CEPR Sanctions Watch February 2023

February 28, 2023

In this edition of Sanctions Watch, covering February 2023: a Federal Judge rules that 9/11 victims are not entitled to Afghanistan’s frozen assets; calls grow to remove Cuba from the State Sponsors of Terror list; sanctions fuel record depreciation and food price inflation in Iran; polling reveals US public supports ending “maximum pressure” approach to North Korea; the EU readies its tenth package of sanctions on Russia; humanitarian and faith-based organizations call for Syria sanctions relief following devastating earthquake; UN high commissioner says sanctions hurt human rights in Venezuela; and a new poll finds that a majority of Americans support reviewing US sanctions policy.

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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.

A Federal Judge ruled this month that the Afghan central bank’s US-based frozen reserves could not be used to compensate families of victims of the September 11 attacks. The decision, which comes after months of litigation, was lauded by Afghan diaspora groups and other 9/11 victims’ families as a step toward the eventual return of the assets to the Afghan people. While the victims’ families deserve justice, noted Arash Azizzada, co-founder of Afghans for a Better Tomorrow, “justice will not be served by raiding the coffers of a people suffering from one of the worst humanitarian crises on the planet.” However, an expected appeal is likely to keep the $3.5 billion tied up for months, if not years, to come.

The other $3.5 billion remains in the control of the US-sponsored Afghan Fund, which has yet to report progress in beginning operations. The prospects for diplomatic engagement with the Taliban government continue to deteriorate following the Taliban’s announcement of additional draconian restrictions on women. As one famed Afghan woman activist and Nobel Peace Prize nominee pleaded for constructive engagement, the State Department announced new visa restrictions on certain members of the government. The people of Afghanistan, meanwhile, continue to suffer the double punishment of Taliban rule and US financial restrictions; per a recent report from Doctors Without Borders, “the chilling effect of the sanctions, combined with development funding gaps and frozen assets overseas, continue to negatively affect the whole economy, with ordinary Afghans bearing the brunt.”

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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, travel, 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.

Following President Biden’s controversial decision to expand Title 42 expulsions last month, the number of Cuban migrants arriving at the southern border dropped by 85 percent. Of those Cuban migrants that were encountered, 41 percent, roughly 6,500 people, were expelled. Those with the financial means and connections to do so have sought to take advantage of a new humanitarian parole program instead, but some Cubans seeking access to the program have encountered an unexpected constraint: as a result of the embargo, they have been blocked from accessing the online services of a major nonprofit that supports sponsorship and resettlement.

Meanwhile, the dire economic conditions that have compelled many to flee driven in significant part by US sanctions remain as critical as ever, and rolling blackouts, also caused in part by the embargo, may soon be returning. The distressing state of the economy has prompted new calls for the lifting of sanctions, including from multiple Latin American leaders who met separately with Cuban officials this month: Mexican president Andrés Manuel López Obrador, Colombian vice president Francia Márquez, and Belizean prime minister Johnny Briceño the latter two objecting particularly to the baselessState Sponsor of Terror” designation imposed under President Trump. Such statements raise the question of an often neglected aspect of the embargo: its negative impact on US relations with countries throughout the region. Perhaps a change in policy is coming, however. Following his State of the Union address this month, President Biden was caught on a live microphone telling hardline embargo-supporter Senator Bob Menendez, “I gotta talk to you about Cuba.”

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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. The European Union also maintains certain trade and financial sector sanctions on Iran.

Iran’s currency hit an all-time low this month, reaching a milestone rate of 500,000 rials to the US dollar. As Al Jazeera reports, “one US dollar changed hands for less than 40,000 rials less than five years ago, when the US unilaterally abandoned Iran’s 2015 nuclear deal with world powers and imposed punishing sanctions.” With inflation reaching 50 percent 70 percent for food and the majority of Iranian youth unemployed, many everyday Iranians are left struggling to meet their basic needs.

The International Atomic Energy Association, meanwhile, reports that Iran has reached new levels of uranium enrichment, though it has not yet achieved weapons grade. With the Iranian people suffering economically, prospects for nuclear proliferation closer than ever, and the recent wave of protests largely snuffed out, critics contend that it is clear that the “maximum pressure,” sanctions-heavy approach led by President Trump, and continued under Biden, has failed. Though negotiations for a return to the nuclear agreement the only approach with a proven record of success remain at an impasse, some argue that an interim agreement may help to salvage it. Also this month, the EU announced new sanctions on 32 individuals and entities this month, including the ministers of culture and education, though it stopped short of designating the Iranian Revolutionary Guard Corps as a terrorist organization a long-debated but controversial measure. 

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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. 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 and its own.

Following a visit to Seoul from US Defense Secretary Lloyd Austin, during which he pledged to strengthen military cooperation and joint exercises with South Korea, the North Korean government warned that the peninsula may soon cross an “extreme red line.” Days later, Pyongyang conducted a long-range missile test, firing the weapon into the sea of Japan. South Korea responded with additional sanctions on Singaporean and South African entities allegedly linked to the development of the weapons.

