ABSTRACT
The economic power of the United States of America (“USA”), which is one of the most leading powers today, is evident. The exercise of this power can result in various sanctions. Economic sanctions applied at the highest level are divided into two categories: primary and secondary. Primary and secondary sanctions relate to different areas of use and the natural and legal persons to which they apply. Although they have various consequences, these sanctions can seriously affect the business activities of citizens subject to the laws of any country when doing business with countries targetted by the USA for various economic, political or security reasons. This is because the Office of Foreign Assets Control (OFAC) of the U.S. Tresury Department has the authority to impose various restrictions on the economic activities of natural and legal persons both within and outside the USA, in order to align the strategic decisions of state and non-state actors with the geopolitical aims of the USA. These sanctions are the tools of foreign policy and may be changed without prior notice, which can restrict trade with other countries. Their economic effects will be examined in terms of the whole world. Sanctions imposed as an economic intervention amount to discrimination against a country where sanctions are applied as they limit that country’s import-export regime and credit needs in order to influence or change current policy.
I . INTRODUCTION
Sanctions imposed as an economic intervention amount to discrimination against a country where sanctions are applied as they limit that country’s import-export regime and credit needs in order to influence or change current policy1. Basically, with economic sanctions, the target is the country that is affected by the sanctions; it is not the party that has legal nexus with the country2.
However, there may be situations where third parties are involved. States aim to ensure the continuity of their political effectiveness in accordance with their political intentions and economic interventions that can be considered marginal3. These sanctions do not always occur as a precaution or response to an unusual international situation; rather, they have begun to be used as a form of international dispute resolution4. Is it possible to mention about the legitimacy of these means in point without predicting reciprocity5? On the other hand, is it possible to indicate a limit to the aforementioned sanctions? Based on the wide margin of appreciation, it is generally accepted that these sanctions, which are formed by the country policies, will have the area of application without any reciprocity with the end of the cold war in the world6.
The U.S.A, which is one of the most influential powers today, uses these sanctions in the most effective way and by doing so increases its economic dominance worldwide. Since 1945, the U.S.A has deferred to economic sanctions as a means of using economic pressure as a second or third stage in diplomacy before military intervention7. Meanwhile, the U.S.A, being the country that imposes economic sanctions the most, resorts its global economic domination as it was an urgent action plan. The U.S.A sustains its economic area in a positive feedback loop depending upon the assurance of its currency, the U.S.A dollar (“USD”), which is the main reason for having a global economic power.
By using the domination mentioned above, it obstructs the trade life of the natural or legal persons concerned by subjecting a natural or legal person from any country to enforce trade with several selected countries for various reasons. The economic sanctions applied are a natural result of this area of domination and control. These sanctions affect all types of contract, regardless of their value. In addition, since the sanctions imposed by the USA are based on the changing USA foreign policy and political concerns, it is practically impossible to predict whether current sanctions will also be implemented in the future. This article analyzes the legal background of economic sanctions currently in force, the types of sanctions, and the countries subject to them.
II. LEGAL BACKGROUND OF THE USA'S ECONOMIC SANCTIONS PROGRAM
The USA sanctions programs are administered and enforced by the Office of Foreign Assests Control (“OFAC”) under the President's national emergency powers8.
OFAC is empowered to impose various restrictions on the economic activities of natural or legal persons within and outside the USA in order to align the strategic decisions of state and non-state actors with U.S. geopolitical goals. It should be noted that these sanctions are a means of foreign policy and may be changed without prior notice. The U.S. government provides a wide margin of appreciation for interpreting and enforcing sanctions based on changing USA foreign policy and political concerns. Due to this, it is practically impossible to predict whether current sanctions will be enforced in the future. Therefore, we will examine economic sanctions anticipated within the scope of current legislation.
U.S. economic sanctions can be categorized as primary and secondary. Primary sanctions are the most common and conventional category. They prohibit U.S. citizens from making agreements with certain countries, organizations, and individuals. As well as applying directly to individual nations, such as the embargos on Cuba and Iran, they may also apply to specific businesses, groups, or individuals, as found on the Specially Designated Nationals and Blocked Persons List (“SDN” ).
Natural and legal persons who are the USA citizens are prohibited from participating in any transaction involving individuals and organizations on the SDN list and it is essential to prevent (freeze) their economic assets, which these individuals or organizations have any interests. In addition, persons outside the U.S. may also be held directly responsible for making transactions with persons on the SDN list involving anything related to the U.S., for example U.S. dollar payments and U.S. staff participation. Any violation of primary sanctions may result in civil and criminal penalties.
There are exceptions to the prohibitions. Under certain circumstances, it is possible to carry out a transaction normally prohibited by applying to the OFAC for a license. There are two different licenses: general and specific. Under a single general license, a transaction, defined within certain limits, may be performed more than once. With a specific license, only the stated transaction is permitted, meaning only a single transaction9.
