Archive for the ‘Russia Sanctions’ Category

Aug

30

To Russia With Love: State Imposes Limited Sanctions for Nerve Gas Attacks

Posted by at 3:56 pm on August 30, 2018
Category: Russia Sanctions • State Department

Novichok Vodka via https://www.rt.com/business/426529-novichok-brand-russia-business/ [Fair Use]I wrote earlier this month on a State Department press release finding that Russia had used chemical weapons in the attacks on Sergei and Yulia Skirpal in the United Kingdom and that, accordingly, sanctions would be imposed on Russia pursuant to the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (the “CBW Act”). That act requires the imposition of five sanctions, although the President has the authority to waive any or all of the sanctions based on national security considerations. On Monday, the State Department published a notice in the Federal Register imposing those sanctions, effective immediately. As expected, the application of certain of the sanctions was waived completely or partially, and the ones given full effect are unlikely to be of much concern to Russia.   As a result, it seems unlikely that Russia will find any reason to curtail its use of nerve agents around the world.

The first sanction required by the CBW Act is the termination of all foreign assistance to Russia under the Foreign Assistance Act of 1961. This sanctions was waived on national security grounds. It’s not clear why State bothered to use the national security waiver here, since Russia last received foreign assistance under the act in 2014 and none was scheduled to be provided in 2019 (or likely any time after that.)

The second required sanction is the termination of arms sales to Russia. State waived this sanction except “with respect to the issuance of licenses in support of government space cooperation and commercial space launches.” You’ve got to get supplies to the International Space Station somehow or other.  And, of course, DDTC stopped granting license to export most items on the USML back in 2014.

The notice imposes the third required sanction completely and without waiver. It terminates all “foreign military financing for Russia under the Arms Export Control Act.” This can hardly be an earth-shaking development. When was the last time the US financed arms sales to Russia? World War II?

The fourth sanction — denial to Russia of “any credit, credit guarantees, or other financial assistance by any department, agency, or instrumentality of the United States Government, including the Export-Import Bank of the United States” — is also imposed without any waiver. Again, this is a sanction without any forseeable impact given the likelihood that little, if any, such federal financial assistance is being provided to Russia.  The last transactions involving Russia financed by the EXIM Bank were in 2014.

The fifth required sanction under the CBW Act is the prohibition of “the export to Russia of any goods or technology” controlled on the Commerce Control List for NS reasons. The State Department notice here has a number of waivers that arguably are not very different from waiving the prohibition in its entirety.

Not surprisingly, the waiver includes any exports under license exception ENC. Remember that all encryption items, other than mass market items, are controlled for NS reasons, so this prohibition would have prohibited, say, exporting network equipment to Russia. How could we spy on them if we don’t sell them routers?  Which is why, of course, Russia limits imports from the United States of items, such as routers, with encryption functionality.  Other exceptions that survive the prohibition are GOV, RPL, BAG, TMP, TSU, APR, CIV, and AVS.

Beyond the waivers for exports under the aforementioned license exports, there are waivers for exports to wholly-owned U.S. subsidiaries, to commercial (i.e. non-governmental) enterprises, and to Russian nationals in the United States. Because Russia has always been subject to NS controls, these waived exports will still require, as they always have, licenses.

One final observation should be made on the meaning of “to Russia” in these sanctions. As noted the sanctions prohibit the provision of federal financial assistance “to Russia.” The reference in the fifth sanction to waivers for deemed exports to Russian nationals in the United States means that “to Russia”  means to anyone in Russia and to any Russian outside Russia.  So, if that a Russian granted asylum in the United States is one of the victims of a natural disaster, FEMA could not provide any financial relief to that Russian.  That’ll teach Russia!

