CEPR Sanctions Watch April 2023

April 27, 2023

In this edition of Sanctions Watch, covering April 2023: US Rep. Greg Casar says US asset freeze helped create Afghanistan’s humanitarian crisis; amid soaring food prices, the US embargo is blocking agricultural exports to Cuba; the World Bank points to sanctions as the cause of sluggish growth in Iran; nuclear envoys call for greater enforcement of UN resolution barring North Koreans from working overseas; the US suggests a total ban of exports to Russia; doctors in Syria say sanctions hinder access to medicine and equipment; Venezuelan opposition envoy to US, and Colombian president Gustavo Petro, call for easing oil sanctions on Venezuela; UN Human Rights Council condemns unilateral sanctions, and more.

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Since the Taliban takeover in 2021, the Biden administration has blocked Afghanistan’s central bank from accessing roughly $7 billion in 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 have also been blocked by European authorities. Along with a cutoff of aid and sanctions on Taliban officials, this asset seizure has contributed to a collapse of Afghanistan’s economy.

The World Food Programme appealed to donors this month as the economic crisis continues to take its toll. As one Afghan businessperson told Al Jazeera, “The sanctions and banking restriction limit Afghanistan’s access to international financial institutions and donors” and create “hesitancy among donors to provide aid to a country under sanctions.” A new report from the Norwegian Refugee Council supports this view, outlining the harms caused by overcompliance: “payment instructions for any international bank transaction that mention Afghanistan get blocked, even for transactions for food shipments via the United Nations.… one European Bank reportedly needed 40–50 staff members to facilitate one financial transaction to Afghanistan.” And a report from the UN Development Programme highlights the role that the asset freeze has played in undermining the Afghan central bank and destabilizing the banking system.

Following the Taliban government’s decision to bar women from working with the UN, the organization is reportedly considering withdrawing from the country altogether, calling the ban “unlawful and an unparalleled violation of women’s rights.” However, the Guardian notes “the potential withdrawal comes amid predictions that the departure of the UN and other agencies could affect women and children most.” At the same time, the UN deputy secretary-general is reportedly planning a conference to discuss potentially recognizing the Taliban as the nation’s legitimate government.

Finally, in a congressional hearing on the US withdrawal from Afghanistan, Congressman Greg Casar of Texas decried the role of US policy in creating Afghanistan’s humanitarian crisis, and questioned the logic behind punishing Afghan civilians for the Taliban’s repression of women: “Today, over half the population of Afghanistan is on the brink of starvation, in part because of actions taken by the U.S. when we froze Afghanistan’s central bank assets… Afghan women activists have pointed out that the economic collapse, caused in part by the asset freeze, overwhelmingly devastates the lives of Afghan women and girls.”

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The US embargo against Cuba is one of the oldest and strictest 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 for a high-level summit on migration this month, in advance of the coming expiration of certain COVID-era migration restrictions at the US-Mexico border. This is the second such meeting since a wave of Cuban migrants began arriving at the US border last year. While no specific outcomes were disclosed, the head of the Cuban delegation blamed the out-migration on the “extreme and inhumane measures” imposed by the United States.

The economic situation in the island nation remains dire. The government announced new measures to ration gasoline this month, and the BBC reports, “Cubans are facing shortages of food, medicines and petrol which have led to long queues forming at shops and petrol stations.” One researcher estimates that inflation exceeded 200 percent in 2022; the anecdote of one Cuban retiree, reported by AFP, is illustrative: “Xiomara Castellanos gets a monthly pension equivalent to $13.80. A carton of 30 eggs in the inflation-battered country costs $14.10 — almost four times more than two years ago.”

As Cubans struggle to pay for basic necessities, US agribusiness representatives touring the country lamented the embargo’s impact on their ability to export food to the island.

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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.

In a new report, the World Bank points to “intensifying economic sanctions” as the main cause of Iran’s ongoing economic challenges, predicting a slowdown from 2.7 to 2 percent growth this year. The gloomy prediction comes amid the continued depreciation of the Iranian rial, and attendant inflation. According to a Stimson Center publication, while the official inflation rate has reached 46.5 percent, the price of some basic necessities, including certain foods, has more than doubled in the last year, making “a decent life … increasingly unattainable.” Medicine, too, is reportedly in short supply.

Late last month, the International Court of Justice ruled that the United States’ 2012 decision to freeze $1.75 billion in Iranian central bank assets for potential compensation to victims of terrorist attacks was a violation of US treaty obligations under the nations’ 1957 Treaty of Amity. However, because the United States terminated this agreement under President Trump, the Court may obligate the United States to pay monetary damages but it cannot order the US to unfreeze the assets.