Unlike primary sanctions, secondary sanctions apply to third parties and do not require a direct relation with the USA. The aim of these sanctions is to persuade third party natural or legal person outside the USA to cease activities with a sanctioned country. For this reason, these sanctions do not carry legal consequences. If a natural or legal person outside the USA makes agreements with individuals, groups, or businesses on the SDN List, it faces the threat of restricted access to the U.S. market and financial system as a secondary sanction. In addition, travel bans, freezing of US-based assets, and other restrictive measures may be applied. Currently, the OFAC imposes secondary sanctions on programs focused on Russia and Iran.
III. EXAMPLES OF ECONOMIC SANCTION TYPES AND IMPLEMENTATION
Sanctions imposed against Iran are the strongest U.S. sanctions involving both primary and secondary sanctions10. Primary sanctions are directly placed on the USA citizens. In this context, the USA citizens are prohibited from almost any activity to be performed with countries or their citizens on the SDN list11. Primary sanctions may also be applied to a USA nexus to a non- USA citizens' transaction related to the countries on the SDN list. In this case, it brings about a kind of obligation that prevents USA citizens from violating primary sanctions. For example, the involvement of employees or institutions in the country into the relevant relation or the use of USA instruments of payment may be considered in this context.
The violation of primary sanctions, either directly or indirectly, may lead to civil or criminal penalties. It has been criticized that these sanctions violate rights under the “first amendment”, which protects the freedom of speech, one of the most essential elements of the USA. One concern is that, because of the possible consequences of these sanctions, American citizens may express their opinions about a country on the list12. Indeed, the USA is still a more distant society from certain ideologies and it can be understood from the reactions (or not given) either popular culture and various legal developments, in which it is refused to contact people from certain countries13.
In contrast, secondary sanctions are targeted solely at non-USA persons. Secondary sanctions do not require any USA connection. They are intended to dissuade non-USA persons from certain activities carried out outside the jurisdiction of the USA. Rather than imposing civil and criminal fines, secondary sanctions operate by threatening to restrict the non-US person’s access to the USA capital markets or financial system, impose travel bans, freeze U.S.-based assets, and other restrictive measures. The United States of America v. Türkiye Halk Bankası A.S. indictment can be given as an example of this. The sanctions mentioned above are discussed in this indictment and it is claimed that the sanctions anticipated by OFAC "bypass the sanctions"14.
USA economic sanctions are applied as foreign policy instruments and these sanctions may be changed without prior notice, based on the government’s wide margin of appreciation in the interpretation and enforcement of sanctions. The margin also gives the USA the authority to prevent commercial transactions by parties it decides to target. One recent example is that of Rosneft Trading. Rosneft Trading, a subsidiary of Rosneft, one of the bieggest companies in Russia, is currently on the sanction list due to its petrol agreement with Venezuela. The chairman of the board of Rosneft Trading. The chairman of the Rosneft Trading board has also been placed on the sanction list. Howvever, accusations of "double standards" have been made given that no sanctions have been applied to the rival firm, Chevron, which is an American company15. Libya and Gaddafi are other examples. It is claimed that the most important issue blocking the flow of Gaddafi’s funds was the sanctions imposed by OFAC16.
It may be claimed that sanctions can be "excessive". A rift netween McDonald’s and OFAC occurred when organizations purchasing services and products from McDonald’s were placed on the OFAC list17.
The sanctions mentioned in the examples above may be assessed as effective given the margin of appreciation of the USA government and they may be subject to change. They may also differentiate depending on the characteristics of the related persons and organizations. It is essential to point out that trading with countries on the SDN list published by OFAC may be claimed to be a de facto risky move. It is also argued that one of the aims of the USA with the relevant sanctions is to prevent the inflow of foreign currency into these countries. In this case, similar sanctions may be faced when dealing with countries subject to sanctions18.
Secondary sanctions are applied to nonUSA citizens. These sanctions include denial of Export-Import Bank loans, credits, or credit guarantees for USA exports to the sanctioned entity, denial of licenses for the USA export of military or militarily useful technology to the entity, and denial of USA bank loans exceeding $10 million in one year to the entity. Also, if the entity is a financial institution, a prohibition can be placed on its service as a primary dealer in USA government bonds. In addition, each counts as a single sanction liable to prohibition on its serving as a repository for USA government funds, to prohibition on USA government procurement from the entity, and to prohibition on transactions in foreign exchange by the entity. Any credit or payments between the entity and any USA financial institution can be prohibited and, furthermore, the sanctioned entity can be prohibited from acquiring, holding, using, or trading any USA-based property in which the sanctioned entity has an interest. An example of a restriction on imports from the sanctioned entity can be a ban on a USA person from investing in or purchasing significant amounts of equity or debt instruments of a sanctioned person. Also, corporate officers or controlling shareholders of a sanctioned firm can be banned from entering the USA. The imposition of any of the above sanctions may be applied to principal officers of a sanctioned firm.