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Aug

8

Sanctions in Name Only Imposed on Russia for Nerve Gas Attack

Posted by at 8:24 pm on August 8, 2018
Category: BIS • Russia Sanctions

Novichok Vodka via https://www.rt.com/business/426529-novichok-brand-russia-business/ [Fair Use]According to a State Department press release released today, the United States has made a determination that Russia used novichok, a chemical warfare agent, in an attack on British soil and, as a result, the US will impose sanctions on Russia under the Chemical and Biological Weapons Control and Warfare Elimination Act of 1991 (the “CBWC Act”), 22 U.S.C. § 5601 et seq.  The text of these sanctions was not released.  Instead, the text will be in a Federal Register notice expected to be published on or around August 22.  The sanctions will be effective as of the date of the publication of that notice.

Because these sanctions are being imposed under the CBWC Act, we can already get a good idea of what these sanctions will be.   The Act contemplates sanctions being imposed in two stages.  The first stage, described in section 5605(a), sets forth the following sanctions, all of which are required to be imposed upon the offending country:

  • Termination of all foreign assistance
  • Termination of all arms sales
  • Termination of all foreign military financing
  • Denial of U.S. government credit or assistance
  • Termination of all exports of items controlled on the Commerce Control List for NS reasons

To be honest, none of these sanctions will have any significant impact on Russia.  Arms sales to Russia have been prohibited for some time now.   The country chart already has Russia controlled for both columns of NS controls.  Of course, you could say that the new sanctions will mean that NS items will not be considered for licenses under any circumstances.  But I don’t think licenses to export NS items to Russia are being readily granted now.

The second stage, if it happens, would take place on November 8 of this year unless the President determines that Russia is no longer using chemical or biological weapons.  If that determination is not made, the President is required to impose three sanctions from a set of six possible sanctions.  Those six possible sanctions are:

  • Opposing multilateral bank financial assistance to Russia
  • Prohibition of U.S. bank loans to the government of Russia
  • Prohibition of all exports of all U.S. goods and technology to Russia
  • Downgrading or suspending diplomatic relations with Russia
  • Termination of all service to and from the United States by Russian airlines

Whether the President will make the findings necessary to impose this second stage and which three of the six will be imposed is anyone’s guess, although I suspect that most people likely have a pretty good guess.   The upcoming Federal Register notice will probably not even address the second stage sanctions.   If the United States does in fact impose the three second stage sanctions, the best guess is probably that he will impose the least restrictive of those, i.e., opposing multilateral bank loans, prohibiting U.S. bank loans, and expelling a few more diplomats.

 

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Jul

25

Tinker, Tailor, Dinner Planner, Spy

Posted by at 3:44 pm on July 25, 2018
Category: Criminal Penalties • FARA • OFAC • Russia Designations • Russia Sanctions

Vladimir Putin via http://en.kremlin.ru/events/president/news/27394 [Fair Use]Prosecutions for violations of the Foreign Agents Registration Act (“FARA”) might kindly be thought of as press ops for prosecutors and catnip for reporters.  And the recent indictment of Maria Butina certainly fits that description:  Spies!  Sex!  Twitter exchanges!  Red Sparrow!  A duped “boyfriend”!!!  Sell me the movie rights now.

On the other hand, economic sanctions prosecutions are boring.  Specially Designated Nationals . . . yawn.  The International Emergency Economic Powers Act . . . big yawn.

But the, ahem, sex appeal of a FARA case as opposed to an IEEPA case may well be a possible explanation for why Butina was indicted under FARA rather than under IEEPA for having performed services in the United States on behalf of a Russian SDN.  It seems to me that the FARA case has some significant difficulties whereas the IEEPA case approaches being a slam dunk.

To simplify matters somewhat, to prosecute Butina for failing to register as a foreign agent, the government needs to prove that she engaged in political activities on behalf of a foreign person in the United States.   The Act defines “political activities” as

any activity that the person engaging in believes will, or that the person intends to, in any way influence any agency or official of the Government of the United States or any section of the public within the United States with reference to formulating, adopting, or changing the domestic or foreign policies of the United States or with reference to the political or public interests, policies, or relations of a government of a foreign country or a foreign political party.

