Archive for the ‘EU’ Category


Jun

16

It’s A Small World After All, Even For Economic Sanctions


Posted by and at 8:02 pm on June 16, 2014
Category: ChinaEconomic SanctionsEURussia SanctionsSanctionsSudan

It's A Small World by Darren Wittko https://www.flickr.com/photos/disneyworldsecets/2767829714/ CC BY 2.0 [https://creativecommons.org/licenses/by/2.0/] (cropped)G-7 countries recent meeting in Brussels understandably grabbed global headlines for their unified message that they “stand ready to intensify targeted sanctions and to implement significant additional restrictive measures to impose further costs on Russia should events so require.”

While sanctions imposed by G-7 countries, as well as the EU, drive the engine of global sanctions enforcement, there are almost 200 other countries in the world and many of them want to have their position on sanctions known.  Last week, for example, Serbian President Tomislav Nikolić surprised no one on Earth (or anywhere else for that matter) when he told Serbian media, “It’s impossible to imagine Serbia imposing sanctions on Russia.”  Of course, Nikolić’s pronouncement is hardly going to cause the E.U. to rethink, even for a fraction of a nanosecond, its position on Russian sanctions.  On the other hand, the E.U. sanctions may cause Serbia, given that Russia is one of it’s largest trading partners, to rethink the wisdom of its application to become a member of the E.U.

Besting Serbia’s population by over a billion, China is emerging as a critical Russian ally and the most important country that is not imposing sanctions against it.  As with Serbia, economic self-interest and the volume of China’s trade with Russia may be at the heart of this.  In fact, reports on the recent $400 billion, 30-year deal for Gazprom to supply natural gas to China suggest the deal would be based on a ruble-yuan exchange and bypass Western financial systems altogether.

With developed countries like China and Serbia using economic self-interest to justify trading with Russia despite its shenanigans in Ukraine, some developing countries may be acting against their own economic self-interest in imposing sanctions to deal with regional conflicts.  Reuters reported this week, for example, that members of the Intergovernmental Agency for Development, an East African trade group made up of Djibouti, Eritrea, Ethiopia, Kenya, Somalia, South Sudan, Sudan and Uganda, have threatened sanctions against South Sudan if warring factions do not cooperate to end conflict in that country.  The United States imposed sanctions in early May against military leaders involved in the conflict, but they likely will provide no meaningful impact.  However, when everyday trade with your neighboring countries starts to become restricted, sanctions are far more likely to achieve the goal of ending conflict.  If East African sanctions succeed against South Sudan while E.U and U.S. sanctions have no impact on Ukraine,  then we will certainly have a situation where it’s the mice that roar while the elephants squeak.

Sanctions news runs on the front page when it involves the United States and Europe but also on the back pages as it involves the rest of the world.  You have to read the whole paper to make sure you have the full story.

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May

13

Russian Sanctions Creep


Posted by at 6:39 pm on May 13, 2014
Category: Economic SanctionsEURussia SanctionsSanctionsSDN List

By President of Russia [CC-BY-3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File:Volodin_V_V.jpeg?uselang=ru
ABOVE: Vyacheslav Volodin


The EU yesterday added new names to its sanctions list.  The latest additions include Russian President Putin’s deputy chief of staff, Vyacheslav Volodin, and Vladimir Shamanov, the commander of the paratroop unit that allegedly took part, despite Russian denials, in the annexation of Crimea.

Also added were a number of Crimean companies:  One is Chernomorneftegaz, a Crimean gas company; another is Feodosia, a Crimean oil supplier.

Volodin but not Shamanov and Chernomorneftegaz, but not Feodosia, are on the U.S. sanctions list. Differences like these suggest incoherence and, at the least, create compliance challenges for multinationals.

Being on a U.S. or EU sanctions list means that the assets of the listed person are frozen and dealings with them by those subject to U.S. or EU jurisdiction are prohibited.

