CEPR Sanctions Watch July 2023

July 31, 2023

In this edition of Sanctions Watch, covering July 2023: 

  • The House of Representatives passes an amendment that would block future sanctions relief for Afghanistan;
  • EU and Latin American leaders condemn Cuba embargo as sanctions fuel Havana water shortages;
  • New report finds Iran sanctions hurt everyday people, and disproportionately women and ethnic minorities; 
  • Activists call for peace agreement and sanctions relief for North Korea amid heightened tensions and 70th anniversary of armistice; 
  • Black Sea grain deal collapses due in part to Russia sanctions overcompliance; 
  • Post-earthquake sanctions exemptions for Syria are set to expire without Biden administration action;
  • Caribbean leaders call on US to lift Venezuela sanctions;
  • The New York Times Editorial Board critiques US overreliance on sanctions, and more.

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Background: Since the Taliban takeover in 2021, the Biden administration has blocked Afghanistan’s central bank from accessing roughly $7 billion of 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 central bank of Afghanistan has reportedly failed a USAID-funded audit intended to determine whether it meets United States conditions for returning a portion of its frozen assets from the Afghan Fund. The US government has not explicitly stated its criteria beyond the absence of “political interference” and “adequate” anti-money-laundering and counterterrorism controls, and the results of the audit have not been released, not even to members of the US-backed Afghan Fund’s Board.

The House of Representatives passed an amendment to the National Defense Authorization Act that would prohibit any easing of sanctions on Taliban-linked entities without an act of Congress. Given the Taliban’s control of the country, the legislation would have far-reaching implications for the entire Afghan economy, and would even undermine minor future sanctions exemptions for humanitarian relief. The amendment, led by Rep. Scott Perry (R-PA), passed largely along party lines, with more than 20 Democrats joining Republicans in support. The bill will now go to the Senate. 

In an op-ed in Foreign Policy, Afghan attorney Wazhma Sadat, who grew up under Taliban rule, makes the case that economic sanctions primarily harm innocent civilians, while failing to change the behavior of the Taliban. Underscoring this point, the isolated Taliban government imposed new restrictions on women this month, ordering the closure of beauty salons that provide a rare source of financial independence for Afghan women. 

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Background: 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.

Over 50 scholars, including renowned economists such as Jayati Ghosh, Ha-Joon Chang, Martín Guzmán, and Jomo Kwame Sundaram, sent a letter to Senator Bob Menendez (D-NJ) arguing that US sanctions greatly harm civilians in Cuba and Venezuela, and thereby drive migration to the US. The letter came in response to Menendez’s strong public criticism of a letter signed by 20 House representatives calling on President Biden to lift sanctions against Venezuela and Cuba to reduce the outflow of migrants from those countries. In his response to the representatives, Menendez claimed that sanctions play no role in migration, but, as the economists and scholars pointed out, the senator “[failed] to cite any research or evidence” to support his assertion. “If you truly believe in protecting the human rights of ordinary Cubans and Venezuelans,” the scholars added, “you should stop leveraging your considerable power in the Senate to maintain the cruel measures that cause profound human suffering, fuel humanitarian emergencies, and push many more people to migrate to the US.”  

In a statement following a summit in Brussels this month, leaders of the European Union (EU) and the Community of Latin American and Caribbean States unanimously decried the US designation of Cuba as a “State Sponsor of Terrorism” and reiterated their support for the annual UN resolution condemning the embargo of Cuba. Cuban entrepreneurs also called for the lifting of sanctions this month, citing their negative impact on small- and medium-sized enterprises.

Over 100,000 Havana residents were left without water in the summer heat this month as a result of the city’s aging infrastructure, driven in part by the difficulty in obtaining parts and carrying out maintenance, due to sanctions. The water shortages come amid a devastating ongoing economic crisis — according to Cuba’s economy minister, growth this year is 8 percentage points below pre-pandemic levels, and inflation has reached 45 percent. 

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Background: 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.