But the affidavit in support of the criminal complaint against Butina, which provides the most detailed statement of the government’s case, summarizes Butina’s activities in the United States as follows:

BUTINA’s efforts in the United States to promote the political interests of the Russian Federation were diverse and multifaceted, including BUTINA’s efforts to organize a series of”friendship and dialogue” dinners, some of which are believed to have taken place in the District of Columbia, as well as BUTINA’s attendance at two National Prayer Breakfasts in the District of Columbia.

It certainly seems to me that going to two prayer breakfasts and arranging dinners probably don’t constitute “political activities.”  But perhaps the government thinks that if it can put a Russian in the dock and yell “Spy!” enough times, the jury won’t be bothered with such legal niceties as the proper outlines of “political activities” under the law.

On the other hand, the criminal complaint provides detailed information on Butina’s interactions with her handler in Moscow, who was not named, but is almost certainly Alexander Torshin.  Torshin was placed on OFAC’s SDN List on April 6, 2018.  To prove a violation of the Ukraine sanctions, it would only be necessary to show that Butina provided  “funds, goods, or services by, to, or for the benefit of” Torshin.  The definition of providing services is, of course, significantly broader than the definition of “political activities” in FARA.

Now although the actions in the criminal complaint pre-date Torshin’s designation in April 2018, there is no reason to believe that Butina was not continuing to act on Torshin’s behalf after his designation.   The complaint details actions by Butina in cooperation with Torshin as late February 8, 2017. Of course, there is a chance that government has no evidence after the designation or has reasons not to reveal such evidence, but I still think that a sanctions case, if there were services performed after April 6, 2018, would be a much easier case to win.

 

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Oct

28

The Dog Ate The White House’s Section 231 Guidance

Posted by at 12:48 pm on October 28, 2017
Category: OFAC • Russia Designations • Russia Sanctions • State Department

Vladimir Putin via http://en.kremlin.ru/events/president/news/27394 [Fair Use]Because Congress was not convinced that the Trump administration would respond to Russia’s various shenanigans in Ukraine and in the U.S. elections, it passed, on August 2, 2017, the Countering America’s Adversaries Through Sanctions Act (“CAATS Act”). Section 231 of the CAATS Act targets U.S. and foreign persons that engage in a “significant transaction with a person that is part of, or operates for or on behalf of, the defense or intelligence sectors of the Government of the Russian Federation.” Under that section, the President must impose at least five of the laundry list of twelve possible (and familiar) sanctions described in section 235, including denial of export privileges, asset blocking, government procurement bans, visa and travel bans and prohibition of lending to, or investment in, the sanctioned entity. That section also permits these sanctions to be imposed not just on a corporate entity but also on its principal officers.

One immediate and obvious issue is the ban on dealing with persons acting on behalf of Russian intelligence. You don’t have to be an avid fan of “The Americans” or John le Carré to know that spooks don’t ever advertise that they are spooks. Kaspersky Labs, which may or may not be acting on behalf of the FSB, vigorously denies that it has had anything whatsoever, now or in the past, with the FSB, which, of course, is to be expected and is not in and of itself convincing proof that they are just a little anti-virus company in Moscow. So section 231(d) required the President to issue, by October 1, 2017, “regulations or other guidance to specify the persons that are part of, or operate for or on behalf of, the defense and intelligence sectors of the Government of the Russian Federation.” Not surprisingly, October 1, 2017 came and went without the required guidance. Tick. Tock. Tick. Tock.

Well, yesterday, almost a month late and after a draft of the guidance was leaked to the New York Times, the State Department released a list of thirty-nine entities associated with Russian defense and intelligence. Of those, only 10 were not previously on the SDN or SSI Lists. Of the twenty-nine already on one of those lists, eight are on the SSI List.

