CEPR Sanctions Watch April 2024

In this edition of Sanctions Watch, covering April 2024:

  • International Crisis Group urges negotiations, economic concessions, with Afghan government;
  • Constituent groups and faith leaders urge SFRC Chair Ben Cardin to help end the embargo of Cuba;
  • Congress passes slew of legislation tightening sanctions on Iran following retaliatory attack on Israel;
  • US, Russia offer competing visions for monitoring sanctions on North Korea at the UN;
  • US moves one step closer to seizing frozen Russian assets, despite precedent concerns;
  • Congress passes bill to sanction individuals involved in Captagon trade, with focus on Syria’s Assad;
  • President Biden allows Venezuela sanctions license to expire (with minor exceptions);
  • The UN Human Rights Council condemns unilateral sanctions as illegal and a threat to human rights, and more.

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Background: Following the Taliban takeover in 2021, the Biden administration blocked Afghanistan’s central bank from accessing roughly $7 billion of its foreign reserves held in the United States. Half of these assets have since been allocated to a trust fund, largely under US control, that has yet to disburse funds to Afghanistan. Around $2 billion of central bank assets have also been blocked by European authorities. Along with a cutoff of aid, this asset seizure — representing the near totality of Afghanistan’s foreign reserves — has contributed to a collapse of the country’s economy.

A new World Bank report on Afghanistan’s economy finds the country struggling to confront deflationary pressure following a 26 percent economic contraction over the last two years “characterized by poverty, food insecurity, high unemployment, and underemployment.” The Bank notes that “approximately half of the population is trapped in poverty, and 15 million individuals are facing food insecurity.” The report adds that constraints in the money supply “due to sanctions, frozen assets, banking disruptions” and other factors have contributed to the deflationary pressures on the economy.

The International Crisis Group’s Graeme Smith argued in a recent article that the West has to rethink its approach to negotiations with the Taliban. He writes, “Sanctions and other economic pressures do not have much effect on the Taliban, but they do drive up rates of malnutrition among children and disease among vulnerable families, especially female-headed households that often struggle in a patriarchal society. …The livelihoods of millions of people should not be indefinitely held hostage to efforts at political dialogue.” Smith suggests that diplomats have to narrow the scope of what they discuss with the Taliban and deal with topics one by one. Urgent economic matters should be a priority and the West should be prepared to make concessions:

… diplomats should reconsider the criteria for removing Taliban from various lists of sanctions. The UN lists of sanctioned individuals, for example, are outdated, to the extent that it is technically impossible for any member of the Taliban to be removed with the existing criteria, which means the sanctions no longer offer any incentive for good behaviour.

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Background: The US embargo against Cuba is one of the oldest and most stringent of all US sanctions regimes, prohibiting nearly all trade and financial transactions between the United States and Cuba since the early 1960s. After a brief loosening under Obama, sanctions were tightened and expanded under Trump — a policy the Biden administration has, for the most part, maintained.

US and Cuban officials met in Washington in April to discuss cooperation on migration from the island, which has reached unprecedented heights in the last few years. Senior Cuban foreign ministry officials used the opportunity to highlight the role of the embargo in driving this migration: “The economic conditions of the people of Cuba push them to migrate, and an important fact in provoking those conditions are US deliberate policies of destroying the Cuban economy,” said Deputy Minister of Foreign Affairs Carlos Fernández de Cossío. In an interview on Pod Save the World, Progressive Caucus Chair Pramila Jayapal (D-WA), who visited Cuba in February, made a similar point, tying the “acute humanitarian crisis” stoked by US sanctions on the island to migration, and urging an immediate end to the US government’s State Sponsor of Terrorism designation for Cuba.

Also last month, over 100 Maryland-based organizations and voters — including the Baltimore County Young Democrats, Our Revolution Maryland, Peace Action Maryland, Pax Christi Baltimore, CASA, and dozens of churches and faith leaders — sent a letter to Senator Ben Cardin (D-MD) asking him to use his powerful position as chair of the Senate Foreign Relations Committee to help end sanctions on Cuba. “As faith communities morally opposed to the use of economic warfare against our Cuban siblings; as diaspora groups concerned with the displacement of people from their homes; as humanitarians, scholars, activists, and defenders of human rights; we say unequivocally that it is time to end the embargo on Cuba,” they wrote. Two of the signers — Reverend Deborah McEachran of the Presbyterian Church and Reverend Dr. Eliezer Valentín-Castañón of the United Methodist Church — later published an op-ed reiterating the points of the letter, and noting Senator Cardin’s “window of opportunity to help right a historic wrong, ease the suffering of millions, and define his legacy as a true forward-thinking leader.”

