US gets tough on sanctions violations
After the US pulled out of the Joint Comprehensive Plan of Action, better known as the Iran nuclear deal, it re-imposed primary and secondary sanctions on the Islamic Republic.
A common misconception is that the US sanctions solely target American entities. In order to attract financial deals and more trade with foreign entities, the Iranian leaders have also been spreading the narrative that business with the Islamic Republic is as usual. But investors ought to be extremely cautious due to the fact that the newly re-imposed sanctions target not only US entities but also non-American companies, firms and individuals.
Most recently, Meng Wanzhou, the chief financial officer of Huawei, the largest telecoms equipment maker in the world, was arrested in Canada at the request of American authorities. Previously, China’s ZTE Corp pleaded guilty to breaking US sanctions against the Iranian regime.
The arrest of Meng is also significant for foreign investors for several other reasons. Hers is the first case since the re-imposition of the US sanctions on Iran where a prominent non-American citizen has been accused of violating the sanctions. The Trump administration is attempting to send a robust message that violations will not be tolerated. Status, position or wealth will not necessarily make foreign investors immune to the repercussions and penalties of violating US sanctions on the Iranian regime.
Secondly, although any non-American entities that continue to carry out transactions with the Tehran regime may believe that they are immune from US sanctions because they are not based in the US, Washington enjoys adequate financial and political leverage to pressure them. For instance, in the case of Meng, the US pressured the Canadian authorities to arrest her and start extradition proceedings.
Another risk for foreign investors dealing with the Iranian regime is that the US can ban American companies and individuals from conducting business with them. For example, when ZTE Corp breached the sanctions by exporting technology that was made in the US to Iran, Washington banned American companies from dealing with the company. The financial pressure against ZTE was so significant it agreed to pay a $1 billion fine to have the US ban removed.
Although some foreign companies may find doing business with the Iranian regime appealing, they should be extremely cautious due to the fact that the risks outweigh the benefits. Non-American individuals and companies run the risk of losing their business with the US and being subject to the sanctions.
In conclusion, the latest development highlights the fact that the US is determined and committed to pressure the Iranian regime and take action against those foreign firms and individuals that carry out business deals with Tehran in violation of its sanctions.