This blog reported on March 29 that OFAC had provided guidance on various technologies eligible for export to Iran as incidental to the exchange of personal communication over the Internet. Most significantly, OFAC indicated a willingness to permit certain fee-based services, such as Skype and Google Voice, to Iranians under this exception. I had suggested that given comprehensive sanctions on major Iranian banks, ordinary Iranian citizens would be hard-pressed to actually pay for these services even if licensed.

Now it appears that Iran might even more effectively prohibit U.S. exports of services and software incidental to personal communications over the Internet. According to this story in Ars Technica, the Iranian government is planning to create a national intranet and cut off access to the Internet for ordinary citizens in Iran, possibly as early as October 2012. The source for this story is a report by Reporters Without Borders entitled Enemies of the Internet

After a number of other outlets picked up the story, Iran is now claiming, somewhat bizarrely, that the story of shutting down the Internet in Iran is an April Fool’s day hoax. Seriously, I guess the mullahs sat around and decided it would be hilarious to tell a whopper about the Internet on April Fool’s day. I think the only April Fool is anyone who actually believes the story that the report was an April Fool’s day joke. Iran’s history of pervasive Internet censorship is well detailed in the Reporters Without Borders report, so the idea of a “clean” national intranet in Iran to replace the real Internet hardly strains credibility.

Last week, the Office of Foreign Assets Control (“OFAC”) issued an interpretative guidance on section 560.545 of the Iranian Transactions Regulations which permits exports from the United States to Iran of services incidental to the exchange of personal information over the Internet. The rule requires that such services be “publicly available at no cost to the user.” The guidance gives some examples that seem to have been obviously covered even without the guidance:

• Personal Communications (e.g., Yahoo Messenger, Google Talk, Microsoft Live, Skype (non-fee based))
• Updates to Personal Communications Software Personal Data Storage (e.g., Dropbox)
• Browsers/Updates (e.g., Google Chrome, Firefox, Internet Explorer)
• Plug-ins (e.g., Flashplayer, Shockwave, Java)
• Document Readers (e.g., Acrobat Readers)
• Free Mobile Apps Related to Personal Communications
• RSS Feed Readers and Aggregators (e.g., Google Feed Burner)

More significant is what the guidance has to say about paid services which aren’t covered by section 560.545. According to the guidance, fee-based personal communications are now covered by the favorable licensing policy set forth in the Statement of Licensing Policy On Support of Democracy and Human Rights in Iran. Specifically, this favorable policy will cover paid web hosting services, paid mobile apps and paid internet communications services such as Skype and Google Voice. The policy also covers payment to Iranians in connection with online advertising on Iranian websites.

This all laudable, but it seems unlikely that anyone will be able to take advantage of these new policies. Specifically, how are Iranians going to pay for these services without routing them through one of the many designated Iranian banks? All such payments will wind up being blocked. Even if the payments are somehow routed only through the few banks that are not designated, it’s not clear how the transfers from individual Iranians will be able to reference the specific licenses to avoid being rejected by U.S. banks.

So although Iranians might find some comfort in OFAC’s lip service on democracy in Iraq, it will be cold comfort if they actually try to obtain the paid services in question.

A number of news reports, like this one, indicate that MV Eglantine was hijacked by Somali pirates yesterday near the Maldives and about 460 nautical miles west south west of India’s Cape Comorin. The scene of the hijacking was 1,800 miles from Somalia. Twenty-three crew members were on board.

Regular readers might recognize the name of this ship because it is one of the Iranian vessels on the Office of Foreign Assets Control’s list of Specially Designated Nationals and Blocked Persons. This leads to a number of interesting questions. Will OFAC send a charging letter to the pirates accusing them of engaging in illegal transactions with a blocked vessel? Or should it send the pirates a thank you note for more effectively blocking the ship than OFAC has so far managed to do?

Another news report says this:

US Naval forces have said they will attempt aid and rescue just as if it were any other flagged ship, Iranian or not.