In a new book, former Los Alamos National Laboratory director Siegfried Hecker argues in favor of a de-escalatory approach to North Korea, citing decades of failed overreliance on adversarial tactics. New polling indicates that the majority of the US public would support such a shift: 68 percent of respondents would support a meeting between the US and North Korean leaders; 58 percent believe the US government should offer “diplomatic and economic incentives” in exchange for steps toward denuclearization; and 52 percent believe the United States should seek a peace agreement to formally end the Korean War. Such a change in approach, including the lifting of sanctions, would come as relief to the North Korean people, who experts warn may be facing a food crisis as a result of poor weather, post-COVID border controls, and sanctions. According to some analysts, food security in North Korea is at its worst since its deadly famine in the 1990s.

For more on what an alternative approach to North Korea would look like, join Women Cross DMZ’s March 1 webinar, “Laying out a roadmap for peace in Korea in 2023.”

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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.

The second Russian oil price cap took effect on February 5, along with the EU’s near-total ban on Russian refined oil products. With only a few weeks of data, its effects so far are ambiguous; Russian oil output is only down 160,000 barrels per day (bpd) from prewar levels thanks to increased shipments to other buyers like China and India. However, Russia announced an upcoming decrease of 500,000 bpd in crude production, and the international energy agency contends that the price cap is eating into Russian revenue. Also this month, the European Union is preparing its tenth sanctions package since the start of the war, potentially targeting Russian rubber and diamonds, and individuals alleged to be responsible for the deportation of Ukrainian children. The United States has turned its focus toward punishing third parties accused of helping Russia evade its sanctions. In particular, as sanctions appear to have pushed Russia and China toward closer cooperation, Treasury Secretary Janet Yellen has warned China of “serious consequences” for any involvement in sanctions evasion — another potential front of hostility in a brewing new Cold War.

The one year anniversary of the Russian invasion this month also prompted reflections on the effects and effectiveness of sanctions thus far. As has now long been evident, early promises that sanctions would have an immediate, dramatic impact not only on the Russian economy but on the Russian government’s behavior have proven incorrect. Instead, the apparent objective has shifted toward a long-term war of attrition and the slow degradation of Russia’s economic base — a process that would undoubtedly hurt Russian citizens and for which there is no clear link to improved prospects for peace in Ukraine. As a top EU official put it this month: “The sanctions are a slow-action poison, a little bit like arsenic.”

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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,” which was 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.

When a 7.8 magnitude earthquake hit Syria and Turkey this month, killing at least 45,000 people and affecting hundreds of thousands more, humanitarian and faith groups like the Presbyterian Church, the American-Arab Anti-Discrimination Committee, the Middle East Council of Churches, and the UN special rapporteur on unilateral coercive measures were quick to call on the Biden administration to suspend its unilateral sanctions on the country. These sanctions have had significant adverse impacts on everyday Syrians and the operations of humanitarian organizations even before this disaster hit, the groups argued, and while they are not the sole source of delays in humanitarian aid, in the context of an earthquake that demands urgent action, they can be particularly lethal.

While the Biden administration did issue a general license, it did so nearly three days after the earthquake hit, at the end of the 72-hour window that most consider critical to rescue efforts. Though the license was well received, many, including a group of 16 national faith organizations, stated that it didn’t go far enough, and that its six-month lifespan is far too short for a recovery that is expected to take years. Others argue that the mere fact that a license needed to be issued post facto is a tacit admission that sanctions hinder humanitarian activity and affect everyday Syrians, and that this disaster should be a moment to rethink the sanctions regime on Syria entirely.

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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 sanctions 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. 

At the conclusion of a visit to Venezuela in late January, UN High Commissioner for Human Rights Volker Türk condemned the humanitarian impact of US sanctions on the country: 

I heard from across the spectrum of people I spoke to, including humanitarian actors and UN agencies, about the impact of sectorial sanctions on the most vulnerable segments of the population and the hurdles sanctions create for the country’s recovery and development, not least in the wake of the Covid-19 pandemic. People I met described their struggle to get basic and essential products to sustain their livelihoods, the impossibility of finding medicines their loved ones so badly need, and the mental impact, anxiety, and depression of falling ever further into debt to survive… While the roots of Venezuela’s economic crisis predate the imposition of economic sanctions, as I highlighted in my interactions, it is clear that the sectorial sanctions imposed since August 2017 have exacerbated the economic crisis and hindered human rights.

Chevron continues to use its temporary license to export oil from Venezuela, shipping nearly 3 million barrels of crude to the United States this month. But Venezuela has struggled to ramp up production as a result of deteriorated infrastructure (which is also the cause of considerable environmental destruction) and a lack of new investment — both of which are attributable in large part to sanctions. While the United States granted Trinidad and Tobago a license to develop a Venezuelan oil field last month, the island nation and Venezuela have not yet come to an agreement on the arrangement, and Venezuelan president Nicolás Maduro has decried the license’s stipulation against cash payments as “colonialism.” Other Caribbean countries like the Bahamas and Antigua and Barbuda are keen to gain access to Venezuelan oil as well, prompting some of the region’s leaders to call for the lifting of sanctions on the country.

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According to new polling, most of the US public favors rethinking current US sanctions policy. The majority of respondents believe that the United States should lift sanctions if they violate international law, interfere with humanitarian aid, damage the economic activity or livelihoods of ordinary citizens, or hinder cooperation on climate change — descriptions that are arguably applicable to almost all of the United States’ broad economic sanctions regimes. In each case, where previous polling is available, support for lifting sanctions has grown in the last few years.

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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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