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Nov

19

What Happens in Panama Stays in Panama (including 200,000 bags of brown sugar)

Posted by George Murphy at 7:08 pm on November 19, 2013

By jonprc (Flickr: north korean ship) [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3ANorth_korean_ship.jpg

We reported last July on Panamaâ€™s seizure of the North Korean vessel Chong Chon Gang sailing from Cuba to North Korea and carrying, among other things,Â disassembled Soviet-era MIG jets and missiles hidden in 200,000 bags of brown sugar. Cuba claimed it was sending these items to North Korea “for repair.” As was reported at the time, the North Korean crew tried to fend off Panamanian boarders with sticks while the vesselâ€™s captain initially claimed to have a heart attack and subsequently attempted suicide.Â The entire ordeal resulted in the rare Cuba-Panama-North Korea diplomatic tiff.Â While we explainedÂ in JulyÂ the UN sanctions against North Korea that were implicated, recent developments also provide telling aspects of U.S. sanctions policy against Cuba.

The United States has remained notablyÂ close-lipped and littleÂ has developed in almost four months since the seizure untilÂ this last week.Â On Wednesday, the Panamanian foreign minister was in Washington and was thanked by Secretary Kerry for Panamaâ€™s “very important interdiction of a North Korean ship with illicit cargo.”Â According to Panamanian media, the Panamanian foreign minister announced on Friday that Panama has granted visas to a North Korean delegation to come to Panama this week to claim the Chong Chon Gang and most of its crew.Â Â The captain, two senior officers, the disassembled weaponry and the brown sugar will not be released.Â Finally, Vice President Biden arrived yesterday in Panama to tour expansion sites of the Canal.

The upshot of the entire incident is that the United States got the best promotion of sanctions against Cuba it could have asked for.Â Panama was the one who exposed Cuba engaging in concealed international arms trafficking with North Korea.Â The United States, as a result, was not thrust into a position to defend an embargo unsupported by most ofÂ its allies, but rather could let Cuba be scolded by another Latin American country.

The United States, of course, most likely played critical behind-the-scenes intelligence and direction related to the seizure, and the recent diplomatic visits between the two countriesÂ are reminders that Panama relies heavily on U.S. support and, therefore,Â would beÂ willing to comply with the occasional Soviet-era arms seizure at the behest of the United States.Â Perhaps not coincidentally, the North Korean crew have been detained at Fort Sherman, a former U.S. military base on the Atlantic side of the Canal.

While Iran takes current front page news on U.S. sanctions policy, the activities onboard the Chong Chon Gang is a singular example of why the United States is not inclined to easeÂ sanctions meaningfullyÂ against Cuba soonÂ and will use this episode as support that sanctions should remain as is.

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Oct

22

Iranâ€™s Newest Diplomacy Tool with the West: PowerPoint

Posted by George Murphy at 11:51 pm on October 22, 2013

Category: Economic Sanctions • Iran Sanctions • Sanctions

By Max Talbot-Minkin (Flickr: Iran's Ambassador to the UN) [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AMohammad_Javad_Zarif.jpg

ABOVE: Mohammad Javad Zarif

According to press reports last week, Iranian Foreign Minister Mohammad Javad Zarif used a Microsoft PowerPoint presentation last week in Geneva to explain to U.S. and EU diplomats what Iran may do to address their concerns with Iranâ€™s nuclear activities. Putting aside the permissibility under U.S. law of how Mr. Zarif obtained PowerPoint, the bigger story is that Iranâ€™s amicable overtures may be working. The New York Times reported on Friday that the Obama Administration is considering a plan that would unfreeze some portion of blocked Iranian assets in exchange for Iranian government commitments with respect to its nuclear program.

While even such a proposed plan is significant given U.S. foreign relations with Iran over the past few decades, there may be some obstacles to loosening sanctions on Iran. Members of Congress quickly responded to news of the Geneva talks with proposals for tighter sanctions on Iran

The United States is not, however, the only one on Iranâ€™s dance card. How the EU responds, for example, to actions by a new Iranian government is a critical component to how effective U.S. sanctions are. Although some U.S. politicians would like to believe Iranâ€™s current pains from sanctionsÂ are felt exclusively because of increased U.S. sanctions, the success of sanctions is not properly evaluated without considering the increase of other sanctions, principally those of the EU and Switzerland, within the last few years.

Using PowerPoint should not be underestimated as a calculated gesture by Iran even if it may have required a U.S. export license. Gestures are important aspects of diplomacy and can lead to significant developments in foreign relations. Just ask Reagan and Gorbachev about their walk along Lake Geneva almost thirty years ago. Congress and the Obama Administration need to find some common ground before talks with Iran resume in Geneva next month in order for the United States to take part in meaningful discussions. If not, the United States may not be part of anyÂ lakeside strolls, which can be especially coldÂ when alone in Geneva this time of year.