In addition, Cubana de Aviación, the country’s state airline, said it had to cancel its long-standing flights to Buenos Aires after Argentine jet fuel providers “refused to service [the airline] … citing concerns over U.S. trade sanctions on Cuba,” Reuters reports.

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Background: US sanctions on Iran began during the 1979 hostage crisis, and currently bar US actors — plus some non-US actors — from almost all trade and financial transactions with Iran. Though certain sanctions were lifted as a result of the 2015 nuclear deal, the majority have been reimposed since the United States’ withdrawal from the agreement. The European Union also maintains certain trade and financial sector sanctions on Iran.

Shortly after Iran’s retaliatory strike on Israel last month, the Biden administration imposed sanctions on 16 individuals and three entities allegedly connected to Iran’s drone industry, as well as on five companies involved in the country’s steel sector. This was soon followed by a dozen additional drone-related sanctions. The United Kingdom and Canada imposed similar drone- and missile-related sanctions as well. The US House of Representatives responded to the attacks by passing a series of bills tightening sanctions against Iran, a number of which were signed into law as a part of the Ukraine-Israel supplemental (H.R. 815) approved by both chambers, including:

  • Stop Harboring Iranian Petroleum (SHIP) Act — Expands sanctions on foreign ports, vessels, and refineries that are involved in the shipment of Iranian oil;
  • MAHSA Act — Requires reports on and mandates sanctions against those connected to the Supreme Leader or President of Iran;
  • No Technology for Terror Act — Codifies existing restrictions on the export of US technologies including cameras, sensors, and circuits to Iran;
  • Holding Iranian Leaders Accountable Act — Requires a report on the financial holdings of certain Iranian officials;
  • Iran-China Energy Sanctions Act of 2023 — Broadens secondary sanctions against Chinese financial institutions involved in purchasing Iranian oil.

Bills which passed the House but were not included in the supplemental, include:

  • The Iran Sanctions Accountability Act of 2023 (H.R. 6015) — which directs the US Executive Director at the World Bank to oppose any financial assistance to Iran;
  • The No U.S. Financing for Iran Act of 2023 (H.R. 5921) — which prohibits the US from supporting any future allocations of the International Monetary Fund’s Special Drawing Rights (SDRs, an international reserve asset) for Iran (despite the fact that existing sanctions have prevented Iran from using its SDRs). If enacted, this legislation could prevent the US from supporting future general allocations of SDRs as the IMF’s Articles of Agreement preclude barring individual IMF members from receiving allocations.
  • The Solidify Iran Sanctions Act (H.R. 3033) — Eliminates the sunset clause of the Iran Sanctions Act of 1996, effectively making oil and weapon-related sanctions permanent.

While some of these bills allow for a degree of enforcement leeway, the tightening of sanctions could have considerable consequences for global oil prices — a likely concern for President Biden, particularly in an election year.

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North Korea

Background: The United States first imposed sanctions on North Korea during the Korean War in the 1950s. Following the country’s 2006 nuclear test, more stringent sanctions were added, which have periodically intensified since then. US sanctions now target oil imports and cover most finance and trade as well as the key minerals sector. In addition, the UN Security Council has adopted nine major sanctions resolutions since 2006. The European Union has implemented these in addition to its own sanctions.

In March, Russia vetoed a UN Security Council resolution that would have extended the mandate of a UN panel of experts tasked with monitoring the enforcement of sanctions on North Korea. To justify its vote, Russia said last month that extending the panel’s mandate did not work to normalize the situation on the Korean peninsula and that sanctions, which are failing, should be reviewed. To that end, UN News reports, “Russia plans to submit shortly a draft resolution to extend the panel’s mandate for one year, with a clear determination for the Security Council to update the parameters of the sanctions regime.” In response to the veto, the US and other supporters of the sanctions, including Japan and South Korea, are reportedly exploring “out-of-the-box thinking” and “some creative ways” to continue the monitoring; multiple options within and beyond the UN are being considered, with the hope that monitoring can begin in May.

“Even if the panel is saved before the [April 30] deadline, it is high time the UN changes its strategy towards North Korea to one prioritising diplomacy over sanctions. … Further isolation of North Korea is not conducive to international peace and security. On the contrary, it increases the risk of not only regional instability but also possible conflict that could have global repercussions,” writes Gabriela Bernal, an analyst with NK News.

Meanwhile, South Korea sanctioned two Russian ships and entities for their alleged links to North Korea’s nuclear and missile programs and for shipping military cargo to the country.

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Background: US sanctions on Russia’s financial, energy, and defense sectors began after the 2014 annexation of Crimea. This sanctions regime was greatly expanded, particularly by the United States, the United Kingdom, and the European Union in response to the 2022 invasion of Ukraine. It includes the barring of most financial transactions and of Russian oil and gas imports as well as the freezing of Russian assets abroad, among other measures.