Whether these sanctions will deter further Russian involvement in the Ukrainian crisis is anyone’s guess.  The reluctance to impose so-called sectoral sanctions, that is, prohibitions on dealings with anyone in a given sector like oil and gas, exposes concerns about the double-edged sword of sanctions:  They truly cut both ways.

Individuated sanctions are, nonetheless, a headache for companies subject to U.S. and EU law because of the broad-based shadow lists of those subject to sanctions under the U.S. rule freezing the assets of any company that is 50% or more owned by a designated person and the EU rule  freezing any assets “controlled by” a designated person.

Shadowing the shadow list means that simple screening of listed persons is not enough.

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Apr

7

When a Firing Squad Gives You Lemons, You Can’t Make Lemonade


Posted by at 7:11 pm on April 7, 2014
Category: EU

Vietnam Firing Squad via Amnesty International http://www.amnesty.org/sites/impact.amnesty.org/files/PUBLIC/Regions/ASA/viet-nam-death-penalty-250x161.jpg [By Permission]The recent decision by Vietnam to execute corrupt bankers has garnered world-wide attention. Rather surprisingly, however, the case has an interesting intersection with export law issues.

As has been reported, the bankers will be subject to rather gruesome execution by firing squad.

Vietnam’s traditional means of execution involves binding perpetrators to a wooden post, stuffing their mouths with lemons and calling in a firing squad.

Death Penalty Worldwide adds another gory detail to death by firing squad in Vietnam: “As the prisoner is dying, an officer fires a pistol shot through the condemned’s ear.”

Apparently even Vietnam is somewhat troubled by all this and wants to transition from this barbaric procedure to lethal injection. But it can’t. According to Patrick Winn on the website Global Post, Vietnam is unable to obtain sodium thiopentol used in executions because the European Union refuses to export the chemical to countries that practice capital punishment.

That of course might make the E.U. feel better about itself, but it won’t stop Vietnam from executing anyone and only assures that prisoners in Vietnam will meet their bloody end with a lemon stuffed in their mouth, multiple bullet wounds, and a final coup de grâce of a bullet in the ear. I’m sure that each person executed in Vietnam will appreciate the European Union’s solicitude for their well-being.

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Jan

21

Wide World of (North Korean) Sports: Piste Off Edition


Posted by at 7:23 pm on January 21, 2014
Category: ChinaEconomic SanctionsEUForeign Export ControlsNorth Korea Sanctions

By Mark Scott Johnson from Sydney, Australia (IMG_7688) [CC-BY-2.0] (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons http://commons.wikimedia.org/wiki/File%3AMount_Paektu7.jpgDennis Rodman and his coterie of NBA All-Stars recently returned to the United States from North Korea after Rodman’s birthday basketball bash for his “friend for life” Kim Jong Un.  While Rodman’s zealous zaniness has grabbed global media headlines, another sports-related development in North Korea, is more significant to sanctions and export control issues: the grand opening this month of the Masik Pass luxury ski and hotel resort.

Pictures taken of the resort show the 120-room hotel, indoor swimming pool and 11 ski runs.  Other pictures also show, however, Italian snow plows, Canadian snowmobiles and Swedish snow cannons.  Recent news reports began to shed light on the obvious sanctions issue: how did North Korea build a ski resort without someone violating sanctions.  U.N. Security Council Resolution 2094 and others prohibit members from selling “luxury goods” to North Korea and even though “luxury goods” are not defined and are not limited to the specific luxury items delineated in Annex IV of Resolution 2094, it seems hard to deny that snowmobiles, snow cannons and the other accoutrements of a “luxury” resort are not “luxury goods.”

According to SkyNews, the Italian snow plow manufacturer has predictably said, “Snow groomers are sold directly to ski resorts and distributors and it is possible that a used snow groomer is than sold to another final user by ski resorts or distributors themselves. On this kind of business we as a producer do not have any influence, no company can avoid that this happens.”