A new report by the Bourse & Bazaar Foundation finds that ordinary Iranian civilians are profoundly impacted by economic sanctions. Between 2010 and 2020, the average household expenditure decreased by one-fifth, with a brief rise in welfare during the 2016–2017 period of sanctions relief. The impacts of the sanctions fell most heavily on public sector workers and typically poor rural agricultural workers, and disproportionately harmed women and ethnic minorities. By contrast, “companies, wealthier individuals, and the government were able to disproportionately offload the cost of economic restructuring onto working families and consumers.” 

There has been no sign of progress in previously reported backchannel talks between the US and Iran this month. The talks, aimed at easing tensions and finding mutual areas of agreement short of a return to the nuclear deal, including possible sanctions relief, may be stalled after Special Envoy Rob Malley was placed on leave for allegedly mishandling classified material. Tensions in the Gulf, and additional sanctions on Iraqi banks — aimed at cracking down on the flow of US dollars to Iran — point to strained relations.

Meanwhile, the EU announced new restrictions on exports to Iran for its alleged role in providing drones to Russia, and in October the UK and other European powers reportedly plan to breach the Iran nuclear deal for the first time by extending sanctions that were set to expire. An anonymous EU official reports, however, that a window of opportunity remains. UN political affairs chief Rosemary DiCarlo told the UN Security Council that a return to the deal remains “the best available option for ensuring the exclusively peaceful nature of Iran’s nuclear programme, as well as for allowing Iran to reach its full economic potential.”

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North Korea

Background: 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.

The familiar pattern of military escalation continued on the Korean peninsula this month. Following a test of an advanced, solid-fueled intercontinental ballistic missile, the North Korean ambassador to the United Nations made a rare appearance at the UN, defending the actions as a response to joint US-South Korean aerial drills and US plans to deploy a nuclear-armed submarine to the peninsula. The United States carried through with its plans, docking a nuclear-armed submarine in South Korea for the first time since 1981, to which North Korea responded with short-range missile tests. The following week, a second submarine — this time nuclear-powered but not nuclear-armed — arrived in South Korean waters.

The heightened tensions underscore the failures of the status quo approach to North Korea as advocates and experts marked the 70th anniversary of the signing of the Korean Armistice Agreement. Hundreds of peace activists, including veterans, religious leaders, and people with relatives in North Korea organized by Women Cross DMZ, used the occasion to denounce the harms of the sanctions- and military-first approach to Korea, and to call for a peace agreement. As Women Cross DMZ’s Christine Ahn said to the Washington Post, “We know that the past 30 years of sanctions [against North Korea] and military exercises and isolation have failed.”

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Background: 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 United States announced a large batch of new Russia-related sanctions this month, targeting 120 people and entities tied to the energy, mining, shipping, and defense sectors, as well as separate designations against a top Serbian intelligence official, and Mali’s minister of defense, for alleged ties to the Russian government and the Wagner Group, respectively. The United Kingdom similarly sanctioned 13 individuals and businesses with alleged Wagner ties in the Central African Republic, Mali, and Sudan, and 13 Russian officials, including the minister of education, for alleged involvement in the forced deportation of Ukrainian children. Canada announced new sanctions against 39 individuals and 25 entities tied to the military, the nuclear sector, and a Russian government-sponsored cultural program that uses celebrities to encourage support for the war. The EU extended existing sectoral sanctions on Russia, first imposed in 2014, for another six months.

The Black Sea Grain Initiative — which helped address the war’s global spillover effects by allowing Ukraine to export grain without Russian interference, in exchange for lifting EU and US sanctions on Russian fertilizer and agriculture — fell apart this month. President Putin claims that the EU and US have not held up their end of the deal; while the sanctions exemptions are technically in place, in a typical example of sanctions overcompliance, many corporations still refuse to engage with the Russian agricultural sector.

Also this month, Russian oil traded for over $60 a barrel for the first time since the price cap was imposed — a sign that Russia is adjusting to restrictions, and that the celebrated double-victory of limiting Russian oil revenue without impacting global oil prices may have been short-lived. 

