On 16 January 2016 the International Atomic Energy Agency (IAEA) reported to the United Nations Security Council that Iran had taken a series of measures called for by the historic nuclear agreement between Iran, the Five Permanent (P5) members of the United Nations Security Council, and Germany. This historic development has been welcomed by New Zealand (external link).
Accordingly, a series of previous Security Council resolutions on the Iranian nuclear issue, including sanctions, have now been terminated and new restrictions applied in accordance with Security Council Resolution 2231.
New Zealand has now started the domestic process for removing the UN sanctions and updating its regulations. This is expected to be completed in February.
The main impact of these changes is to remove the current requirement for New Zealanders doing business with Iran to register with the Ministry of Foreign Affairs and Trade.
Once in place, the updated New Zealand regulations will place new, more limited, restrictions on transfers of certain sensitive items (for example, nuclear and ballistic missile-related technologies), as well as impose an asset freeze and travel ban on designated individuals and entities.
In the long term it is hoped that the lifting of sanctions will allow for a stronger trade and economic relationship between New Zealand and Iran.
New Zealand has had an Embassy in Tehran since 1975 making it New Zealand’s longest-standing mission in the Middle East. During the 1980s Iran was one of New Zealand’s top five export markets. With the latest sanctions New Zealand commodity exports to Iran have declined to less than NZ$90 million in the year ending September 2015, down from over NZ$163 million in 2014.
What is the immediate impact for New Zealanders?
Until the domestic process is completed, the existing New Zealand regulations for doing business with Iran – including having to register with the Ministry of Foreign Affairs and Trade – remain in place.
In the short term, New Zealanders doing business with Iran must continue to register using the MFAT website.
What happens once sanctions are removed?
There will be a continued need for New Zealanders to exercise vigilance when doing business with Iran.
Some countries, such as Australia, the European Union and the United States, impose their own restrictive measures in addition to UN sanctions.
New Zealand businesses trading with countries which have such "autonomous" sanctions are advised to seek independent legal advice to make that their business does not contravene other sanctions regimes.
In the case of the US, some 400 Iranian individuals and entities were removed from the US Treasury's sanctions’ list on January 16, but US sanctions continue to restrict non-US citizens from conducting transactions with a list of Iranian individuals/entities. Other US sanctions related to terrorism, ballistic missile and human rights issues will also remain in place.
There is also an obligation for New Zealand exporters to follow regulations regarding the export of strategic goods to all countries, not just Iran.
What sectors are affected by US sanctions?
New Zealand businesses, particularly those doing business in the US or with links to the US, should be familiar with the impact of US sanctions and the US Treasury guidelines (external link) about Iranian oil, gas, petrochemicals, shipping, financial, insurance, gold and precious metals and auto sectors that non-US persons may now engage in.
The way has now been cleared for direct shipping to return to Iran’s main port (Bandar Abbas) and the main container terminal (Al Rajaie Terminal at Bandar Abbas).
New Zealand companies will no longer need to ship goods via other ports, but the speed at which direct shipping returns to Iran will be a decision for the large shipping companies.
Other factors for New Zealand exporters to consider
The lifting of sanctions offers the prospect of real economic opportunities in Iran as the country opens up to the world.
But Iran will remain a challenging market to do business in. An opaque regulatory environment, weak commercial law and IP protection, very high tariff levels and problems with corruption mean that New Zealand companies looking to do business in Iran will need to do their homework. Finding the right local partner will be critical.