If an international agreement is violated and no one makes a sound, did it really happen?
by Samuel Cutler
A few weeks ago, the State Department imposed sanctions on Greek businessman Dimitris Cambis and his company, Impire Shipping Ltd., pursuant to the Iran Sanctions Act of 1996 (ISA), for his role in operating what Treasury Under Secretary for Terrorism and Financial Intelligence David Cohen described as an “intricate Iranian scheme that was designed to evade international oil sanctions.” While OFAC’s designation has been covered at length, less noticed is the fact that the sanctions on Cambis and his companies seem to violate a Clinton-era pact between the US and EU, in which the US pledged to waive sanctions against EU persons under the ISA, known at the time as the Iran and Libya Sanctions Act.
According to OFAC and an earlier story by Reuters, Cambis used a web of front companies to purchase eight aging oil tankers, worth little more than their weight in scrap metal, in order to facilitate the sale of Iranian crude to China. An example provided by Reuters illustrates how the scheme worked: In early December, the Leycothea, one of Cambis’ ships, anchored alongside the Iranian tanker Marigold off the coast of the UAE Emirate of Sharjah, just across the Persian Gulf, from the Iranian shipping hub of Bandar Abbas. Once anchored, a ship-to-ship transfer took place, concealing the origin of the crude and allowing it to be traded on the global market as non-Iranian oil. About a month later the Leycothea made a port call to China’s Zhanjiang oil terminal. Each of these tankers is capable of carrying approximately $200 million worth of oil per shipment.
In the recent past, the EU has reacted strongly to attempts by the US to impose secondary sanctions on its citizens and companies. Following the passage of the Cuban Liberty and Democratic Solidarity Act of 1996, commonly known as the Helms-Burton Act, the EU filed a World Trade Organization (WTO) challenge alleging that secondary sanctions violated US commitments under the General Agreement on Tariffs and Trade (GATT). While the WTO challenge refers only to the Helms-Burton Act, the EU concurrently voiced serious concerns about the ISA. The EU also passed European Council Regulation 2271/96, which contains legal countermeasures against the extraterritorial application of US sanctions and forbids EU persons “actively or by deliberate omission” from complying with the Cuban Democracy Act of 1992, the Helms-Burton Act, and the ISA. In order to settle the dispute, the Clinton administration entered into an agreement with the EU known as the “Understanding with Respect to Disciplines for the Strengthening of Investment Protection.” In exchange for the withdrawal of the WTO challenge, the United States, among other measures, committed to waiving future ISA sanctions against EU persons.
The SDN designation of Cambis and Impire Shipping represent the first sanctions against an EU person under the ISA. Despite the apparent violation of the Investment Understanding, a response by the EU has been nonexistent so far. This reflects a broader acceptance by the EU of US secondary sanctions, at least when it comes to Iran, over the past two years. Since the passage of the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) in 2010, US and EU Iran sanctions policies have largely come into alignment. The fact that Cambis is a minor player engaged in activities that are sanctionable under both US and EU law likely dampens any enthusiasm for challenging an infringement on EU or Greek sovereignty. In this case, the action might even be tacitly supported by the EU because it allows for the US to do the “dirty work” of imposing sanctions against an EU citizen without granting them the right to present a legal challenge in an EU court, which has recently caused EU policymakers major headaches. What is clear is that at least when it comes to Iran, there are few nations interested in challenging US secondary measures, regardless of past agreements.
— Samuel Cutler is a policy adviser at Ferrari & Associates, P.C., a Washington, DC boutique law firm specializing in US economic sanctions matters.
Photo Credit: U.S. Navy/ Richard J. Brunson