On April 15, the US sanctioned 12 entities and 10 individuals in Belarus over their alleged support for Russia’s war in Ukraine. The US and UK jointly prohibited the Chicago (CME) and London (LME) metal exchanges from accepting new Russian aluminum, copper, and nickel. Sanctions concerning the LME will “reverberate through metals markets because of the LME’s central position at the heart of the industry,” Bloomberg notes. In addition, the US has reportedly begun drafting sanctions against Chinese banks for their war-related exports to Russia.

On April 20, Congress passed the REPO Act, which will allow the US government to seize Russian assets it has frozen and redirect them toward Ukraine’s reconstruction. “If the REPO Act is enacted, then currency seizures, now seen as a tool of last resort, might turn into standard operating procedure, to America’s detriment. Any foreign government … would think twice before parking its assets in the United States or with one of its NATO allies,” Christopher Caldwell wrote in the New York Times. The US is not likely to seize Russia’s assets on its own, reports the AP; rather, it hopes to use the REPO Act as leverage in talks with Europe as a way to address allies’ concerns about the use of Russia’s assets.

The US and Europe are continuing discussions about what to do with these frozen assets. Treasury officials say that discussions are a “work in progress,” and Reuters reports that “one of the most promising proposals under consideration would see G7 countries pull forward the interest due on the frozen Russian assets to use as collateral for loans or bonds issued to help Ukraine.” Nevertheless, there continues to be apprehension. “Moving from freezing the assets, to confiscating them, to disposing of them” could start “breaking the international order that you want to protect; that you would want Russia to respect,” European Central Bank (ECB) President Christine Lagarde warned. China, Saudi Arabia, and Indonesia are reportedly lobbying the EU to resist pressure to seize Russian assets. For its part, the EU is reportedly considering a 14th package of sanctions against 40 entities in several countries for helping Russia evade sanctions, and the ECB is pushing European banks operating in Russia to scale back their operations.

Sanctions on Russia still pose challenges for the country. The production of liquified natural gas (LNG) by Russia’s largest producer at its Arctic LNG 2 project has been suspended due to sanctions. At the same time, these measures have hindered the country’s efforts to repair oil refineries and have “caused substantial supply-chain issues and price increases” of semiconductors. Russian trade with China fell in March for the first time year-on-year since 2022 amid US threats of secondary sanctions, while “Turkey’s trade with Russia is stuttering because of Western sanctions,” Bloomberg reports. The EU’s foreign policy chief published a blog boasting about the effects of Brussels’ sanctions on Moscow, including halving revenue from fossil fuel exports; sharply increasing inflation, even for food; aggravating Russia’s “industrial weakness”; halving car production, and more.

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Background: As a designated “State Sponsor of Terrorism” since the list’s creation, Syria has faced unilateral sanctions in some form since 1979. These were augmented during the George W. Bush administration, and greatly expanded under Presidents Obama and Trump to bar most financial transactions with Syrian entities. The “Caesar Act,” passed by Congress in 2019, goes even further, imposing secondary sanctions on third-party entities that engage in such transactions, even if they have no connection to the US.

Congress passed the Illicit Captagon Trafficking Suppression Act of 2023 last month as a part of the Ukraine-Israel supplemental (H.R. 815), which would require the president to impose sanctions on any individual involved in the production or trade of Captagon, an amphetamine-like drug that the US and its allies have long accused the Assad family, Hezbollah, and others of profiting from. Given the extensive sanctions already in place against most of these actors, it is unclear how much of an impact these new measures might have. The Biden administration announced sanctions against 11 individuals and entities alleged to be involved in the trade in March.

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Background: While the George W. Bush and Obama administrations adopted sanctions on military equipment and against Venezuelan individuals, it was under Trump that broad financial sanctions and restrictions on oil exports were first implemented. These have caused at least tens of thousands of deaths of Venezuelans, from the resulting economic collapse and drastic reduction in access to essential imports and production, including food, medicine, health care, and health infrastructure. In addition, the United States, the United Kingdom, and others have frozen — and in some cases transferred to opposition actors — Venezuelan state assets.

President Biden allowed General License (GL) 44, which had temporarily eased sanctions on Venezuela’s oil sector since October, to expire last month. In its place, he issued GL 44A, which provides a six-week buffer period for companies to continue to transact with Venezuela as needed to wind down their operations. The administration also reiterated that it would consider specific licenses — individual private proposals for engagement with the sanctioned oil sector on a case-by-case basis. The extent to which this would be put into practice remains entirely unclear, however, (though some have already begun to test the waters) and the rest of the sanctions remain in place. As noted by CEPR senior research fellow Francisco Rodríguez, whether or not the US government adopts a flexible approach with regard to special licenses may have significant consequences for both global oil prices and migration to the United States.

