Archive for the ‘Sanctions’ Category


Oct

22

Iran’s Newest Diplomacy Tool with the West: PowerPoint


Posted by at 11:51 pm on October 22, 2013
Category: Economic SanctionsIran SanctionsSanctions

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 Iran’s nuclear activities. Putting aside the permissibility under U.S. law of how Mr. Zarif obtained PowerPoint, the bigger story is that Iran’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 Iran’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 Iran’s current pains from sanctions 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 any lakeside strolls, which can be especially cold when alone in Geneva this time of year.

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Copyright © 2013 Clif Burns. All Rights Reserved.
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Sep

25

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


Posted by at 9:30 pm on September 25, 2013
Category: Economic SanctionsSanctionsSudan

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 Monday’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 he’s been accused.” Harf continued, “Clearly, we have a visa application right now and would condemn any potential travel by him, but I just don’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 policy’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 Bashir’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 Bashir’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 Bashir’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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Copyright © 2013 Clif Burns. All Rights Reserved.
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Sep

5

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


Posted by at 10:59 pm on September 5, 2013
Category: Criminal PenaltiesEconomic SanctionsICEIran SanctionsSanctions

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. Campbell’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. sanctions’ 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 persons’ 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 sanctions’ purpose or the laws themselves.

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Copyright © 2013 Clif Burns. All Rights Reserved.
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May

29

The Curious Case of Elaf Islamic Bank and the Part 561 List


Posted by at 5:08 pm on May 29, 2013
Category: Economic SanctionsIran SanctionsOFACSanctions

Elaf Islamic Bank via http://www.al-sharq.com/ArticleDetails.aspx?AID=269169&CatID=108&Title=%D8%A3%D9%85%D8%B1%D9%8A%D9%83%D8%A7%20%D8%AA%D8%B1%D9%81%D8%B9%20%D8%A7%D9%84%D8%AD%D8%B8%D8%B1%20%D8%B9%D9%86%20%D8%A8%D9%86%D9%83 [Fair Use]

The Office of Foreign Assets Control (“OFAC”) recently announced that it removed Iraq’s Elaf Islamic Bank from its Part 561 List. Elaf became noteworthy last July when it and China’s Bank of Kunlun became the first two foreign financial institutions named to the 561 List.  U.S. financial institutions are prohibited from opening or maintaining a correspondent account or a payable-through account for banks on the 561 List.

As we reported at that time, OFAC provided no details for the reasons of either bank’s designation. In the case of Elaf, however, we have referred to a 2012 New York Times article reporting that the Obama Administration has said that Elaf facilitated transactions worth millions of dollars with sanctioned Iranian banks and has objected to the Central Bank of Iraq’s allowing Elaf to continue to attend its U.S. dollar currency auctions.

OFAC now says that Elaf has offered its mea culpa, frozen the accounts it holds for the Export Development Bank of Iran (“EDBI”) and begun “reducing its overall exposure to the Iranian financial sector.” Quite an about-face from a foreign entity that reportedly had denied any wrongdoing and seemed not to be concerned with U.S. sanctions against it.

One might ask how this development squares with Congress continuing to legislate further sanctions against foreign banks for dealings with Iran, as we reported last week. One answer may be that Congress continues its chest thumping and OFAC does its best to show that these sanctions have some bite behind the bark.  This is a hard case to make when the Part 561 List was only two and is now one.

If the goal, however, is to deter non-U.S. banks from financing the Iranian government and its apparatus, Kunlun and Elaf seem to be examples of the low-hanging fruit of the global financial community. If the United States goes after bigger banks alone, it would, of course, run the risk of jeopardizing cooperation with others, most notably the European Union, on how to advance international sanctions against Iran. OFAC appears cognizant to that point when referring to EDBI as “U.S. and EU-designated.” If sanctions are extraterritorial in nature, it helps to have friends outside the territory to support you.

In any event, it is hard to assess whether the settlement with Elaf or the Part 561 sanctions in general will be effective as part of future sanctions enforcement. The Elaf development appears to be a victory on paper as a non-U.S. person agreed to terms with the U.S. government over its dealings with Iran apparently occurring exclusively outside the United States. One can only wonder about how the United States will monitor Elaf’s frozen accounts or any of its future dealings with Iranian banks.

For now, at least, the Part 561 List just became a lot a lonelier for Kunlun, and it is a bit easier for everyone to comply with a List of one.

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Copyright © 2013 Clif Burns. All Rights Reserved.
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May

16

Palestine: A Reminder of the OFAC Regulatory Labyrinth


Posted by at 1:36 pm on May 16, 2013
Category: Economic SanctionsOFACSanctionsSDN List

SUPARCO HQ http://www.suparco.gov.pk/assets/images/hq.jpg [Fair Use]

OFAC this week issued a general license redefining the term “Palestinian Authority” as that term is used in three sets of U.S. sanctions regulations relating to terrorism. The change was only to add a phrase to account for Prime Minister Salam Fayyad’s resignation. You may be asking yourself how we got to the point where OFAC issues licenses to redefine a regulatory term because of the resignation of a foreign political leader. The answer is, not surprisingly, not so simple.

The Palestinian Authority (PA) is not, and never has been, on the SDN List. But back in 2006, OFAC announced, by virtue of the Hamas victory in the PA legislative elections, it determined that Hamas “has a property interest in the transactions of” the PA and, therefore, “U.S. persons are prohibited from engaging in transactions with” the PA. The strained logic that an entity has a property interest in the transactions of a government because individuals affiliated with the entity won a plurality of a legislative election vote was implemented into the terrorism regulations as interpretive provisions, which still exist. This was a harbinger for things to come.

In 2007, as a result of Prime Minister Fayyad’s appointment, OFAC issued a general license authorizing U.S. persons to engage in all transactions with the PA that were otherwise prohibited by defining the PA to be the government of President Abbas and Prime Minister Fayyad. OFAC could have, instead, at that point explained the situation and removed the interpretive provisions from the terrorism regulations. It did not, and we commented here on the oddity of this situation over five years ago. The new general license this week perpetuates the situation further. Now the regulations include the interpretive provisions, the 2007 general license and the new general license clarifying the other general license.

It should not be this complicated. If OFAC’s goal is to hedge its bets that the PA may at any time fall back under control of Hamas, which the Gaza Strip effectively has been since 2007, there are more direct ways to make the PA subject to sanctions that are easier for U.S. persons to follow and understand. The most obvious candidate, if the United States believed there was a Hamas-related terrorism threat with the PA, would be adding the PA to the SDN List or some form of direct sanctions. If not direct, then an interpretive provision is second-best, but one that provides a more realistic justification than the current “property interest” logic. Of course, a new interpretive provision would put the onus on OFAC to explain further notions of ownership and control that have thus far not received enough attention.

Until then, we will wait for the next general license when the new prime minister is determined.

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Copyright © 2013 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)