CEPR Sanctions Watch November 2023

In this edition of Sanctions Watch, covering November 2023:

  • UN special coordinator says that sanctions have “crippled” Afghanistan’s private sector;
  • UN General Assembly votes 187 to 2 to condemn the US embargo on Cuba while US imposes new sanctions on airlines flying Cuban migrants to Central America;
  • A new World Bank report finds that sanctions helped drive a massive jump in poverty and a “lost decade” of economic growth in Iran;
  • North Korea closes nearly a dozen overseas embassies amid sanctions-related economic difficulties;
  • The EU advances its 12th sanctions package on Russia;
  • UNHCR cites sanctions as an obstacle to timely humanitarian assistance in Syria;
  • Venezuelan and foreign firms move to take advantage of temporary sanctions waiver;
  • Biden removes sanctions on Chinese research institute, and more.

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Background: Following the Taliban takeover in 2021, the Biden administration 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 of central bank assets have also been blocked by European authorities. Along with a cutoff of aid, this asset seizure — representing the near totality of Afghanistan’s foreign reserves — has contributed to a collapse of the country’s economy.

In October, the Pakistani government announced that all undocumented migrants and refugees in its territory, the vast majority of whom are Afghans, would be expelled to their home countries after November 1. Since then, nearly 375,000 Afghans have entered Afghanistan, with many staying in border camps before proceeding to other parts of the country. A total of 1.3 million people are expected to return. Afghanistan is ill-prepared to receive these numbers of returning refugees, not least because of sanctions. Journalist Freshta Jalalzai writes in The Diplomat: “Afghanistan seems poorly equipped to effectively handle a substantial influx of returnees.… [It] is grappling with economic turmoil due to global sanctions, central bank assets frozen by the United States, the departure of nearly all international organizations, and an alarming spike in unemployment after the Taliban takeover of the country in 2021.”

A new independent assessment by a UN special coordinator on the situation in Afghanistan finds that sanctions have “crippled [the] Afghan banking and the private sector” and recommends a path toward greater engagement and normalization with the Taliban government. Along with other measures, the report states that “the international community should move swiftly to identify a solution to the current dilemma of Afghanistan’s frozen assets, revisit the various sanctions regimes, and move toward more permanent economic solutions, such as the recapitalization of [Afghanistan’s central bank].” These measures would be conditioned on the government’s ability to “govern inclusively” and its “acceptance of their obligations and commitments in international conventions, and good faith measures to comply with these through policy, legislation and in practice.”

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Background: The US embargo against Cuba is one of the oldest and most stringent 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.

The UN General Assembly voted this month to call for an end to the US embargo of Cuba, citing its devastating effects on civilian populations and the fact that it is in violation of the UN Charter. The nonbinding resolution passed by a vote of 187 to 2, with only the US and Israel opposed. This marks the 31st time in about as many years that the resolution has passed nearly unanimously. Critics of the embargo cited the vote as evidence of hypocrisy in the US government’s claims to support a “rules-based international order.” Prior to the vote, representatives from around the world, including the EU, expressed their opposition to the embargo. Chilean president Gabriel Boric and Mexican president Andrés Manuel López Obrador also, separately, urged President Biden to end the embargo this month surrounding the inaugural Americas Partnership for Economic Prosperity Leaders’ Summit.

The state of the Cuban economy remains dire, in large part as a result of import shortages. According to Cuban officials, “Production of pork, rice and beans — all staples on the Cuban dinner plate — are down by more than 80% this year over pre-crisis levels and eggs 50%…. It has only been possible to acquire 40% of the fuel, 4% of the fertilizer and 20% of the animal feed required.” A special EU human rights envoy noted this month that the embargo is “hurting the human rights situation because it hurts people on the ground. The people who are impacted are ordinary Cuban citizens who have difficulty accessing food, medicines.” And at a meeting with US officials, the Cuban vice foreign minister highlighted the connection between this sanctions-induced misery and migration from the island to the US. Rather than lifting sanctions to reduce this suffering and migration pressure, the administration this month imposed new sanctions on airlines flying Cuban migrants to Central America.

Also this month, US Senator James Risch (R-ID) introduced a bill to sanction anyone connected to Chinese intelligence bases in Cuba. No evidence has been presented for the presence of such bases, and even the White House denies their existence.

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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.

An alarming new report from the World Bank finds that economic sanctions are a leading cause behind a “lost decade” of economic growth in Iran. According to Bloomberg News, the report states, “sanctions have reversed decades of poverty reduction in Iran.” Between 2011 and 2020, almost 10 million people fell into poverty “from a combination of sanctions, bad economic management and volatile international oil prices.” Sanctions “have had ‘a deleterious impact’ on economic growth and Iranians’ welfare,” it continues, with “women bearing the brunt of the impact.”

Also this month, the Biden administration granted a four-month extension to a waiver issued in July that allows Iraq to deposit energy payments owed to Iran into restricted accounts in both Iraq and abroad. This is the 21st waiver of this type, with the first being issued in 2018 by former president Trump. Despite misleading reports, the waiver does not appear to allow Iran immediate access to the full $10 billion owed to it by Iraq. The administration has also made clear that the use of funds is restricted to nonsanctioned, humanitarian purposes. Nevertheless, the move has been criticized by members of Congress.

