CEPR Sanctions Watch October 2023

November 02, 2023

In this edition of Sanctions Watch, covering October 2023:

  • Sanctions and funding gaps hamper aid and recovery efforts after deadly earthquakes rock Afghanistan;
  • Regional leaders blame sanctions for migration from Cuba and Venezuela;
  • US pauses sanctions relief deal with Iran following Hamas attacks;
  • US claims North Korea shipped weapons to Russia in violation of UN sanctions;
  • The EU greenlights the channeling of profits earned on frozen Russian assets to Ukraine;
  • UN independent Syria expert condemns harmful sanctions as violence escalates;
  • US eases certain oil and financial sanctions on Venezuela following agreement on election conditions;
  • The EU adopts a sanctions framework for Niger, the Southern African Development Community calls for sanctions on Zimbabwe to be lifted, Gaza suffers a catastrophic siege, 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.

A series of earthquakes in northwestern Afghanistan have exacerbated an already dire humanitarian crisis. In addition to the destruction of 21,500 homes, at least 1,950 people have been injured and another 1,480 have lost their lives. Due to the government’s limited capacity, international aid organizations have been primarily responsible for responding to the disaster, but funding gaps have severely impacted their ability to provide aid. In the New Humanitarian, Afghan journalist Ali Latifi writes, “The earthquakes are just the latest natural disaster to test the ability of the Taliban-led government to assist the nation’s 32 million people while facing cutbacks in international aid, crippling sanctions, billions of dollars of losses in asset seizures, banking restrictions, and diplomatic challenges due in part to the Islamic Emirate’s own restrictive policies.” In an article for the Middle East Institute, Shanthie Mariet D’Souza notes: “The Taliban’s international isolation … has neither compelled the Taliban to change its behavior nor improved its capacity to respond to such disasters.”

Days before the disaster, the Pakistani government had 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. This decision stems from an increase in terrorist attacks — including several major suicide bombings — on Pakistan’s border with Afghanistan and Islamabad’s allegation that Afghanistan is harboring terrorists. A Radio Free Europe article states: “The cash-strapped Taliban government, which is under international sanctions, is unlikely to be able to absorb millions of returning refugees and migrants.”

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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.

Despite last month’s reports that the Biden administration was preparing to make it easier for Cuban small business owners to access financing, an official announcement has yet to be made. In the meantime, in an interview with Newsweek, Cuba’s vice foreign minister laid out four policies that he believes the Biden administration can pursue to help the Cuban people with little political cost. These include removing Cuba from the State Sponsors of Terrorism list; ending the sanctioning of shipping companies that import fuel to Cuba; ceasing the targeting of Cuba’s international medical cooperation; and suspending Title III of the Helms-Burton Act, which allows domestic and foreign-based companies with ties to Cuba to be sued in US courts.

The US Export–Import Bank canceled an $800 million line of credit to Pemex, Mexico’s state-owned oil company, over alleged Mexican donations of oil to Cuba while it was suffering an energy crisis this summer. Pemex denies that the oil was a donation, but has not disclosed the shipment’s financial terms. Mexican president Andrés Manuel López Obrador said that Mexico would continue providing oil to Cuba, calling the embargo “inhumane and unjust,” and adding that Mexico does not need permission to assist Cuba. The Mexican president has also criticized US sanctions on Cuba and Venezuela for driving migration, a sentiment that was echoed by multiple Latin American heads of state during a regional summit on migration in which they signed an agreement that, according to El País, notes “the migration problem is fueled in large part by ‘coercive unilateral measures’ imposed by the United States on various countries, particularly Venezuela and Cuba. The agreement denounced the economic sanctions as ‘contrary to international law.’”

Finally, ahead of the annual UN General Assembly vote calling for an end to the Cuban embargo, the Cuban foreign ministry released a report estimating that the blockade has cost the country $4.8 billion from March 1, 2022, to February 28, 2023.

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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.

Following the October 7 attacks in Israel by Hamas, the US and Qatar agreed to, at least temporarily, deny Iran access to frozen Iranian funds that had been placed in a Qatari-managed humanitarian fund as a part of last month’s prisoner exchange agreement. The move comes despite the fact that there is, so far, no concrete evidence tying Iran to the attack. Ryan Costello of the National Iranian-American Council argues that breaking the terms of the agreement would “risk increasing humanitarian suffering and further punishing ordinary civilians,” adding that “blocking these funds would renege on yet another rare diplomatic agreement with Iran. This would render any diplomacy with Iran exceptionally difficult … including on critically important issues like hostages, regional security, and the nuclear program.”

