Companies engaging with Iran's energy sector must guard against sanctions and bribery risks

Tom Stocker, of Pinsent Masons, the law firm behind Out-Law.com, made his comments as the EU prepares to renew a range of financial and trade sanctions which it imposed on Iran in 2010 and 2012. In January the EU granted "limited, temporary and targeted relief" on some of the sanctions and legal experts believe the sanctions could be further relaxed when they are reviewed as part of a Joint Plan of Action which is due to finalised in late July 2014, subject to Iran making progress towards satisfying the P5 + 1 powers that its nuclear programme is solely for peaceful purposes.

Stocker said that many European companies are preparing to re-enter the Iranian energy market, which was once a major supplier of energy resources to Europe. Interest in developing contacts with Iran has been fuelled by recent concerns about the security of Europe's domestic energy supply after the EU and US imposed sanctions on a number of Russian individuals and energy sector companies following Russia's recent activities in neighbouring Ukraine, which the EU and US say has undermined the sovereignty of the Ukraine. 

"But there are significant risks as companies will need to seek third party engagements to pursue operations in Iran," said Stocker. “As the market opens up there may be an increased expectancy from some individuals looking to cash in and any company moving in will be exposed to substantial risk of bribery."

Stocker said that all contracts relating to engagement with the Iranian energy market must take into account the requirements of sanctions and anti-bribery rules. He has previously said that companies which fall foul of sanctions requirements can face "eye-watering penalties".

Stocker also pointed out that a number of Iranian individuals will remain subject to assets freezes and that companies must ensure they familiarise themselves with 'know your customer' (KYC) guidelines. KYC guidelines were established by financial authorities to help firms effectively manage their money laundering risks by helping them to understand how to detect whether their goods and services are being procured for money laundering purposes. They were also designed to help firms meet their obligations under the Proceeds of Crime Act 2002.

"Having in place contracts with anti-bribery and sanctions compliance clauses is also a must," Stocker said. "There is a need to check the extent of the sanctions that remain in place and to carry out 'know your customer' checks and due diligence on third party agents and intermediaries."

In addition to a range of trade sanctions imposed by the US in 2010, the EU banned the provision of oil & gas related equipment and services for use in Iran.

Stocker added that successful re-entry of European headquartered companies could be hindered by the more stringent US sanctions which apply to any organisation financed by EU-banks which use the US financial markets. "There is a need to check both EU and US sanctions before pressing on with any opportunity relating to Iran," he said.

"It won't be 'full steam ahead'," said Stocker. "A considerable number of international oil and gas outfits will need to be mindful of the complex and stringent US and EU sanctions and will need to implement measures to ensure essential financing is not suspended."

"Iran is rich with natural resources and was once one of the key providers of petrochemicals to the European markets," said Stocker. "At such a pivotal time for our domestic energy supply and global resources, oil and gas companies are assessing alternative access to fossil fuels as the threat of sanctions on Russia becomes a genuine concern."