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Background: 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.

In a new op-ed for The Hill, CEPR senior research fellow, and author of “The Human Consequences of Economic Sanctions,” Francisco Rodríguez argues that the Assad Regime Anti-Normalization Act would “further punish millions of innocent Syrians” while doing little to contribute to US policy goals in the country. Voting on the bill, initially believed to be planned for this month, has been delayed until at least September.

The European Union has agreed to extend its humanitarian sanctions exemptions, formed in response to February’s earthquake, by six months. The US’s exemptions, which have been criticized for being insufficient in scope and timeline, are set to expire on August 8. Republican lawmakers recently wrote to President Biden, urging him to allow the exemptions to expire, while the Carter Center issued a report highlighting the exemptions’ importance and calling for their extension. When asked about sanctions’ impact on humanitarian operations, UN humanitarian and emergency relief chief Martin Griffiths noted that sanctions “have … an impact on the lives of ordinary people.” He added: “I don’t think you’ll find in a group of humanitarians … that you’ll find a huge amount of support for sanctions anywhere.” 

The Syrian pound hit its lowest-ever point this month, against the backdrop of a wide economic crisis. According to Reuters, which cites sanctions as a leading cause of the country’s economic challenges: “The United Nations says more than 15 million people need aid across the country — a record number. GDP has dropped by more than a half between 2010 and 2020, the World Bank says, and an ever-declining local currency fuels inflation.”

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Background: 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. 

Leaders of Caribbean nations called for the lifting of US sanctions on Venezuela this month, noting that their nations, too, suffer at the hands of sanctions, as a result of increased oil prices. “Not only are these sanctions illegal,” said Barbadian CARICOM ambassador David Comissiong, “not only have they severely damaged the nation of Venezuela, the welfare and wellbeing of the people of Venezuela, but they are also damaging the developmental prospects of countries like Barbados…”  

As described in the Cuba section above, more than 50 leading economists, historians, and political scientists sent a letter to Senator Bob Menendez (D-NJ) this month citing the near-total academic consensus that US sanctions greatly harm civilians in Cuba and Venezuela. The authors of the letter call for the lifting of sanctions on both countries in order to lessen civilian suffering, and to address a root cause of migration to the US. Separately, Congressman Jim McGovern called for an easing of sanctions on Venezuela, stating: “Democracy and civil rights will not be advanced by maintaining punishing economic sanctions. All that does is continue to hurt people – innocent people.

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Representative Chuy García (D-IL), a longtime critic of US sanctions policy, introduced an amendment to the National Defense Authorization Act that would have required the Treasury or State Department, prior to imposing new sanctions, to certify that they would not increase mortality in the target country. It was not, however, put to a vote by the Republican-controlled Rules Committee.

Also this month, the New York Times published an editorial critiquing the United States’ overreliance on economic sanctions as a “a tool of first resort.” Citing the work of CEPR fellow Francisco Rodríguez, and the CEPR report “The Human Consequences of Economic Sanctions,” the editorial board acknowledged that sanctions can harm targeted populations, and have an extremely low success rate in achieving their purported policy goals. The editorial is particularly critical of US sanctions on Venezuela, and recognizes the impact of sanctions on migration from Venezuela and Cuba. However, the piece neglected to mention the findings of the CEPR report, and of other studies, that broad economic sanctions are directly responsible for far-reaching human suffering, and even mass death (in contrast, a new op-ed by the Institute for Policy Studies’ Phyllis Bennis spotlights just that); nor does it consider, as Congressman Jim McGovern and other sanctions critics have, that economic sanctions may be an often-intentional form of collective punishment. Ultimately, the board makes the case for moderating and improving the efficacy of broad economic sanctions, rather than rejecting the tool outright as illegal and inhumane. (For more on that, read CEPR’s new fact sheet, “The Case Against Economic Sanctions.”)

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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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