IV. CONCLUSION
OFAC began to play a critical role in international trade by using its authority to impose various restrictions on the economic activities of natural or legal persons inside and outside the USA, in order to align strategic decisions of state and non-state actors with USA geopolitical aims. The effectiveness of OFAC greatly increased due to most international contracts in the near future and some national contracts adopting the U.S. dollar as their currency, thereby ensuring the economic arena is dominated by the USA. The economic sanctions imposed by OFAC are foreign policy tools applied by USA to other countries, which, since they may be changed without prior notice, may severely restrict the trade areas and economic freedoms of those countries. The wide range of areas to which secondary sanctions are imposed by the USA as an economic tool, and the wide margin of appreciation of the administration in this regard, also reduces the predictability of these sanctions. The policy pursued by the USA has caused damage both at national and international lev - els. Since there is a possibility that persons or organizations subject to these sanction may face high fines if they establish a commercial relation with any company, the U.S. is now even able to control some actions of persons and legal persons beyond its jurisdiction. Although these sanctions do not include legal and criminal penalties, there is a threat of restrictions on their access to the USA market and financial system, and, as a result, these sanctions have increased the dominance of the USA on the world economy.
BIBLIOGRAPHY
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FOOTNOTES
1 Robert Eyler, Economic Sanctions International Policy and Political Economy at Work, Palgrave, Macmillian, 2007, p. 4.
2 Eyler, p. 2.
3 Eyler, p. 2.
4 Eyler, p. 2.
5 For further information, see, Ali Z. Marossi / Marissa R. Bassett, Economic Sanctions Under International Law, Springer, Netherlands 2015.
6 Marossi, s. V.
7 Eyler, p. 2
8 US Department of the Treasury Organizational Structure, https:// www.treasury.gov/about/organizational-structure/offices/pages/ office-of-foreign-assets-control.aspx (Access Date: 17.03.2020).
9 OFAC Frequently Asked Questions, treasury.gov/resource-center/faqs/ Sanctions/Pages/faq_general.aspx (Access Date: 03.03.2020).
10 The Reports regarding the Iranian sanctions prepared by Republic of Turkish Tehran Embassy Commercial Consultancy please see https://ticaret. gov.tr/yurtdisi-teskilati/guney-asya/ iran/pazar-bilgileri/abd-yaptirimlari (Access Date: 03.03.2020).
11 Tracy J. Chin, “An Unfree Trade In Ideas: How OFAC’s Regulations Restrain First Amendment Rights” (Unfree Trade In Ideas), New York University Law Review, December 2008, V. 86, P. 6, y. 1886.
12 Chin, Unfree Trade In Ideas, Y. 1910.
13 Citizenship regulation adopted in India, common and uncommon beliefs were counted and Muslims were not counted. Therefore, Muslims are prevented from obtaining the citizenship. The USA did not react to this situation unlike Donald Trump paid an official trip to India. For detail information please see: https://www.usatoday. com/story/news/politics/2020/02/25/ trump-india-doesnt-take-position-caacitizenship-law/4865556002/ (Access date: 02.03.2020)
14 Please see for relevant indictment https://www.justice.gov/opa/press-release/file/1210396/download (Access date: 03.03.2020).
15 Olga Yagova / Natalia Chumakova / Dmitry Zhaddinnikov, “Rosneft faces logistics headache over sanctioned Swiss oil trader”, https:// www.reuters.com/article/us-rosneftoil-sanctions/rosneft-faces-logisticsheadache-over-sanctioned-swissoil-trader-idUSKBN20F2SQ (Erişim Tarihi: 03.03.2020); Latest Rosneft Sanctions Ratchet Up U.S. Threats for Foreign Firms Dealing With Venezuela https://www.nytimes.com/ reuters/2020/02/19/world/asia/19reuters-venezuela-politics-usa-rosneft. html(Access date: 03.03.2020).
16 Serdar Acar, Ekonomik Yaptırımlar, Vedat Kitapçılık, İstanbul 2015, P. 472.
17 Terrence J. Lau, “Triggering Parent Company Liability Under United States Sanction Regimes: The Troubling Implications of Prohibiting Approval and Facilitation”, American Business Law Journal, Volume 41, Issue 4, Summer 2014, I. 426, naklen Serdar Acar, P. 391.
18 Report on the Recent Developments Economic Sanctions Implemented in Iran https://ticaret.gov.tr/ data/5b8e43c813b8761b8471b9f6/ iran%20yaptirimlar%20notu%20internet%20icin%2023012020.pdf (Access Date: 03.03.2020).
