U.S. sanctions against Iran are the toughest yet, and are rippling out to affect even U.S. companies that avoid Iran. Although the U.S. has imposed sanctions since 1979, the restrictions imposed this month are extra-territorial, affecting U.S. companies and their foreign subsidiaries. American organizations and their foreign subsidiaries, therefore, are strongly advised to analyze their supply chains from cradle to grave and to conduct detailed risk assessments.

With implementation this month of the “Iran Threat Reduction and Syria Human Rights Act of 2012,” multinational companies are now liable “for Iran-related sanction violations committed by their foreign subsidiaries – including those incorporated as separate legal entities outside U.S. jurisdiction”, according to attorneys Gregory Husisian , partner, and Christopher M. Swift, associate, at Foley & Lardner, LLP.

The increased liability became effective March 8, and requires companies to disclose their subsidiaries’ Iran-related dealing to the Securities and Exchange Commission. Previously, foreign subsidiaries were permitted to interact with sanctioned countries provided there was absolutely no involvement or oversight of U.S. citizens or personnel, and no use of the U.S. financial system. Special licenses are available for companies that were unable to completely halt any Iranian involvement by their subsidiaries by the deadline.

These more extensive sanctions are disruptive to multinational corporations that conduct business in the Middle East, because of the fluidity of trade in the region. Therefore, companies throughout the world that do business with the U.S. must also evaluate their supply chains in terms of their direct and indirect connections to Iran.

The sanctions are particularly interesting because Iraq’s oil minister recently agreed to build a gas pipeline with Iran and Syria. It is expected to begin constructing the first section in 2014, to transport gas from Iran to Iraq. As State Department spokesperson Victoria Nuland said Friday, “(We are concerned) about any country increasing its energy dependence on Iran. That’s the wrong direction to go...because we are seeking to increase the pressure on the Iranian regime, but also because they’re an unreliable partner.”

A wide range of penalties may be imposed against American citizens or companies violating the sanction. They include fines of up to $10 million and 30 years in prison and/or seizure of assets. Companies and individuals outside the U.S. may be faced with travel bans, exclusion from the U.S. financial system and/or freezing the assets of foreign officers and directors.