Archive for the ‘Economic Sanctions’ Category



Yes, We Have No Bananas!

Posted by at 5:33 pm on August 16, 2016
Category: Economic SanctionsOFAC

Bananas by Anthony Easton [CC-BY-SA-2.0 (], via Flickr [cropped and processed]

The problem with many economic sanctions, particularly those aimed at drug lords, is that they wind up hurting the wrong people. Consider the case of the designation of the inaccurately named John Angel Zabaneh by the Office of Foreign Assets Control (“OFAC”) as detailed in this excellent Reuters news story. OFAC put Zabaneh on the SDN List based on its belief that Zabaneh is connected with Joaquin “El Chapo” Guzman, head of Mexico’s Sinaloa drug cartel, although Zabaneh denies this.

Because drug lords do not live by drugs alone, targeted narcotics kingpins in Central America often have other, and sometimes quite significant, legitimate business interests. In this case, Zabaneh was also a banana farmer in Belize and his farms contributed a significant portion of Belize’s banana exports. It should probably come as no surprise that bananas constitute about 20 percent of all of Belize’s exports.

So when OFAC designated Zabaneh, it ultimately resulted in shutting down his banana farms when his customers became unwilling to deal with him. This resulted, according to the Reuters article, in a 13.5 percent plunge in banana exports from Belize and the loss of 900 jobs previously held by workers on the Zabaneh farms.

There is no evidence that this caused Mr. Zabaneh to exit the drug trade, if he ever was in it, or crimped his lifestyle in any fashion. The only effects, it would appear, of the OFAC sanctions was that it allowed the U.S. government to feel good about itself and caused a bunch of people in Belize, with no connection to any drug trade, to wonder where there next meal might be coming from.

Photo Credit: Bananas by Anthony Easton [CC-BY-SA-2.0 (], via Flickr [cropped and processed]. Copyright 20xx Sami Keinanen

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



A Brief Brexplanation of Brexit and Brexport

Posted by at 11:37 am on June 24, 2016
Category: BrexitEconomic SanctionsEUOFAC

Boatleave-12 by Gary Knight [CC-BY-SA-2.0 (], via Flickr [cropped]

Although Brexit is unlikely to be in effect for almost two years or more, there are some questions as to what impact Brexit might have on British export controls and economic sanctions.  Any prediction here is risky beyond my speculation that the UK will be unlikely to alienate the U.S. and other allies by significantly altering its export and sanctions regimes.

At this point, and in the wake of the vote last night, you may find it useful to understand the legal background under which Brexit will affect U.K. export controls and sanctions.   Given that all your Facebook friends have suddenly become experts on Brexit (soon to be known as Brexperts), you can now impress them as a Brexport Brexpert.

Let’s start with the Wassenaar Arrangement.  The European Union is not a party to the Wassenaar Arrangement.  Rather all member states of the E.U. (other than Cyprus) are individual members of the Wassenaar Arrangement.   Accordingly, Brexit will have absolutely no impact on Britain’s obligations under Wassenaar.   The Wassenaar Agreement is the source, via Council Regulation (EC) No 428/2009 (and associated legal amendments) of the UK Control Lists.  Although the intermediate authority for the lists will go away on Brexit, no alteration in those control lists will occur by virtue of Brexit alone.

This brings us to Council Regulation (EC) No. 428/2009, which establishes the E.U. framework for export controls. Here it is important to understand that the regulation did not create a centralized EU export control regime. Rather it left principal authority with Member States to implement their own control regimes in accord with principles set forth in the regulation. Britain’s Export Control Order of 2008 implements 428/2009 and related EU authorities. Although it will become untethered from 428/2009 on Brexit, there is no reason that it should not remain in place post-Brexit.

The situation with sanctions is somewhat more complicated and depends on the particular EU sanction. The JCPOA, which lifted many international sanctions on Iran, for example, will not be affected because the U.K. is an independent signatory to the JCPOA.  Other E.U. sanctions, such as the Russia/Ukraine sanctions, have direct legal effect in the U.K., although it is up to the member state to establish and enforce penalties. In these instances, there is no independent legal authority in the U.K. for that sanction, and its status after Brexit becomes uncertain. It is, of course, likely that Britain will not seek to alienate its allies by walking away from these sanctions, but it will have to enact domestic legislation to implement them before or after Brexit.

