Do Newly Proposed Iran Sanctions Target Iraq?
Posted by Clif Burns at 8:53 pm on May 22, 2013
Category: Economic Sanctions • Iran Sanctions • OFAC
ABOVE: Central Bank of Iraq
Another day on the Hill, another round of sanctions against Iran. As if there were nothing else for these politicians to do. Academic question: how many could actually point out Iran on an unlabeled map? Just a thought.
The newly proposed sanctions are in H.R. 850, imaginatively titled the Nuclear Iran Prevention Act of 2013 which today was voted out of the House Foreign Affairs Committee. The bill, with the euphonic acronym NIPA, is likely to pass both the House and the Senate, there being nothing else, apparently, on the legislative agenda.
One of the major features of the proposed legislation is to extend the secondary sanctions on foreigners who deal with Iran. Currently those secondary sanctions basically cover petrochemical transactions. NIPA would give the President the authority to impose sanctions on foreign individuals who engage in a “significant” transaction with the Central Bank of Iran or other designated Iranian financial institutions for the purchase of goods or services by or from a person in Iran.
But the most interesting provision was one that was slipped into today during the committee markup. In an Amendment in the Form of a Substitution a new section 205 was added That section prohibits a foreign financial institution from opening a correspondent account at a U.S. financial institution if the foreign bank facilitated a “significant” transaction with the Central Bank of Iran or any other designated Iranian bank in a currency other than that of the country in which the foreign bank is operating.
The target of these sanctions is unstated but seems clear. The United States has objected to the Central Bank of Iraq permitting Elaf Islamic Bank to participate in its weekly hard currency dollar auctions even though Elaf had been designated under CISADA for supplying U.S. dollars to Iran. Perhaps implicitly acknowledging the political and diplomatic repercussions of sanctioning the Central Bank of Iraq, the proposed bill permits the President to grant waivers. This gives Congress a version of plausible deniability and the ability to blame the Executive Branch if these new sanctions go awry.
UMass Lowell Fined For Entity List Violations
Posted by Clif Burns at 4:54 pm on May 20, 2013
Category: BIS • Entity List
Back in April the University of Massachusetts at Lowell (the “University”) agreed to pay to the Bureau of Industry and Security (“BIS”) a suspended penalty of $100,000 in connection with its unlicensed export of an atmospheric sensing device, antennae and cables valued at slightly more than $200,000 to Pakistan’s Space and Upper Atmosphere Research Commission (“SUPARCO”). The fine will be waived if the university does not commit any more export violations during a probationary period of two years.
The items at issue were all classified as EAR99. The violation occurred because SUPARCO is on BIS’s Entity List. The licensing policy for SUPARCO has a presumption of approval for EAR99 items, so had the university applied for a license for these exports, it almost certainly would have been granted.
The atmospheric sensing device is likely the basis for this research paper titled “Study of maximum electron density NmF2 at Karachi and Islamabad during solar minimum (1996) and solar maximum (2000) and its comparison with IRI” and co-authored by employees of SUPARCO and a professor at the University. This paper raises an interesting deemed export issue since transfer of technology, even EAR99 technology, would be a violation of the EAR unless the transferred technology was “publicly available” or if it qualifies as “fundamental research.” It is not always easy to determine whether discussions with foreign persons on the Entity List fall within these exceptions, so cooperative projects with such persons by a university will always entail more than a modicum of risk.
Palestine: A Reminder of the OFAC Regulatory Labyrinth
Posted by George Murphy at 1:36 pm on May 16, 2013
Category: Economic Sanctions • OFAC • Sanctions • SDN List
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.
On the Internet, Nobody Knows You’re a Syrian
Posted by Clif Burns at 7:59 pm on May 14, 2013
Category: OFAC • Syria
According to this report, Network Solutions in April seized over 700 domain names relating to Syria. Among these were sites used by the Syrian Electronic Army, a pro-Assad hacker group that has achieved some notoriety for taking over the AP’s Twitter account and pushing out a false tweet about alleged explosions at the White House. They also hacked The Onion’s Twitter account which led to this memorable story and headline on the satire site: “Syrian Electronic Army Has A Little Fun Before Inevitable Upcoming Death At Hands of Rebels.” All of the domains now show the owner as “OFAC Holding.” A complete list can be found here.
Frequent readers of this blog will no doubt be aware that OFAC has issued a series of general licenses permitting provision in sanctioned countries of services incident to personal communications over the Internet. However, General License No. 5 for Syria explicitly excludes from the General License “domain name registration services.”
Of course, shutting down the sites now does not negate the violation that occurred in providing these web hosting services to Syria in the first place. And a large part of the problem here is that domain services are normally provided without any human involvement. A registrant fills out a web form, hands over a credit card number to pay for the annual fee, and a computer program takes care of the rest. Add to that, as the famous New Yorker cartoon caption suggests, “on the Internet, nobody knows you’re a dog.” It is simply not clear how Network Solutions could screen out every registration from an embargoed country. Instead, it seems the best an Internet registrar can do is shut down the domain names once it learns of the problem.
The big questions, then, are this: does Network Solutions have a voluntary disclosure pending at OFAC on this and what will OFAC’s response be?
Re: Burma (or is it Myanmar?): Why We Are All Lost in Translation
Posted by George Murphy at 10:33 am on May 12, 2013
Category: Burma Sanctions • Economic Sanctions • OFAC • Sanctions
The White House last week issued a notice continuing the national emergency with respect to Burma. The notice itself is an annual rite of passage for all U.S. sanctions programs under IEEPA, including those relating to Burma. What is surprising this time around is that nothing has changed from past notices. The current notice still refers to the “unusual and extraordinary threat to the national security and foreign policy of the United States” by “the actions and policies of the Government of Burma.”
This is where the head-scratching should begin. A lot has happened in the past year or so that one would think warrants an updated (and apt) notice. In late 2011, Secretary of State Clinton made the first State visit to Burma since 1955. Last May, the President nominated the first U.S. ambassador to the country in over two decades. Just this past November, the President became the first sitting president to visit Burma. Most important to U.S. businesses was OFAC’s significant relaxation last year of countrywide sanctions prohibiting the export of financial services to Burma, new investments in Burma and imports from Burma.
All of these events are major developments in U.S.-Burmese relations. So why would the White House use a boilerplate notice when it could have taken the opportunity to depict an accurate picture of what U.S. foreign policy currently is? The notice is, of course, a legal requirement and the Burmese government has not shed all doubt over its commitment to democracy and human rights. But describing the situation as an “unusual and extraordinary threat” to the United States without any further context? In light of all this Administration has accomplished with Burma, it seems odd and misleading to use an off-the-shelf response in this instance.
One consequence of this on the U.S. business community will likely be time and resources many spend confirming that the sanctions that have been lifted against Burma have now not been repealed. Such a sanity check would be reasonable given the notice and especially for those who have begun exploring business with Burma.
The Administration should have a complete and consistent script of what U.S. foreign policy is with respect to Burma so it, and the rest of us, can all be on the same page.