Russia to lift sanctions on Turkey

Russia’s Prime Minister, Dmitry Medvedev, has asked ministers to prepare to lift economic sanctions against Turkey, which Russia imposed towards the end of last year when Turkey shot down a Russian fighter plane near the Turkish border with Syria.  Russia’s sanctions on Turkey restrict the import of certain Turkish goods, including fruit and vegetables, and tourism to Turkey.  The Prime Minister has said that the sanctions will be lifted gradually, to avoiding causing damage “to Russian producers and partners who have already occupied a niche” under the sanctions.  President Putin has signed a decree to lift the tourism measures.

White House chief of staff assesses Cuba sanctions policy

In a speech to the Truman Conference 2016, White House Chief of Staff Denis McDonough set out the factors behind the Obama administration’s policy of rapprochement with Cuba, and highlighted some of the limitations of sanctions as a foreign policy tool.

McDonough said that the policy of isolating Cuba through sanctions for more than 50 years, in the belief that doing so “would plant the seeds of democracy and empower the Cuban people”, had the opposite of the intended effect.  Echoing comments made earlier this year by Treasury Secretary Jack Lew on the risks of using sanctions without international backing (see previous blog), McDonough noted that it was the US that ultimately found itself isolated, from both its regional and international partners, and that it saw its influence in the world diminish as a result.  He contrasted this with the success of sanctions in changing Iran’s nuclear policy, where there was an international consensus behind the measures.

The full text of the speech is here.

EU Council agrees new trade rules on capital punishment and torture goods

The EU Committee of Permanent Representatives (COREPER) has, on behalf of the Council, agreed amendments to the EU’s rules on the sale and export of goods that may be used for capital punishment or torture.  The amendments to Regulation 1236/2005, agreed in view of developments since its introduction in 2006, would:

  1. prohibit the brokering of banned equipment listed in Annex II, to cover transfers of goods that are not located in the EU;
  2. prohibit the transit of goods listed in Annex II, and of goods listed in Annex III or IIIA where the transporter is aware that they may be used for capital punishment or torture;
  3. ban the provision of brokering services by any broker for goods listed in Annex III or IIIA, where the broker is aware that they may be used for capital punishment or torture;
  4. ban the supply of technical assistance in respect of goods listed in Annex III or IIIA by anyone who is aware that they may be used for capital punishment or torture;
  5. introduce a prior authorisation regime for brokering services and technical assistance for Annex III and Annex IIIA goods;
  6. ban the advertising or promotion of Annex II goods at exhibitions and trade fairs;
  7. provide for an urgency procedure in case rapid amendments to the Annexes are needed when new goods enter the market; and
  8. establish a coordination group, as a platform for Member States and the Commission to exchange information on administrative practices.

The amendments are due to be approved by the EU Parliament in September, and will then be submitted to the Council for adoption.  The Council’s press release is here.

Russia renews food embargo

Russia has renewed its embargo on food imports from several of the countries that have imposed sanctions on Russia, until 31 December 2017.  The countries include member states of the EU, the USA, Canada, Australia, Norway, Albania, Montenegro, Iceland, Liechtenstein, and Ukraine.

Deputy Prime Minister Arkady Dvorkovich said he thought the sanctions would be renewed “unless some miraculous changes occur in the geopolitics” (see previous blog).  Last week the EU renewed its trade sanctions on Crimea & Sevastopol, and is likely to renew its sanctions targeting sectors of Russia’s economy next month (see previous blogs here and here).

US citizen pleads guilty to sanctions conspiracy

A US citizen, Asim Fareed, has pleaded guilty to conspiring to ship items from the US to customers in Iran, and to provide false documentation to the Department of Commerce to hide the identity and location of the customers.  The items were to be shipped from the US to the UAE, and from there transhipped to Iran.  No shipments were actually delivered to Iran. In the Department of Justice’s press release, Special Agent in Charge Jonathan Carson stated that “providing or causing false statements on export documents and illicit trade with Iran will remain a high priority for the Office of Export Enforcement”.

The guilty plea was part of a plea agreement with the US Attorney’s Office for the Middle District of Pennsylvania. No sentencing date has been scheduled.

OFAC hires new staff to deal with Iran licence applications

It is reported that OFAC has hired new staff in order to expedite the processing of licence applications for businesses looking to trade with Iran.  OFAC’s acting director John Smith has said that the agency is “stretched to the limit” having received “hundreds if not thousands” of applications since the implementation of the JCPOA in January this year, each of which is said to require complex assessment.

In April, Iran’s Supreme Leader Ayatollah Ali Khamenei stated that sanctions on Iran had been lifted on paper only, due to the US having created “Iranophobia so no one does business with Iran” (see previous blog), and there is a risk that OFAC’s applications backlog compounds this situation.

UK Court dismisses sanctions funding judicial review

The Administrative Court in the UK has dismissed a claim for judicial review brought by Egyptian businessman Ahmed Ezz, which challenged the rationality of an HM Treasury decision on the release of his frozen funds for the payment of legal expenses in Egypt – R (on the application of Ezz) v HM Treasury [2016] EWHC 1470 (Admin).  Mr Ezz is subject to an asset freeze under the EU’s sanctions on Egypt (see previous blog), for allegedly misappropriating public funds.  The decision at issue was to assess the reasonableness of the legal fees charged by Mr Ezz’s Egyptian lawyers by taking the maximum London legal rates and converting them to a reasonable rate in Egypt via the IMF’s purchasing power parity (PPP) ratio.  The ratio compares the relative costs of living in different countries, and in this way HM Treasury reduced the maximum daily rate payable for appearing in court from £15,000 in the UK to $5,790.98.

The Court found that, in accordance with general principles of interpreting EU law, the derogation from the asset freeze under the EU’s Egypt sanctions for payment of legal expenses must be interpreted restrictively.  It said that this was particularly so given that the objective of the sanctions was to recover misappropriated public funds, which would allegedly be undermined were Mr Ezz’s application successful.  It noted that HM Treasury had been generous in using the maximum daily rate in London as its starting point, and that the “reasonable” fees allowed by the EU did not necessarily mean the highest legal fees payable.  The Court concluded by saying that it was not unreasonable for HM Treasury to use the PPP conversion ratio, even though the cost of legal services in Egypt may not be perfectly reflected by a ratio based on general living expenses.

OFAC fines HyperBranch for sanctions violations

OFAC has fined HyperBranch Medical Technology Inc., a US medical goods company, $107,691.30 for apparent violations of US sanctions on Iran.  HyperBranch is said to have exported thousands of units of medical goods to its distributor in the UAE, with knowledge or reason to know that the goods were ultimately destined for Iran.

In its enforcement notice, OFAC said that HyperBranch voluntarily disclosed the violations and that they did not constitute an egregious case.  OFAC found the conduct to have been aggravated by the fact that HyperBranch’s former CEO and International Sales Manager knew the ultimate destination of the exports, and that it did not have a sanctions compliance program in place.  In mitigation, OFAC noted that the harm caused to US sanctions objectives by the violations was limited because the exports involved medical end-use products that were likely eligible for a specific licence.