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North Korea

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 their first meeting in four months, US, South Korean, and Japanese nuclear envoys called for stricter enforcement of sanctions against North Korea, particularly a 2017 UN Security Council resolution banning North Koreans from working overseas. At the time of the resolution’s passage, the New York Times described the ban as a “last test” of the ability of sanctions to deter the country’s nuclear ambitions. Six years later, the country’s weapons program has progressed significantly.

The meeting of the envoys came in response to a flurry of North Korean weapons tests that took place this month, which the Kim government sees as a deterrent against threatening joint military exercises by the US, Japan, and South Korea. At a UN Security Council meeting intended to address the months-long tit-for-tat escalatory spiral on the peninsula, a high-level UN official urged restraint by all parties: “Diplomacy — not isolation — is the only way forward.” The representative from Brazil, while condemning the weapons tests, highlighted the failure of the status quo, sanctions-first approach: “When we say the Council ‘must do more’ we do not mean ‘more of the same.’” Soon thereafter, the United States announced that it would be sending nuclear submarines to South Korea for the first time in 40 years.

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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, with the barring of most financial transactions and of Russian oil and gas imports, and the freezing of Russian assets abroad, among other measures.

G7 ministers pledged this month to intensify sanctions against Russia; one proposal reportedly on the table is a complete ban on exports to the country (with a few humanitarian exemptions). According to unnamed officials, the scheme was advanced by the United States, but was met with skepticism by the EU and Japan who fear economic blowback. The unlikely proposal comes as sanctioning countries seek more ways to squeeze Russia beyond wide-reaching sanctions already in place. Treasury sanctioned over 50 individuals and entities that allegedly enable Russia to import critical technologies; US Treasury officials are reportedly planning a series of trips to encourage countries that have abstained from sanctioning Russia to begin doing so; and the EU is negotiating its eleventh package of sanctions, which it expects to finalize by early May. Among the options under consideration is a Polish and Baltic proposal to penalize Russia’s nuclear energy sector.

New data from the International Energy Agency suggests that Russian oil price caps are working as intended. While daily oil exports are at their highest since April 2020, revenue is down 43 percent from one year ago. The agency’s data does not, however, show that sanctions are effective in modifying the Russian government’s political calculus or in hastening peace in Ukraine.

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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.

The Biden administration announced new sanctions against six Syrian officials and members of Bashar al-Assad’s family late last month for their alleged role in drug production and trafficking, one of the few times that Biden has invoked the Caesar Syria Civilian Protection Act during his presidency. The European Union followed up three weeks later with sanctions on more than 30 individuals and companies. These new sanctions come amid growing regional diplomatic normalization with the Assad government, which the United States and its European allies remain firmly opposed to.

Meanwhile, the earthquake relief and reconstruction effort continues to reveal the humanitarian impacts of US sanctions policy, even as humanitarian aid itself is nominally permitted. “It’s gotten really hard for us under U.S. sanctions,” one senior physician told NPR. “We’ve depleted a large amount of our stockpile of medicine. And in some cases, we can’t fix or upgrade our medical equipment.” NPR reports: “The U.S. says its sanctions target Assad’s regime and not humanitarian assistance. But doctors in Syria say they have trouble importing basic supplies because foreign banks fear financial penalties.”

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While the George W. Bush and Obama administrations adopted sanctions on arms purchases and against Venezuelan individuals, it was under Trump that broad financial sanctions and restrictions on oil exports were implemented, with dramatic effects on Venezuela’s economy. In addition, the United States, the United Kingdom, and some other governments have frozen Venezuelan state assets abroad, and have transferred others to Venezuelan opposition actors.

The Biden administration received pleas from two very different South American political figures to ease sanctions on Venezuela. In what the Associated Press calls a “sharp break” from the “maximum pressure” campaign of the past, the Venezuelan opposition’s new envoy to the United States, Fernando Blasi, urged President Biden to lift oil sanctions to prevent Venezuela becoming “another Cuba”: “It will become an issue for politicians in Florida to win elections. … That would be an extremely sad destiny for a country.” Meanwhile, in a bilateral meeting with President Biden, Colombian president Gustavo Petro also reportedly called for lifting sanctions against Venezuela. Colombia has become the single largest host of migrants fleeing Venezuela’s sanctions-driven economic crisis, and was host this month to a conference on Venezuela’s political crisis.

Valero — the second largest oil refiner in the US — is reportedly seeking a license to import Venezuelan crude oil, following the Biden administration’s November decision to grant a similar license to Chevron. There are no signs of the administration’s position on the matter.

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By a vote of 33 to 13, the UN Human Rights Council passed a resolution this month condemning unilateral coercive measures — i.e., economic sanctions — as undermining the fulfillment of fundamental human rights. Expressing concern about both the humanitarian impacts and dubious legality of unilateral sanctions, the resolution calls on all nations to remove existing unilateral coercive measures and to refrain from imposing additional ones.

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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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