Sanctions proponents have seized on the moment to try to derail the deal — at least two bills in the House and another two in the Senate seek to refreeze the $6 billion. An additional bill in the Senate intends to ban imports of Iranian oil and natural gas. Furthermore, several Republican representatives have introduced legislation to further limit Iran’s access to the US financial system and to IMF financing. Moreover, in a letter, a bipartisan group of 110 representatives called for “maximum enforcement” of all US sanctions on Iran. Even before October 7, members of Congress had introduced bills aimed at making the president’s lifting of Iranian sanctions more difficult and prohibiting sanctioned Iranian officials from entering the US, including for the purpose of visiting the UN. The US also sanctioned members of Iran’s Islamic Revolutionary Guard Corps for their alleged support for Hamas.

UN Security Council sanctions prohibiting Iran from importing or exporting ballistic missiles and drones, which were imposed under the Iran nuclear deal, expired on October 18. The EU and UK decided to maintain their own sanctions on Iran in line with the UN’s expired ones, and the US announced new sanctions on the country’s missile and drone programs that target “11 individuals, eight entities, and one vessel based in Iran, Hong Kong, the People’s Republic of China (PRC), and Venezuela.” The State Department separately imposed sanctions on two Iranian officials and entities. Moreover, 45 countries, including the US and many European countries, signed a statement saying they will take steps to counter Iran’s drone and missile activities.

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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 US alleges that North Korea shipped over 1,000 containers of arms to Russia for their use in the war in Ukraine in violation of UN sanctions that prohibit the country from trading arms and military equipment. The Russian foreign minister also met with Kim Jong Un in Pyongyang, where the two discussed ways to “ramp up cooperation,” Reuters reports. The US condemned the shipments in a joint statement with Japan and South Korea. The US, Japan, and South Korea have also carried out their first ever trilateral aerial exercise off the Korean peninsula, adding to long-simmering tensions.

In a USA Today op-ed on the ineffectiveness of sanctions, the Asia Society Policy Institute’s Rorry Daniels writes, “The North Korean government has easily passed the cost of sanctions onto its citizens while decision-makers live large. Moreover, North Korea has adapted to sanctions by finding workarounds. In short, sanctions have lost their leverage.”

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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.

EU leaders, with US support, agreed this month to channel €3 billion of investment profits, generated from €197 billion in frozen Russian assets, to Ukraine. The details of the plan are expected in December. However, several member states and legal scholars have cautioned against the legal risks of such a move, as Russia’s state assets are protected from confiscation and expropriation under international law, and the EU is obligated to fully return the assets, along with any accrued interest, once sanctions are lifted. Separately, the G7 is expected to announce a ban on imports of Russian diamonds at the end of this month, with the EU’s 12th sanctions package, which contains similar provisions, following shortly thereafter.

In light of Russia’s apparent success in adjusting to the G7’s oil price caps, with Russian oil often trading above the designated ceiling since mid-July, the US has imposed its first cap-related sanctions on shipping companies based in the UAE and Turkey. The G7 signaled that stricter enforcement of the price cap may be on the horizon, and the UK said it is carrying out numerous investigations into breaches. Separately, the US has imposed export controls on 42 Chinese companies, along with seven entities from Finland, Germany, India, Turkey, the UAE, and the UK for allegedly supplying US-origin circuits to Russia. In addition, Australia has extended its sanctions on Russia for two years.

The Financial Times reported that the Russian ruble briefly fell “below the psychologically important barrier of 100 to the dollar” on October 3 — due to ongoing sanctions — though it quickly bounced back following the introduction of additional capital controls. Three weeks later, Russia’s central bank increased its key interest rate by 2 percent, bringing it to 15 percent. Furthermore, while the country’s economy grew by 2.2 percent this year, the IMF has lowered its 2024 growth forecast to 1.1 percent. Russia’s current short-term growth is fueled by its high military spending, but economists and IMF officials say the long-term prospects of its economy under sanctions are dim. Whether and how these economic challenges will translate to peace in Ukraine, and what their effects might be for Russian civilians, remains unclear.