Doesn’t the U.S. Navy need a license from OFAC to provide rescue services to the Iranian crew members and shipping company? Will OFAC send the Navy a charging letter if it rescues the crew without an OFAC license? Will the Navy have to block the ship once it rescues it?

Of course, these are all rhetorical questions. Even so, one must wonder how we ever expect our sanctions to deter Iran’s nuclear ambitions if we let our Navy rescue their ships every time they get in a tight spot. A few unrescued Somali hijackings and I’m sure Iran would just throw in the towel and turn their nuclear facilities over to us.

Take a gander at this headline of a company press release today:

WWA Group Receives Cautionary Letter from Office of Foreign Assets Control

Yes, that’s right, the WWA Group, a global heavy equipment auctioneer, is trumpeting to the world that it received a “cautionary letter” from OFAC. You’d think that they had received a billion dollar government contract from the Department of Defense but, no, the cause for high fives and a happy dance is a “cautionary letter.” Either WWA Groups thinks it just dodged a bullet (or, perhaps, a thermonuclear device) or it was an extraordinarily slow news day in the WWA Group cubicles in Austin.

Maybe they did dodge a bullet. A statement in the company’s 2007 annual report reveals more about the nature of the company’s brouhaha with OFAC:

The U.S State Department and the U.S. Treasury Department of Foreign Assets Control (“OFAC”) have identified Iran, Sudan and Syria as state sponsors of terrorism, and forbid the sale of goods or services by U.S. persons or companies to these countries or to agents of the respective governments of these countries.

On April 27, 2007 WWA Group received a “cease and desist” order from OFAC proscribing the sale of equipment or services, or facilitating the sale of equipment or services to persons with registered addresses in Iran, Syria or Sudan. WWA Group has never sold equipment at auction or delivered equipment to countries or to agents of the respective governments of these countries which OFAC has identified as state sponsors of terrorism However, we have in the past sold equipment to private individuals or companies resident in Iran, Sudan or Syria who may have, on their own accord, exported such purchased equipment to their countries of residence.

If WWA Group got just a cautionary letter in such a circumstance, perhaps they do have the right to break out the champagne and alert the press. Because frankly the defense that they sold stuff to Iranians but were shocked, shocked to learn that the equipment wound up in Iran was, frankly, a flea-bitten dog of an argument. Now whether OFAC is happy that WWA Group is telling the whole world it got a pass in this case is a different matter.

[h/t to Michael Mellen, who is in the office next to mine, for sighting this press release.]

The White House issued an executive order today blocking all property of the Iranian government and all Iranian financial institutions. Prior to this action, the Iranian Transaction Regulations (“ITR”) required U.S. persons to reject transactions with these parties rather than to block them.

Simultaneously with the executive order, the Office of Foreign Assets Control issued two new general licenses — cleverly named General License A and General License B — that would nevertheless permit certain transactions involving the newly blocked parties. It also updated the FAQs on the OFAC website to provide further explanations of the effect of the executive order and the two new general licenses.

The first fear that you might have is that the blocking of the Government of Iran and all Iranian financial institutions might effectively end certain transactions authorized under the ITR, say, for example, the payment of fees in connection with the registration of trademarks in Iran permitted under section 560.509 of the ITR. General License A was issued to take care of that. It permits activities already authorized under specific licenses or general licenses issued under the ITR. “General license” in this context doesn’t just refer to documents titled “General License” like this General License A but also refers to activities specifically authorized by the regulations itself, like the previously mentioned authorization of certain activities relating to trademarks in Iran. General License A specifically excludes from its scope transactions relating to closing or liquidating Iranian accounts otherwise authorized by section 560.517.

General B permits non-commercial personal remittances as long as they are not made through Iranian banks or other entities that were previously blocked, such as Bank Saderat or Bank Melli, not including the Iranian financial institutions that were blocked by this latest executive order.