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Oct

7

An Iranian Skyscraper in NYC Shows a Juicy Side of Sanctions Enforcement

Posted by George Murphy at 5:08 pm on October 7, 2013

Category: Criminal Penalties • Economic Sanctions • Iran Sanctions • OFAC

Source http://650Fifth.com [Fair Use]

In an 82-page opinion issued last month, U.S. District Judge Katherine Forrest granted forfeiture of 650 Fifth Avenue, a 36-story building in midtown Manhattan which houses, among other posh tenants, the flagship store for Juicy Couture. The impending problems for 650 Fifth started when the former Iranian Shah Pahlavi formed a U.S. non-profit, which borrowed $42 million from Bank Melli in 1975 to retire a loan on the property at 650 Fifth and construct the building itself. (Bank Melli is wholly owned and controlled by the Iranian government.) What followed in 1979, of course, was the Iranian Revolution and, over the next decade, the Iranian government developed an ownership structure of the property and building at 650 Fifth, which resulted in, among other things, creation of U.S. entities controlled by the Iranian government to transfer rental income from 650 Fifth to Bank Melli.

The case is without question one-of-a-kind and, as such, grabbed news headlines when forfeiture was granted. It should be noted, however, that the issue of whether 650 Fifth was ever blocked property was not brought before the court even though Bank Melliâ€™s property or interests in property in the United States were blocked beginning in 2007. Instead, the United States commenced a forfeiture action in 2008. 650 Fifth became, in effect, a blocked property via forfeiture on the grounds that, as Judge Forrest explained under U.S. forfeiture law, 650 Fifth Avenue is property that “bear[s] a substantial connection” to violations of IEEPA, namely violations of Iranian sanctionsÂ in whichÂ U.S. entities controlled by the Iranian government provided services to the Iranian government by way of the entitiesâ€™ ownership and management of 650 Fifth, including collecting rental income from the building and remitting it to the Iranian government via Bank Melli.

In the case of 650 Fifth, forfeiture is quite a costly penalty with the building itself reportedly valued between $500 and $700 million, and the opinion stating that at least $75 million had been reinvested in the building by the Iranian government. Forfeiture of the building itself makes it one of the largest U.S. sanctions penalties ever.

The upshot of this decision for other circumstances that donâ€™t include a Manhattan skyscraper owned and controlled by the Iranian government is a reminder that any violation of IEEPA-based sanctions carries with it a potentially hefty penalty in the form of forfeiture that wonâ€™t be found in OFACâ€™s regulations except their reference that sanctions violations “may also be subject to â€¦ other applicable law.” When considering what is at stake inÂ a sanctions violation, property connected to the violation has to be part of the calculus, especially in circumstances where the government pursues a criminal violation and seeks a monetary penalty that requires forfeiture of such property to meet it. In an egregious case like 650 Fifth, the building itself fit the bill.

Clif adds: It is important to understand that the defendants in the case were found by the judge to have concealed the interest of Bank Melli and to have concealed the payment of the rent collected by the U.S. owners to Bank Melli. Â This is why Juicy Couture, or the other tenants in the building, are unlikely to receive nastygrams from OFAC alleging that they violated the Iran sanctions through payment of their rent. Â Also, because Bank Melli was not the owner of the building, but was simply receiving income from the building, the building itself would not be blocked. Â Hence, forfeiture was the more viable option for the U.S. Government. Â Plus, of course, the USG now owns the building and receives the rental income. Â If it had been blocked, the current owners would still “own” the building while all rental income would sit in blocked accounts.

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Sep

25

Coming to America? What a Trip to NYC Could Mean for U.S. Sanctions on Sudan

Posted by George Murphy at 9:30 pm on September 25, 2013

Category: Economic Sanctions • Sanctions • Sudan

By U.S. Navy photo by Mass Communication Specialist 2nd Class Jesse B. Awalt/Released (DefenseImagery.mil, VIRIN 090202-N-0506A-724) [Public domain], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AOmar_al-Bashir%2C_12th_AU_Summit%2C_090202-N-0506A-724.jpg

ABOVE: Omar Al-Bashir

From news that appeared to break recently in the Sudanese press, Sudanese President Omar Hassan al-Bashir submitted a visa application to the U.S. State Department in order for him to attend UN General Assembly meetings that begin next week. When asked about the application at Mondayâ€™s State Department press briefing, Deputy Spokesperson Marie Harf said, “We condemn any potential effort by President Bashir to travel to New York, given that he stands accused of genocide, war crimes, and crimes against humanity by the International Criminal Court. We would say that before presenting himself to UN headquarters, President Bashir should present himself to the ICC in The Hague to answer for the crimes of which heâ€™s been accused.” Harf continued, “Clearly, we have a visa application right now and would condemn any potential travel by him, but I just donâ€™t have anything further than that.” While it can be expected the State Department will have a concrete position by next week, this situation, and the U.S. response, could serve as an important juncture in U.S. sanctions against Sudan.

