevant, however, it is the number of individuals and entities targeted under each program and the growth of different types of designation which makes compliance ever more complex.
The second trend is the pace of change. Of the 30 active sanctions programs listed by the U.S., 22 were updated in 2018. Since President Trump came to power there have been material changes to some of the most high profile sanctions programs including Russia, Venezuela, North Korea and of course Iran. Aside from Sudan, the general trend has also been to make the sanctions more stringent.
The third trend has been the divergence between the U.S. and the E.U., best reflected in their approaches to Iran, where the E.U. continues to attempt to salvage the deal that led to the relaxation of sanctions whilst the U.S. reimposes sanctions and promises more are to come. Many companies wish to trade freely worldwide, but where this is impeded, they desire certainty as to where they can trade without sanctions being imposed.
With the U.S. sanctions having the effect that most trade by European companies with Iran risks the imposition of sanctions, and the E.U. legislating to seek to prevent European business changing their behavior to comply with U.S. sanctions, businesses are stuck between a rock and a hard place. Any weakening of E.U. and U.S. relations over the coming years may well be reflected in the sanctions sphere with further divergence in other sanctions programs such as the sanctions against Russia.
The final trend is an increased focus on shipping and insurance with both at the forefront of the minds of governments and regulators. This is reflected in, for example, the U.S. Advisory to the Maritime Petroleum Shipping Community in November which highlighted risks to the shipping industry. We can expect more sanctions to be targeted expressly at shipping and insurance in the coming years.
All of these trends can be expected to continue during 2019, with ever more resources needed to ensure safe navigation through the sanctions maze.
Mark Church is Director (FD&D) of North P&I Club.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.