Western goods flowing into North Korea is not new.  In fact, we reported last year on the curious infiltration of an Apple iMac on Kim Jong Un’s desk and suggested it, like many Western goods in North Korea, came from China.  Plausible deniability about to whom a manufacturer’s customers sell its products becomes, of course, more attenuated when your business is selling “state-of-the-art snow cannons” that retail for 14,000 Euros each.

U.N., U.S., E.U. and Canadian sanctions policies fail if a repressive regime like North Korea’s so-called supreme leadership continues to violate human rights but opens a ski resort to sustain its control.  Like sanctions against Iran, Cuba and other countries, a principal goal is to curtail infrastructure projects that support the sanctioned governments.  While a ski resort is not the largest national infrastructure project, sanctions were designed to prohibit it being built and supported by Western goods and technology.

Even if the sales of the items found at Masik Pass were beyond detection of reasonable know-your-customer requirements, Italian, Canadian and Swedish enforcement authorities would at least have grounds to inquire further, especially company records and communications involving sales to Chinese resellers that may have been possible routes to North Korea.  While any manufacturer or retailer can’t know everything about its customers, knowing more gives a company greater support to conclude that its business does not involve impermissible activities or give law enforcement a reason to examine its business further.

Clif adds: Blame me, not George, for the terrible pun in the post title.

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Mar

1

E.U. Court Overturns Sanctions on Iranian Bank


Posted by at 5:09 pm on March 1, 2013
Category: EUIran Sanctions

Bank Saderat by Aghajanpour http://fa.wikipedia.org/wiki/%D9%BE%D8%B1%D9%88%D9%86%D8%AF%D9%87:BankSaderatMehr.jpg (CC BY-SA 3.0)The General Court of the European Court of Justice on February 5 set aside the sanctions that the European Union had imposed on Bank Saderat of Iran. (Bank Saderat was blocked in the United States by the Office of Foreign Assets Control in 2008 under the provisions of Executive Order 13382, meaning that U.S. persons are forbidden to engage in any transactions with the bank and that any of the bank’s assets that come into the possession or control of a U.S. person must be blocked.)

The E.U. Court relied on a number of largely procedural arguments to overturn the E.U. sanctions on Bank Saderat, but two substantive arguments were also relied on by the court, both of which were dubious at best. First, the Court argued that Bank Saderat was no longer owned by the Iranian government and that the 94% share held by the government at the time of the E.U. sanctions had been reduced to a minority position. In fact, according to publicly available documents, the Iranian government is still the largest single shareholder of the bank.  Moreover, the Iranian government’s prior holdings were  spun off to other Iranian government entities.  As a result,   some have forcefully alleged that this was a “fake privatization” and a “scam” designed to escape international sanctions on the bank.

The second substantive ground cited by the E.U. Court was even more preposterous. At issue is whether the bank provided banking services to Iranian entities involved in Iran’s nuclear program. In this regard, Bank Saderat admitted that it processed letters of credit for two companies engaged in nuclear proliferation but argued that these were “ordinary banking services … and that those services did not relate to transactions linked to nuclear proliferation.” It’s hard to understand how this “ordinary banking service” argument would not provide a “get out of jail free” card to any Iranian bank providing services to nuclear proliferators. All banking services can likely be characterized as “ordinary” in some sense, and it is doubtful that any bank is engaged in extraordinary services directly related to proliferation. What would such services be? Does the bank have provide advice on the construction of enrichment centrifuges before it can be sanctioned? And how do you determine what transactions are or are not related to the proliferation activity?

The Court did, however, reject Bank Saderat’s argument, premised on diplomatic cables published by Wikileaks, that the sanctions were the result of undue pressure exerted on European governments by the United States Government. The court noted:

[A]s regards the diplomatic cables, the fact that some Member States were subject to diplomatic pressure, even if proved, does not imply, by itself, that such pressure affected the contested measures which were adopted by the Council or the assessment carried out by the Council when they were adopted.

The E.U. Court’s action here followed closely on earlier action in the last week of January by the Court striking down the E.U. sanctions on Iran’s Bank Mellat

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