Photo Credit: Boatleave-12 by Gary Knight [CC-BY-SA-2.0 (], via Flickr [cropped]. Copyright 2016 Gary Knight

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



Save the Fokkers

Posted by at 11:40 pm on April 7, 2016
Category: Burma SanctionsCriminal PenaltiesEconomic SanctionsGeneralIran SanctionsSudan

Fokker Services Building in Hoofddorp via [Fair Use]

The United States Court of Appeals for the District of Columbia Circuit just reversed the decision of a lower federal district court which tossed out the deferred prosecution agreement between the Department of Justice and Fokker Services B.V.  Fokker had admitted, in a voluntary disclosure to the Office of Foreign Assets Control (“OFAC”), that  it had obtained U.S. origin aircraft parts which it then re-exported to Iran, Sudan and Burma without the required licenses. This blog has previously criticized both the highly unusual decision of the DoJ to turn a voluntary disclosure to OFAC into a criminal prosecution and the district court’s decision to toss aside the DPA as too lenient, apparently in the belief that Iran was somehow involved in the 9/11 terrorist attacks.

The Court of Appeals decision, which restores the DPA and reverses the lower court, is based simply on its interpretation of the Speedy Trial Act. Because a DPA starts the Speedy Trial Act’s seventy-day clock running, the Act provides, in 18 U.S.C. § 3161(h)(2), that a DPA can turn off this clock “with the approval of the court.” Otherwise, of course, the defendant could escape prosecution after seventy days, despite provisions of the DPA that prosecution would be avoided only upon good behavior by the defendant during a longer period, typically one to three years.

The Court of Appeals held that this requirement of approval did not give the district court the authority to question the leniency of the DPA, the charges brought by the government or the parties prosecuted under those charges. Rather the court reviewing a DPA is limited to determining if the DPA is

geared to enabling the defendant to demonstrate compliance with the law, and is not instead a pretext intended merely to evade the Speedy Trial Act’s time constraint.

The only other authority of the lower court, according to the Court of Appeals, would be to reject “illegal or unethical provisions” of the DPA, noting that the District Court had not argued that anything in the DPA was either illegal or unethical.

The Court of Appeals opinion is, thus, good news and bad news. The bad news is that a court can’t refuse to approve a DPA on the grounds that it was unfair for the government to turn a voluntary disclosure to an administrative agency into a criminal prosecution. The good news is that if the exporter does agree to a DPA, it can have a high degree of certainty that the district court cannot condition approval of the DPA on the insertion of more onerous provisions.

Photo Credit: Fokker Services Building in Hoofddorp via Fokker [Fair Use] [cropped]

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Copyright © 2016 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)



White House Fires First Salvo at Chinese Government Hacking Activities

Posted by at 12:47 pm on April 2, 2015
Category: ChinaCyber WeaponsEconomic SanctionsOFAC

By Poa Mosyuen (Own work) [CC-BY-SA-3.0 (], via Wikimedia Commons the Office of Foreign Assets Control published an executive order and accompanying FAQs under which the White House establishes the circumstances under which it will add certain persons and entities engaged in hacking computers and networks in the United States to the Specially Designated Nationals and Blocked Persons list. U.S. persons would be prohibited from engaging in any transactions with any of the designated cyberviolaters and all property of the cyberviolaters that comes into the United States or under the control of U.S. persons would required to be blocked.

Unlike most executive orders of this type, no parties have been designated yet under its authority; it is purely prospective in nature. This suggests that the order is, for the moment, mostly a diplomatic salvo and that its likely target is China. The numerous cyber attacks on the United States by China, including the recent Anthem breach, have been well documented and just as vociferously denied (in a clear methinks the lady doth protest too much” fashion) by the Chinese government.

