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Pillsbury Winthrop Shaw Pittman LLP
Evolving U.S. Economic Sanctions and their Legal Implications – Cuba, Iran, Russia and Burma
Christopher R. Wall
July 2015
U.S. Economic Sanctions - Overview
Administered by U.S. Department of the Treasury, Office of Foreign Assets
Control (OFAC).
Statutes, executive orders and regulations for each program
International Emergency Economic Powers Act (IEEPA)
Trading With The Enemy Act (TWEA)
Generally apply to U.S. persons
U.S. citizens
Individuals physically present in the U.S.
U.S. companies and overseas branches
Cuba sanctions also apply to foreign subsidiaries of U.S. companies,
Iran sanctions hold parent companies responsible for actions of subsidiaries
that would violate sanctions if engaged in by parent company.
Berman Amendments exemption for information and travel (except Cuba).
1 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
U.S. Economic Sanctions – Overview (cont.)
Country Sanctions
Cuba
Iran
Russia
Sudan
Syria
Old/Partial Regimes
Burma
Libya
Balkans
Sierra Leone
Liberia
Iraq
Belarus
2 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Targeted Entities
Terrorists
Terrorism List Governments
Foreign Terrorist Organizations
Narcotics Traffickers
Persons Engaged in the Proliferation of WMD
Specially Designated Nationals and Blocked Persons (“SDN List”)
Identifies individuals, entities, and vessels with whom U.S. persons may not trade
and blocks property of these parties.
Entities in which a designated person owns 50% or more interest are also blocked
even if entities themselves are not listed.
3 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Types of Sanctions
Comprehensive economic sanctions (i.e., Iran, Syria, Cuba, Sudan, Syria)
prohibit:
U.S. export/import trade with target country/SDN
Investment in target country
Dealings in property of target country/SDN
Most sanctions programs require blocking property of sanctioned
government or listed person/entity.
Banks must freeze funds received and notify OFAC.
Transactions denominated in U.S. dollars clearing through U.S. banks even
if no U.S. persons involved in underlying transaction (property interest and
export of services).
Foreign banks prosecuted for hiding role of sanctioned parties in such
transactions,
Each program is different - must examine specific regulations
4 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Prohibited Facilitation
U.S. persons may not “facilitate” activities by non-U.S. persons that would be
prohibited for U.S. persons, such as:
Approving a transaction or participating in contract negotiation/performance
Furnishing any kind of transactional support
Advising on how to structure a transaction
Referring sanctioned country business to non-U.S. entity
OFAC construes “facilitation” broadly
5 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Cuba
Embargo in place since 1963 – total blocking regime.
Prohibits U.S. persons (including foreign subsidiaries of U.S. companies) from
engaging in any transaction in which Cuba or a Cuban national has an
interest.
Cuban Assets Control Regulations – codified in statutory form in 1996 Helms-
Burton Act.
Limited OFAC licensing authority at the time for travel to Cuba for certain
humanitarian and cultural activities, telecommunications services, journalism,
family remittances, etc.
Current Cuba Policy
Presidential announcement in December 2014 and publication of OFAC and
Commerce Department regulations in January 2015.
Embargo remains in place but greatly expanded licenses for travel,
remittances and other types of economic activity, including:
6 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Cuba (cont.)
Cuba - New Activities Permitted
Exports under License Exception SCP (Support for the Cuban People)
Exports under License Exception CCD (Consumer Communications Devices)
OFAC general license for telecommunications services
Internet services and exports
Imports of Cuban goods and services from private sector
Travel and travel services
Banking and credit cards
Remittances
Other support for private business
Cuban nationals in third countries or the United States
Transactions other than those specifically authorized are still prohibited.
Lifting the embargo will require Congressional action.
7 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Iran
Iranian Transactions and Sanctions Regulations generally prohibit:
Trade (import/export)
Services to or from Iran and dealing in services from Iran
New investment
Transactions with blocked parties
Transactions with Iranian financial institutions or the Central Bank of Iran
Transactions with the Government of Iran
Facilitation by U.S. persons
“Secondary” Extraterritorial Sanctions and Special Provisions
Prohibitions on foreign companies making investments in petroleum sector
Sanctions against foreign countries that do not reduce purchases of Iranian oil
Prohibitions on certain transactions by foreign financial institutions
Subsidiary liability – U.S. parent can be fined for actions by subsidiary that
violate Iran sanctions
SEC reporting for certain Iran-related activities of affiliates
8 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Iran - Joint Plan of Action
Sanctions relief for Iran during nuclear negotiations – in effect since January
2014.
Primarily related to “secondary” extraterritorial sanctions implemented under
executive orders.
U.S. forbearance in not imposing sanctions on foreign financial institutions that
conduct transactions related to exports of Iranian petrochemical products.
Temporary suspension of sanctions on Iranian auto industry.
Temporary suspension of sanctions on gold and precious metals.
OFAC licensing for the supply and installation of spare parts for civil aviation
(available for U.S. and non-U.S. persons).
Pause in U.S. efforts to further reduce Iran crude oil exports below current
levels and continued waiver for certain countries continuing to purchase
Iranian oil.
9 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russian and Burma
Iran - Joint Plan of Action (cont.)
Iranian commitments
Reduction in stocks of enriched uranium and no new enrichment over 5%.