Two bills introduced in the Senate this month seek to ramp up enforcement of oil sanctions against Iran and counter China’s evasion of Iran sanctions. The House saw the introduction of one Iran sanctions bill, while another successfully passed. Meanwhile, Florida governor Ron DeSantis signed into law state-level sanctions against Iran, though the Tallahassee Democrat reports that their potential effects are unknown. Finally, after facing pressure from the US and Israel, the EU is reportedly discussing ways to further sanction Iran over its support to Hamas, though members of the bloc are significantly divided on whether or not to do so.

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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.

North Korea announced that around a dozen of its embassies in Spain, Hong Kong, and a number of African countries are closing. While a government official cited “changing global environments and national foreign policy,” North Korea experts and South Korea’s unification ministry point to economic difficulties from international sanctions and the COVID-19 pandemic as the primary reasons, though others say this signals a genuine shift in foreign policy that seeks to intensify relations with Russia and China. Regardless, France 24 notes: “The last time the nuclear-armed country dropped diplomatic missions on this scale was in the mid-to-late 1990s when the country was hit by a famine in which hundreds of thousands of people died.”

The Financial Times reports that Western aerial patrols surveilling North Korea’s evasion of sanctions are increasing tensions with China, which claims that the flights are a pretext to expand the West’s military presence in the Pacific. Even so, South Korea and the UK signed a defense agreement that will allow the two to jointly enforce UN sanctions on North Korea, particularly through sea patrols.

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

The US has sanctioned around 130 firms and people from Turkey, China, and the UAE over their alleged assistance to Moscow in procuring military equipment and dual-use goods. Sanctions were also placed on a dozen Russian companies in the metals, mining, and energy sectors, one of which is heavily involved in the Arctic LNG 2 project, which is expected to produce and ship liquified natural gas to global markets. The Financial Times described this as a “move that could cause disruptions in global energy markets that Washington has so far been keen to avoid.” US allies such as Japan and France, who have firms involved in the project, may be impacted, something Japan has said is “inevitable.” In addition to these sanctions, the US has continued to enforce the G7 cap on Russian oil, with three UAE-based shipping companies having been sanctioned for violating the cap. Furthermore, 10 individuals and 20 entities in Russia and several Balkan countries were sanctioned by the US for “corruption and malign activities” in an effort to counter Russian influence in the Western Balkans.

On November 15, the European Commission submitted to the European Council its proposal for a 12th round of sanctions against Russia. It now awaits approval and reportedly faces pushback over concerns of legality, feasibility, and economic competitiveness. A statement said the proposal aims to sanction over 120 individuals and entities “from the Russian military, defense, and IT sectors, as well as other important economic operators.” It also includes a ban on the import and sale of Russian diamonds, a tightening of oil sanctions, and measures to crack down on sanctions evasion. Also this month, the UK imposed sanctions on 29 individuals and entities “operating in and supporting Russia’s gold, oil and strategic sectors,” according to a government statement. The Czech Republic froze Russian state-owned properties in the country, excluding diplomatic missions, and Canada sanctioned nine individuals and six entities for “their role in the Kremlin-backed orchestration of disinformation and war propaganda.”

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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.

The UN High Commission for Refugees (UNHCR) reports that 70 percent of Syria’s population is in need of humanitarian assistance. In a new factsheet, the agency cites economic sanctions as one of the main challenges to meeting the essential needs of the population: “The current sanctions only allow a certain number of white-listed containers and operators to transport items to Syria, leading to unpredictability in the supply line.” Similarly, in an appeal for assistance for Syrian children before the coming winter cold, UNICEF notes: “the impact of sanctions are further compounding the dire situation.”

In a clear demonstration of sanctions “overcompliance,” the world’s largest shipping company, Maersk — which had helped provide aid in response to this year’s earthquake in Turkey and Syria — announced this month that it would shut down all operations in the country: “With Syria being a highly sanctioned country, business activity has already been very restricted, and Maersk has therefore conducted limited operations in Syria in full compliance with international sanctions. This has recently become even more challenging logistically, and we have therefore made the decision to close our operations down completely.”

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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.

Public and private actors alike have started to take advantage of the easing of sanctions announced by the Biden administration last month following the signing of an election agreement between President Nicolás Maduro and the US-backed opposition. State-owned oil company PDVSA has reached agreements with Swedish, French, Spanish, and Italian firms to reactivate wells and boost production; Venezuela, Shell, and Trinidad and Tobago are nearing a deal to develop a Trinidadian natural gas field; and PDVSA and US-based oil corporation Chevron have expanded the terms of their oil swap arrangements. Given the temporary nature of the sanctions waivers, analysts expect the economic benefits to be limited, but even a marginal increase in revenue is likely to translate to increased social spending for Venezuelans ahead of a general election that’s expected to take place in 2024.

Amid thawing relations, the European Union extended its sanctions on Venezuela this month but shortened the timeline for their reassessment from one year to six months, and Canada has begun to take steps to restore diplomatic ties.

At a meeting at the White House, Chilean president Gabriel Boric — who has consistently expressed concern that “sanctions tend to negatively affect people in countries more than governments” — reportedly praised the easing of sanctions. Chile is among many countries in the region that has seen an influx of Venezuelan migrants since the imposition of US sanctions. The lifting of sanctions is expected to help reduce outflows of Venezuelan migrants, including to the US border, though the Biden administration also controversially paired the sanctions relief with a resumption of deportation flights to the country.

And a new poll from the Florida International University finds that only one-third of Venezuelan Americans think US sanctions have been effective in achieving their goals.

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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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