Whether this will be effective in deterring China remains to be seen. One response by China to any future designation might be to double down and engage in cyber retaliation. Given the asymmetric nature of cyber warfare between the U.S. and China, due to the fact that the U.S. is more connected and more vulnerable than China, such retaliation cannot be discounted.

An additional point should be made on these new sanctions. I have seen some popular tech media and bloggers suggest that the sanctions might be applied to domestic hackers, even relatively benign ones doing things similar to what got Aaron Schwartz in trouble. It is important to remember, however, that the International Emergency Economic Powers Act, under which the executive order was issued, restricts the scope of the order to blocking “any property in which any foreign country or a national thereof has any interest,” thereby preventing purely domestic application of these sanctions. A domestic hacker would have to be working on behalf of a foreign country or foreign national to be designated under the new cyber sanctions.

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Copyright © 2015 Clif Burns. All Rights Reserved.
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Sen. Landrieu Attempts to Clarify the Record … But Doesn’t

Posted by at 8:28 pm on September 10, 2014
Category: Economic SanctionsOFACSDN ListVenezuela

Sen. Landrieu [Official Portrait, Public Domain]

On Sunday, in Lafayette, LA, The Advertiser printed an opinion from Sen. Mary Landrieu entitled, “Sanctions, as written, will hurt La. workers.”  While we hoped Sen. Landrieu was writing to clarify the record in response to our post last week, she was writing instead to respond to an earlier opinion in The Advertiser written by Sen. Marco Rubio and Rep. Bill Cassidy.

Sen. Landrieu began by referring to the Lake Charles, LA oil refinery as “owned by Citgo, a Venezuelan company with a strong and respected reputation in Louisiana.”  Citgo, however, is quite clearly a U.S. company, founded and incorporated in the United States over a hundred years ago.  It became wholly owned U.S. subsidiary of Petróleos de Venezuela, the Venezuelan national oil company, in 1990, but remained a U.S. company.  The hawkish view on U.S. sanctions is, of course, that Citgo, even though a U.S. company employing U.S. persons, is not immune from the conduct of its foreign parent if, in this case, Petróleos de Venezuela’s conduct were found to be at variance with U.S. economic sanctions and was added to the SDN List, its subsidiary Citgo would be equally blocked and unable to employ U.S. workers.

In her opinion, Sen. Landrieu continued to defend her opposition to the Venezuela Defense of Human Rights and Civil Society Act of 2014 because she believed that “the legislation as written was too vague” and “will continue to oppose it unless the language of this resolution makes crystal clear that there will be no threat to the [Lake Charles] refinery.”  But, as we pointed out last week, Sen. Landrieu’s references to amending the Act have led to no clear (crystal or otherwise) suggestions on how to do so.  We think we can help her out.

The Act, like other sanctions bills, already permits the President to waive the application of sanctions against a person if he determines that such waiver is necessary for the “national security interests of the United States.”  The amendment we recommend to Sen. Landrieu is to rewrite the waiver in Section 5(c)(1) to read, “The President may waive the application of sanctions under subsection (b) with respect to a person if the President determines that such a waiver is in the national security or economic interests of the United States.”  By adding simply “or economic” to the waiver condition, the President has another avenue to defend not imposing sanctions against otherwise sanctionable foreign persons.  Again, as we pointed out last week, the President would not take lightly a decision to block Citgo’s assets in Louisiana or anywhere else in United States.  Congress, moreover, would be hard-pressed to oppose a waiver if the President were able to show that imposing sanctions would have tremendous economic ramifications.

If Sen. Landrieu wants to take the position that U.S. economic sanctions against human rights violators can’t come with a cost that significantly harms the U.S. economy, there is a way to protect that interest.  Whether or not her position wins the day on the Senate floor, we think the only practical way to do so is to give the President more discretion in how he may choose not to impose sanctions.  A tidy addition of the two words “or economic” should do the trick and put to bed another odd episode of “How a Bill Becomes a Law.”


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Copyright © 2014 Clif Burns. All Rights Reserved.
(No republication, syndication or use permitted without my consent.)