Trading with Iran Under Sanctions

International trade with Iran is often described in overly simple terms. One frequently hears that “Iran is sanctioned,” followed by the assumption that international companies are therefore prohibited from trading with the country.

That conclusion is legally inaccurate and commercially misleading.

Iran is subject to extensive sanctions and restrictive measures, but there is no single worldwide legal rule called “the Iran sanctions.” The United States, European Union, United Kingdom, United Nations and other jurisdictions operate different legal regimes, with different territorial scopes, prohibited activities, designated persons, licensing mechanisms and enforcement rules. The United States itself administers the Iran programme through multiple statutes, executive orders and regulations rather than through one single prohibition.[1]

The practical question for an international company is therefore not simply “Is Iran sanctioned?” It is: Which laws apply to this particular transaction, to these particular parties, involving this particular product, payment route and supply chain?

1. There Is No Single “Iran Sanctions” Regime

The first mistake in sanctions analysis is to treat all sanctions as if they were part of one universal system. They are not.

United States. The United States maintains the broadest and most complex sanctions architecture relating to Iran. OFAC administers restrictions under the Iranian Transactions and Sanctions Regulations, Iranian Financial Sanctions Regulations, several statutes and numerous Executive Orders.[1] U.S. law also contains authorisations, exemptions and licensing mechanisms, including provisions relevant to qualifying humanitarian transactions.[2]

European Union. Following the 2025 snapback process, the EU reimposed nuclear-related restrictive measures previously suspended under the JCPOA. Separate measures relating to human rights and other grounds also remain in force.[3][4] The EU also maintains its Blocking Statute addressing specified extraterritorial measures of third countries, including certain U.S. measures concerning Iran.[5]

United Kingdom. The UK maintains a separate Iran sanctions regime, including financial, trade and transport restrictions, together with exceptions and licensing mechanisms.[6][7]

United Nations. UN measures must be distinguished from autonomous national or regional sanctions. A Security Council measure and a unilateral national restriction do not have the same legal basis, geographical operation or compliance consequences.

2. Jurisdiction Comes Before Prohibition

Before asking whether an activity is prohibited, a company should ask a more fundamental question: Why does this particular sanctions regime apply to us or to this transaction?

Relevant connecting factors may include place of incorporation, nationality or residence, location of conduct, subsidiaries and affiliates, origin of goods or technology, designated persons, ownership and control, payment architecture, banking relationships, transport and insurance arrangements, and other jurisdiction-specific connections.

A company incorporated in Türkiye, for example, should not simply assume that every prohibition imposed upon a U.S. company applies identically to it. Equally, being incorporated outside the United States does not mean U.S.-related legal exposure can automatically be ignored.

3. The Product Matters

The legal analysis may change significantly depending on whether a transaction involves ordinary consumer goods, food, pharmaceuticals, medical devices, industrial machinery, chemicals, telecommunications equipment, software, controlled technology, dual-use goods, energy-sector equipment, aviation items or military and proliferation-sensitive products.

The humanitarian sector illustrates the problem particularly well. OFAC recognises authorisations relating to qualifying agricultural commodities, medicines and medical devices, subject to detailed conditions.[2]

4. Iran Is Sanctioned — But It Is Not Economically Isolated

Sanctions have made Iran's international trade more difficult, expensive and legally complex. They have affected banking relationships, foreign investment, shipping, insurance and access to certain technologies. But Iran has not ceased trading with the world.

Trade has instead become more geographically concentrated and operationally complex. China provides the clearest example. Chinese customs data continue to record substantial bilateral goods trade, while other estimates that attempt to account for oil flows produce considerably larger figures.[8][9]

5. China: A Different Legal and Political Position

China does not accept the proposition that U.S. unilateral sanctions automatically establish legal obligations for Chinese economic operators merely because Washington has imposed them. In 2026, China's Ministry of Commerce reiterated its opposition to unilateral sanctions lacking a basis in international law or UN Security Council authorisation and criticised U.S. Iran-related sanctions imposed on Chinese companies and citizens.[10]

China, Russia and Iran had also stated jointly in Beijing in March 2025 that they opposed unilateral sanctions and called for their termination.[11]

6. Russia and the Multipolar Sanctions Environment

Russia likewise does not treat unilateral U.S. and European sanctions against Iran as universally binding legal rules. Its position, together with China's, illustrates that global sanctions compliance is increasingly multipolar.[11]

But Russian or Chinese involvement does not remove all sanctions risk. A transaction may still involve a listed entity, restricted goods, controlled technology, prohibited end use, an exposed financial institution or another relevant jurisdictional connection.

7. Türkiye, the Gulf and Regional Trade Routes

Iran's commercial relationships extend well beyond China and Russia. Türkiye occupies an important geographical position between Europe, the Caucasus, Central Asia, the Middle East and Iran, while the UAE has long served as another significant commercial and logistical interface for regional trade.

