United States Wind Down on Iranian Petroleum Trade – Developments and Key Implications

On 1 July, we drew Members’ attention to the U.S. Office of Foreign Assets Control’s ("OFAC") General License X ("GL X"), which temporarily authorised certain activities involving Iranian petroleum trade under US law. In particular, it was highlighted that significant risks remained from an EU and UK sanction perspective, and that the Licence may be revoked or amended by OFAC at any time.

Effective 7 July 2026, GL X, dated 21 June 2026, is revoked and superseded in its entirety by General License X1 (“GL X1”).

Key takeaways for Members

• US wind down:

GL X1 requires that all activity conducted under the previous GL X be wound down by 17 July 2026 and that any payments in relation to this activity that amount to funds passing to a blocked person be made into a blocked, interest-bearing account located in the US. In particular, it should be noted that GL X1 does not permit any new activities/transactions that would have previously been authorised via GL X.

• EU prohibitions continue to apply:

EU sanctions continue to prohibit the purchase, transport and insurance of Iranian-origin oil, irrespective of destination.

• UK regime remains designation-based:

The UK continues to impose asset freezes on Iranian persons/entities, although it does not currently impose a comprehensive prohibition on Iranian oil trade itself.

• Lawful trade may still result in uninsured exposure:

Members should not assume that a transaction which is permissible under applicable UK sanctions laws will necessarily be free from significant insurance or financial risk. Even where a transaction involving Iranian-origin oil is permissible under applicable UK sanctions laws (for example because no designated person or entity is involved), sanctions restrictions affecting the International Group pooling arrangements, EU-based pooling partners or reinsurers may, in the event of a substantial claim, prevent or restrict the recovery of contributions that would otherwise be available. Any shortfall arising as a result of such unrecoverable contributions would fall outside Club cover pursuant to Rule 5V and would remain for the account of the Member concerned.

• Heightened multi-jurisdictional risk:

Members may be exposed to conflicting US, EU and UK sanctions regimes, particularly where an EU nexus (e.g. insurers, financing or ownership) is present. Members should carefully consider both sanctions compliance risks and the potential impact of differing sanctions regimes on insurance arrangements and the availability of financial support in the event of a claim.

Conclusion

Under GL X1, activities involving Iranian petroleum trade previously authorised by GL X must be wound down by 17 July 2026 – after which, US sanctions will revert in full to their pre GL X position.

Any new activity involving Iranian petroleum trade previously authorised by GL X is not permitted.

Significant sanctions restrictions continue to apply under EU and UK regimes, and Members should carefully assess the legal, compliance and insurance risks arising from any proposed transaction. In particular, a transaction may be lawful under one sanctions regime but nevertheless give rise to insurance recovery issues if sanctions restrictions prevent or restrict the recovery of amounts that would otherwise be available from the International Group Pool.

Members are reminded that cover is not available for any trade that breaches applicable sanctions and are advised to conduct thorough due diligence on the parties, cargoes, vessels and other service providers that are or may be involved before engaging in any trade with a high sanctions risk, maintaining appropriate records of their due diligence investigations and findings.

Given the potential application of multiple sanctions regimes, Members should carefully assess the legal, compliance and insurance implications of any proposed transaction and consider obtaining specific legal advice where appropriate.

The above is provided for general informational purposes only and does not constitute legal advice.   

Members requiring further information should contact their usual Club representative.