Although Syria, Iran and North Korea have attracted most of U.S. foreign policyâ€™s attention in the past year, Sudan remains among the few countries under a comprehensive U.S. trade embargo. Sanctions against Sudan, however, continue to allow foreign subsidiaries of U.S. companies to do business there, and the sanctions themselves do not even apply in general to what the Sudanese Sanctions Regulations refer to as “Specified Areas of Sudan.” The Areas, most of which are along the Sudan-South Sudan border, are among the richest in oil and other natural resources in the entire country.

From a U.S. sanctions perspective, Sudan is more open for U.S. business than Iran. Yet since Bashirâ€™s last trip to the United States in 2006, former Iranian president Mahmoud Ahmadinejad has attended UN meetings in New York on several occasions and even spoke at Columbia University. Although his trips were not without controversy, Ahmadinejad was still permitted to enter (and leave) the United States. Reactions from the State Department and Ambassador Samantha Power about Bashirâ€™s visa request point out a difference that Bashir has a warrant issued for his arrest by the ICC, an organization incidentally to which neither Sudan nor the United States are parties. In short, Bashir is one of the most condemned sitting foreign leaders by the United States and most of the world. His visa request, therefore, invites comparison to those prior ones of Ahmadinejad and other leaders of sanctioned countries.

Whether Bashir, his regime and, by extension, Sudan should be subject to stronger sanctions like those against Iran is a debate for U.S. foreign policymakers that is not treated as a political priority at the moment. What is significant about Bashirâ€™s visa request is that Bashir himself may be forcing the issue on the United States, notwithstanding the widespread violence that has continued in Sudan to the present. Issuing or denying a visa both carry significant foreign policy consequences and may lead to a closer examination as to what current U.S. sanctions and export control objectives are with respect to Sudan.

Clif adds: It should also be noted that a denial of the visa for Al-Bashir would be a violation of Article IV of the UN Headquarters Agreement, pursuant to which the United States committed not to impose any “impediments to travel” by “representatives of Members” to UN Headquarters “irrespective of the relations existing between” the United States and the country involved.

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Sep

5

Let Them Eat (Yellow)cake: The Effect of Stretching U.S. Sanctions Too Thin

Posted by George Murphy at 10:59 pm on September 5, 2013

Category: Criminal Penalties • Economic Sanctions • ICE • Iran Sanctions • Sanctions

Yellowcake Uranium source:http://commons.wikimedia.org/wiki/File:Uranium_conversion_1.jpg [Public Domain] On August 22nd, Patrick Campbell of Sierra Leone was arrested by ICE agents at JFK Airport and charged with violating the Iranian Transactions Regulations. Campbellâ€™s arrest made global headlines because he concealed raw uranium inside shoes in his luggage. According to an affidavit attached to the criminal complaint against Campbell, he had communicated for over a year prior to his arrest with an undercover ICE agent about selling Uranium 308 (or yellowcake) from Sierra Leone to Iran. In 2013, apparently without any assistance from ICE, Campbell was able to obtain on his own a U.S. travel visa in order to meet with the agent in the United States about the sale of uranium. He was arrested after clearing U.S. Customs.

It would appear that Campbell could be charged with any number of crimes under U.S. law because of his possession of uranium and, as the AP reported last week, his travelling on a fake passport. The only offense alleged in the criminal complaint, however, is “[b]rokering the supply of goods which the defendant knew were destined and intended for supply to Iran.” The affidavit alleges that Campbell impermissibly furthered the brokering by “flying into JFK” to finalize the sale and “bringing with him a sample of Uranium [and] a contract for the sale.”

Prosecuting Campbell for violating U.S. sanctions is a case of compelling facts making shaky law. It does not appear that Campbell met, spoke or even texted with the undercover ICE agent once he entered the United States. Had he done so, a federal prosecutor would be in a much better position to show Campbell attempted to “act as broker” in the United States as required under the Regulations.

U.S. sanctionsâ€™ severe penalties are obviously enticing for law enforcement to use wherever a case could be made. But what if a foreign person is attempting to fly out of the United States to conduct business relating to Iran and has on his laptop contract documents evidencing such business? Under the logic of the Campbell complaint, the foreign person could be arrested for his attempt to leave the United States in order to conduct eventual business relating to Iran. While prosecution under such circumstances alone is unlikely, it would not seem so unlikely after the Campbell case for the government to prosecute someone under such circumstances if the foreign person faced other charges and sanctions violations carried the largest penalty.

The United States has been recently expanding its reach over foreign personsâ€™ dealings with Iran, most notably foreign subsidiaries of U.S. parent companies. As the stretch of sanctions includes more foreign individuals and their subsequent imprisonment, the United States may find itself retreating from expanding prosecution after a successful defense or even international criticism that U.S. sanctions as so applied are too attenuated for a reasonable interpretation of the sanctionsâ€™ purpose or the laws themselves.

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