A transaction routed through Türkiye, the UAE or another third country does not cease to be subject to relevant sanctions merely because an intermediary jurisdiction has been introduced. Conversely, the fact that goods ultimately enter Iran does not itself establish that every transaction in the chain violates every foreign sanctions regime.

8. Counterparty Due Diligence: The Name on the Contract Is Not Enough

Sanctions screening should not stop with the buyer's name. A sophisticated compliance review should examine, where relevant, the customer, shareholders, beneficial owners, controllers, directors, end user, banks, intermediaries and logistics providers.

The objective is not merely to run a name through a sanctions database. It is to understand the transaction, including ownership, control, end use, intermediaries and commercially unusual features.

9. Legal Permissibility Is Not the Same as Bankability

A transaction may be legally permissible under the sanctions rules applicable to the seller and still be rejected by a commercial bank. Banks make decisions based not only on statutory prohibitions but also on internal compliance policies, correspondent relationships, dollar exposure, regulatory expectations, documentation requirements and institutional risk appetite.

10. Payment Architecture Is Part of Compliance

In sanctions-sensitive trade, payment architecture becomes part of the legal analysis. The parties should know which banks will send and receive payment, whether correspondent banks are involved, which currency will be used, whether intermediaries act for another party, and whether all payment participants have been screened.

A lawful transaction should not depend upon misleading payment descriptions, undisclosed intermediaries or concealment of the real parties. The more complicated the payment chain becomes, the more important documentation becomes.

11. Shipping, Insurance and Logistics Cannot Be an Afterthought

The commercial contract may be between seller and buyer, but the physical transaction may involve exporters, freight forwarders, carriers, vessels, ports, insurers, customs brokers, importers and end users. Each may introduce a separate compliance issue.

OFAC's maritime guidance concerning Iranian oil trade illustrates the attention regulators place on vessel ownership, flag history, ship-to-ship transfers, documentation and potentially deceptive maritime practices.[12] The broader compliance lesson is simple: know how the goods actually move.

12. Sanctions Compliance and De-Risking Are Different Concepts

Sanctions law asks whether conduct is prohibited, restricted, licensed or otherwise regulated. De-risking asks whether an institution wishes to assume the commercial or compliance burden associated with that conduct.

A bank may impose a stricter policy than the law itself. An insurer may refuse coverage. A shipping line may decline Iranian destinations. A supplier may prohibit resale to Iran contractually even where no universal statutory prohibition exists. Those decisions should not automatically be described as “the law.”

13. Exceptions and Licences Matter

Sanctions analysis should never end merely because a prohibition has been identified. The next questions are whether an exception applies, whether a general licence exists, or whether a specific licence can be obtained.

UK guidance draws a useful distinction: an exception automatically permits specified conduct when statutory conditions are met, whereas a licence provides permission for conduct that would otherwise be prohibited.[7] The U.S. system similarly uses general and specific licences and other authorisations.[1]

14. Contract Drafting Under Sanctions Risk

Depending on the transaction, contracts may need sanctions representations, continuing compliance obligations, end-use undertakings, export-control provisions, notification of ownership changes, banking arrangements, alternative lawful payment mechanisms, licensing cooperation, suspension rights, termination rights and change-in-law provisions.

15. Build the Compliance File Before the Shipment

The strongest sanctions defence is rarely a document created after a problem arises. It is the contemporaneous compliance record created before the transaction was executed.

A well-organised file may include corporate and beneficial ownership information, screening results, product classification, end-user and end-use information, licences or exceptions relied upon, legal analysis where appropriate, contracts, invoices, payment records, transport and insurance documents, customs records and internal approvals.

16. A Practical Iran Transaction Screening Framework

The Real Commercial Effect of Sanctions

The impact of sanctions on Iran should not be measured solely by asking whether international trade exists. It plainly does. The more meaningful question is how sanctions alter that trade.

They may increase transaction costs, reduce available banking channels, limit willing counterparties, increase compliance expenditure, affect insurance and shipping, discourage investment, increase contractual complexity, change settlement currencies, redirect trade geographically and increase the importance of intermediaries and regional commercial hubs.

Conclusion

Trading with Iran under sanctions requires something more sophisticated than checking whether the word “Iran” appears on a sanctions list. It requires separating jurisdictions, identifying the persons to whom their rules apply, classifying the product, understanding ownership and end use, analysing payment and logistics channels, screening counterparties and determining whether exceptions or licences are available.

China and Russia do not approach unilateral Western sanctions in the same manner as the United States, European Union or United Kingdom. China continues substantial commerce with Iran and has publicly opposed U.S. unilateral and secondary sanctions, while China and Russia have jointly opposed unilateral sanctions they regard as unlawful.[10][11]

At the same time, the continuing involvement of China, Russia, Türkiye and other trading partners does not make sanctions irrelevant. Nor does it make every Iran-related transaction lawful.