No enrichment activities at Fordow and Arak facilities and no new enrichment
locations.
No reprocessing or construction of facilities for reprocessing.
Enhanced IAEA monitoring and reporting.
10 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Iran Nuclear Agreement Review Act of 2015
Amendment to Atomic Energy Act of 1954
Requires President to submit to Congress within five days of concluding an
agreement a package containing: (1) agreement, (2) verification assessment
report, and (3) certification that the agreement meets U.S. non-proliferation
objectives and ensures that Iran’s nuclear related activities will not be used
to advance military or explosive purposes.
Congress has 30 days to review package if submitted before July 10, 2015 or
60 days if submitted between July 10 and September 7, 2015
May enact joint resolution of disapproval or take no action.
President’s veto may be overridden by 2/3 vote of both Houses of Congress –
no sanctions relief during legislative process.
11 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Iran Nuclear Agreement Review Act of 2015 (cont.)
Issues
Duration of agreement – temporary halt in Iranian weapons development
Pace of lifting sanctions – immediate or phased.
Nuclear sanctions vs. terrorism, WMD human rights and other sanctions
Full Iranian accounting of past nuclear weapons activities
Inspection of military and research facilities
“Snap-back” of sanctions
Role of United Nations Security Council (Russian and China veto)
12 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Russia – SDN Designations
Persons who have asserted governmental authority over a region of Ukraine
without the authority of the Ukraine government and leaders of an entity
engaged in such activity, including:
Luhansk People’s Republic
Donetsk People’s Republic
Officials of the Russian government and business leaders, including:
Gennady Temchenko
Arkady and Boris Rotenberg
Yuri Kavalchuk
Igor Sechin (President and Chairman of Rosneft)
Entities operating in the arms or related materiel sector, including:
Kalishnikov Concern
United Shipbuilding
Almaz-Antey GSC
13 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Russia – SDN Designations (cont.)
Bank Rossiya
Personal bank for senior Russian officials
Provides corporate services, including in the oil, gas and energy sectors as
well as retail services.
Correspondent relationships with banks around the world
U.S. credit card issuer
Wide array of entities owned or controlled by these SDN’s (50% rule)
14 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Russia Sectoral Sanctions – Directives 1 - 2
Financial Institutions – extension of credit to listed entities of longer than 30
days or new equity
Bank of Moscow
Gazprombank
Russian Agricultural Bank
VEB
VTB
Sberbank
Oil and Gas – extension of credit to listed entities of longer than 90 days
OAO Novatek
Rosneft Oil Company
Gazpromneft
Transneft
15 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Russia Sectoral Sanctions – Directive 3
Defense - extension of credit to listed entities of longer than 30 days or new
equity
Rostec
U.S. Commerce Department, Bureau of Industry and Security (BIS) prohibits
exports/reexports of certain items listed in the Export Administration
Regulations (EAR) to military end-users in Russia.
16 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Russia Sectoral Sanctions – Directive 4
Prohibits U.S. persons from providing, exporting or reexporting directly or
indirectly goods, services (except financial services) or technology to listed
entities in support of:
Exploration or production from deep water (greater than 500 ft.), Arctic
offshore, or shale projects that have the potential to produce oil in or offshore
Russia.
Listed entities include Gazprom, Gazpromneft, Lukoil, Rosneft, Surgutneftgas.
BIS also prohibits exports/reexports of items subject to the EAR.
Listed items include pipes, tubing, casings, etc. used in oil drilling and
production as well as oil and gas exploration data and software (not limited to
listed entities).
Exporter knows or is unable to determine whether the item will be used directly
or indirectly in exploration for, or production of, oil or gas in Russian deep
water, Arctic offshore or shale formations in Russia.
Entity List designations.
17 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Russia - Crimea Executive Order 13685
Blocks property of designated entities operating in the Crimea region of
Ukraine and prohibits:
New investment in the Crimea region of Ukraine
Exports to and imports of goods, services or technology to/from the Crimea
region of Ukraine
Approving, facilitating, financing or guaranteeing such transactions
Issues related to screening transactions involving a region rather than an
entire country.
18 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Burma – General Licenses
Easing of sanctions in conjunction with democratic reforms General License 16 authorizes export/reexport of financial services to Burma,
subject to limits on dealings with blocked persons, Ministry of Defense and
state and non-state armed groups.
General License 17 authorizes new investment in Burma, subject to limits on
dealings with blocked persons, Ministry of Defense and state and non-state
armed groups.
Requires annual reports to State Department if aggregate investment
exceeds $500,000.
Requires State Department notification of agreement with Myanma Oil
and Gas Enterprise (MOGE)
General License18 authorizes importation of Burmese products except for
jadeite or rubies mined or extracted from Burma or jewelry containing such
jadeite or rubies.
General License Number 19 (incorporated in Burmese Sanctions Regulations)
authorizes dealings with four Burmese banks designated as SDN’s.
19 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma
Burma – Remaining Sanctions
Remaining sanctions on Burma prohibit only:
Dealing with blocked persons and entities owned or controlled by blocked
persons
Dealing with Ministry of Defense and armed groups that involve
export/reexport of financial services or new investment in Burma
Some imports still prohibited
Facilitation by U.S. persons of prohibited activities
20 | Evolving U.S. Economic Sanctions and their Legal Implications –
Cuba, Iran, Russia and Burma