Prior to the decision, numerous parties made their views known on the possibility of sanctions snapback. New York Times editor Farah Stockman noted that the sanctions are “deeply unpopular with the Venezuelan people” and that “the sweeping power of U.S. sanctions can do great harm but rarely delivers the political results that American officials seek.” Former Obama administration official Tommy Vietor noted that sanctions “just seem to have caused enormous economic hardship and suffering for the people.” Elliott Abrams, who helped lead Venezuela policy for the Trump administration, sent a letter urging President Biden to allow the license to expire.

In its recently published 2023 Annual Report, the Inter-American Commission on Human Rights states that it “takes note of the findings of the UN special rapporteur on unilateral coercive measures and human rights, who, after visiting [Venezuela], pointed out that sectoral sanctions have no normative basis in international law and have worsened the situation of people in a vulnerable situation. For this reason, the IACHR reiterates its call for them to be lifted.”

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The UN Human Rights Council adopted a resolution last month condemning and calling for the immediate lifting of all unilateral coercive measures — i.e., economic sanctions — which it describes as broadly harmful to civilian populations, contrary to the realization of fundamental human rights, and a violation of international law. The Council adopts similar resolutions on an annual basis, affirming a clear and consistent position against the measures. The United States opposed the resolution.

The Senate Committee on Foreign Relations advanced the Restoring Sovereignty and Human Rights in Nicaragua Act, which aims to extend and tighten sanctions against Nicaragua, including by extending the end-date of the Nicaraguan Investment Conditionality (NICA) Act of 2018 to 2028; directing the secretaries of State and Treasury to urge members of the Central American Bank for Economic Integration to deny any loans or financial assistance to Nicaragua; requiring a review of Nicaragua’s involvement in the the Dominican Republic-Central America Free Trade Agreement; and more. The bill, and its companion legislation in the House — which includes far more extensive provisions such as those prohibiting “any investment in any sector of the economy of Nicaragua” by US persons — are led primarily by Republicans, but also have the co-sponsorship of Democratic Senator Tim Kaine (VA).

Oxfam warned that, as a result of the ongoing Israeli blockade on Gaza, which includes severe restrictions on humanitarian aid and food, people are surviving on “less than 12 percent of the recommended daily 2,100 calorie intake needed per person,” and less than half the trucks needed to meet this target are entering Gaza. The Guardian reports: “Malnutrition is spreading at record pace among children, according to the World Food Programme. More than 90% of young children and pregnant and breastfeeding women are subsisting on two or fewer food groups — mainly bread — with no access to fruit, vegetables, milk or proteins.” Human Rights Watch said “Children in Gaza have been dying from starvation-related complications since the Israeli government began using starvation as a weapon of war,” a war crime that Israeli human rights organization B’tselem agrees Israel is committing.

A leaked cable from USAID humanitarian experts says that the spread of hunger and malnutrition in Gaza is “unprecedented in modern history” and that hunger-related deaths will “accelerate in the weeks ahead.” During a congressional committee hearing, USAID chief Samantha Power became the first US official to confirm that famine is already occurring in Gaza. The UN Special Rapporteur on the right to health, South African health care advocate Tlaleng Mofokeng, asserted that “Gaza is unequivocally witnessing genocide.”

Israel’s April 1 deadly strike on seven World Central Kitchen aid workers led several aid organizations to temporarily suspend activities in Gaza. Israel later announced that it would be reopening a crossing to allow more aid into the strip. Nevertheless, aid organizations say this measure is insufficient, that a surge in aid has not materialized, and that Israel continues to impede the entry of aid. Turkey announced that it was imposing restrictions on exports to Israel until more aid reaches Gaza, while the French foreign minister reportedly stated that “pressure, and possibly sanctions, must be imposed on Israel to open crossings to get humanitarian aid to Palestinians in Gaza.” Russia is also calling for sanctions on Israel.

The United States, meanwhile, has approved $17 billion in military aid to Israel and $1 billion in aid to Gaza. On April 26, the US State Department announced that it was pausing its plan to sanction an Israeli military battalion allegedly involved in human rights abuses in the occupied West Bank territories. The agency said that it had decided to suspend the sanctions plan after receiving “new information” from the Israeli government, but had been under intense pressure to reverse its decision from Israeli officials and members of Congress, including House Speaker Mike Johnson.

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About Sanctions Watch

Economic sanctions have become one of the main tools of US foreign policy despite widespread evidence that they can cause severe harm to civilian populations (which may, in fact, be the point). Though now a defining feature of the global economic order, sanctions and their human costs receive relatively little attention in most US media outlets.

CEPR’s Sanctions Watch news bulletin aims to generate more awareness on the use and impact of sanctions through monthly round-ups of news and analysis on US sanctions policy.

Click here to see past editions of CEPR’s Sanctions Watch.

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