It is not at all clear why this list and the guidance are being issued from the State Department rather than from the Department of Treasury’s Office of Foreign Assets Control which normally handles economic sanctions of this sort. The result is that Heather Nauert, who held a State Department briefing on the new guidance and admitted that she was not a “sanctions expert,” had no idea what she was talking about. Hilariously (or perhaps tragically) she says that the entities on the list are “entities that [people] can no longer do business with.” The issued guidance says the exact opposite: “The Act does not provide for sanctions in cases in which transactions are not “significant.'” Oops.

Of course, even though the prohibition is only on “significant transactions” with these entities, it is not altogether clear what constitutes a “significant transaction.” Inexplicably, there is no dollar threshold mentioned in the guidance. The most detailed statement on what is not significant is this confusing statement: if a”transaction for goods or services has purely civilian end-uses and/or civilian end-users, and does not involve entities in the intelligence sector,”  this will “weigh heavily against” a determination that it is a significant transaction.  What this says, given that the restrictions are on dealings with the intelligence and defense sectors, is that transactions in the defense sector with purely civilian end-users or civilian end-uses won’t be deemed to be significant transactions. How a transaction in the defense sector can have purely civilian end-uses and end-users is far from clear.

Finally, it is important to understand that nothing in the guidance says that this is a comprehensive list of entities in the defense and intelligence sector where significant transactions can lead to sanctions. If you have a significant transaction with an entity in the intelligence sector, even one operating under deep cover, you and your principal officers can be sanctioned. Whether this will ever happen is unclear, but U.S. and foreign companies doing business with Russian companies will be doing so at their own risk.  Whether this is the intended result or simply an unintended result of incompetence is irrelevant.

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Jul

28

Sausage Making Looks Good Compared To This Law

Posted by at 3:02 pm on July 28, 2017
Category: OFAC • Russia Sanctions

Carsten's Sausage Factory via https://commons.wikimedia.org/wiki/File:Packing_Carsten%27s_weiner_sausages_on_an_assembly_line,_Tacoma,_Washington_(4670205658).jpg [Public Domain]The Russia Sanctions Review Act of 2017, which may or may not get vetoed by the White House, has now passed both the House and the Senate as sections 215  and 216 of the euphoniously named Countering America’s Adversaries Through Sanctions Act ( or the “CATS Act”)(seriously?). Section 216 attempts to circumscribe the authority of the White House to alter sanctions on Russia without a sign-off by Congress.  I doubt anyone will be surprised to learn that the bill is a confusing mess that likely will not accomplish its purpose, unless its purpose is simply to tell voters that Congress means business, very serious business.

The legislation requires the President to file a report with Congress before he acts “to terminate” Russia sanctions, acts “to waive the application” of the sanctions against specific persons or takes “a licensing action that significantly alters United States’ foreign policy with regard to the Russian Federation.”  Depending on whether this action is intended to significantly alter U.S  foreign policy with respect to Russia, the legislation sets forth a 30- or 60-day review period by Congress — 30 days if no; 60 days if yes.   The proposed action may not take effect within the review period unless specifically authorized by a joint resolution of both house of Congress.

Alert readers (or basically anyone other than members of Congress) will immediately see the hole in this scheme — a hole big enough to fire a Nork  No-Dong missile through.  That hole is the general license, a concept which dates back at least to the general license for Cuba travel issued by the Carter administration in 1977 (i.e. seven years before Mark Zuckerberg was even born).  A “general license” with respect to Russia sanctions is definitely not a “termination” of them.   And whether a particular general license “significantly alters United States’ foreign policy” with regard to Russia, well that’s a judgment call on which reasonable people could always disagree and on which no court will ever venture an opinion.

The Federal Register notice granting the broad general license to engage in activities otherwise prohibited by Russia sanctions will simply note that in the considered opinion of OFAC the general license, which OFAC reserves the right to withdraw at any time, does not significantly alter U.S. foreign policy towards Russia.   And if Congress disagrees with that administrative determination, what is it going to do?  Arrest OFAC? Scream and holler on C-SPAN?  No, it will do what it always could have done before and without passing the CATS Act — pass a law reversing the general license.

Your tax dollars at work.

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(No republication, syndication or use permitted without my consent.)

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