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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 the wake of what he calls “the largest escalation of hostilities in Syria in four years,” the Chair of the UN Independent International Commission of Inquiry on the Syrian Arab Republic warned, “There is no evidence during the past decade that sectoral unilateral coercive measures have resulted in positive behavioral changes by the government or others. It is ordinary people who bear the brunt of their impact and related over-compliance.”

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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.

As the 2024 Venezuelan presidential election approaches, the Maduro government and representatives of major opposition parties have agreed to a partial deal outlining basic conditions for competitive elections. The US responded by announcing that it will permit the trading of some Venezuelan bonds and will lift many restrictions on the country’s oil and gas sector for a period of six months, allowing Venezuela to sell oil to most countries, including the US. The Biden administration has threatened to reimpose the sanctions if Venezuela does not follow through on the deal, or if it does not lift a ban preventing hard-line opposition leader María Corina Machado from running for office. Machado won the opposition-organized primary — which the government decried as fraudulent — but is currently banned from running for office for her alleged involvement in efforts to overthrow the government. The question of Machado’s ban was not directly addressed in the agreement.

Analysts believe the relief will allow Venezuela to increase crude oil production by about 25 percent in six months. Current production stands at around 750,000 to 800,000 barrels a day, a far cry from the 2.3 million barrels of daily output the country had in 2016, before former President Trump imposed broad oil and financial sanctions, which The New York Times says have “strangled” the economy. Republican senators have responded to these developments by introducing a bill to prohibit Venezuelan and Iranian oil and gas imports.

Also this month, a US judge ordered that Citgo — the US-based subsidiary of Venezuela’s state oil company, which was transferred to opposition control when the Trump administration recognized Juan Guaidó as Venezuela’s president, must be auctioned off to repay Venezuelan creditors. While the Biden administration temporarily extended Citgo’s protection from creditors, the auction process is expected to begin in January.

Separately, the UN Secretary-General has reportedly given permission for the UN to begin administering $3 billion in frozen Venezuelan state funds for humanitarian purposes. While the Maduro government has long condemned the freezing of the funds as illegal and illegitimate, it ultimately agreed to the UN-administered fund arrangement in November 2022.

US Congresswoman Alexandria Ocasio-Cortez said during an interview that “broad-based sanctions [on Venezuela] … punish the overall economy, harm everyday working people and are driving them into the economic and political destitution that force millions of people, not just to the United States but also to our regional partners, like Colombia.” Mexican president Andrés Manuel López Obrador has also tied sanctions on Venezuela to migration (see the Cuba section above).

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This month, the EU adopted a sanctions framework allowing it to impose sanctions on certain Nigerien individuals and entities. Notably, however, in announcing humanitarian aid to Niger, the EU recognized that sanctions have caused humanitarian organizations to experience “disruptions in the supply chain of key items while the local population has been faced with drastic price increases.” The AP reports that “the country’s 2023 budget, which was meant to be largely funded through the now-withheld external support from donors and loans, has been slashed by 40%.” The consequences for Nigerien citizens are likely to be dire.

In a reiteration of previous appeals, the Southern African Development Community (SADC) and the chair of the African Union Commission have called for all sanctions on Zimbabwe to be lifted. The SADC statement says, “The extent of this block to Zimbabwe’s socio-economic growth on the livelihood of its people represents a modern-day atrocity.”

Israel, with the backing of the United States, has imposed a “complete siege” of the Gaza Strip, further tightening its 16-year blockade on the territory’s two million inhabitants by cutting off all water, electricity, food, and fuel, on top of a bombing campaign described by The New York Times as “one of the most intense of the 21st century,” as well as ground incursions. A humanitarian catastrophe has ensued, with thousands killed and thousands more injured, and food, water, and fuel running dangerously low. The UN described the aid that was eventually allowed to enter as “nothing more than crumbs,” and fuel — which is crucial for energy stations, water systems, hospitals, the provision of aid, and other vital services — remains cut off. Human Rights Watch, Amnesty International, and the UN Secretary-General have labeled Israel’s siege and bombing as collective punishment, a war crime under international humanitarian law. Oxfam contends that Israel has used starvation as a weapon of war, and Brazilian president Lula da Silva has said a genocide is taking place. The US has imposed two rounds of sanctions on Hamas officials, as well as on people and entities in multiple countries allegedly tied to the group’s financial and support networks. Japan later announced similar measures.

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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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