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11. Meeting the challenge of secondary sanctions

Author:
Ellie Geranmayeh and Manuel Lafont Rapnouil
Publication Date:
06-2019
Content Type:
Policy Brief
Institution:
European Council On Foreign Relations
Abstract:
Secondary sanctions have become a critical challenge for Europe, due to the Trump administration’s maximalist policy on Iran and its aggressive economic statecraft. Europe’s vulnerabilities mostly result from asymmetric interdependence with the US economy, due to the size of US markets and the global role of the US dollar. In future, states will likely weaponise economic interdependence with the EU to target countries that are more important to the European economy than Iran, such as China and Russia. European countries should demonstrate that, despite their economic interdependence with the US, they control EU foreign policy. The EU and its member states should strengthen their sanctions policy, begin to build up their deterrence and resilience against secondary sanctions, and prepare to adopt asymmetric countermeasures against any country that harms European interests through secondary sanctions. They should also attempt to bolster the global role of the euro and lead a robust international dialogue on the role of sanctions.
Topic:
Foreign Policy, Sanctions, European Union, Economy, and Donald Trump
Political Geography:
Russia, China, Europe, Iran, North America, and United States of America

12. American Sanctions and European Sovereignty

Author:
Jean De Ruyt
Publication Date:
02-2019
Content Type:
Working Paper
Institution:
EGMONT - The Royal Institute for International Relations
Abstract:
The decision by the United States to withdraw from the “Joint Comprehensive Plan of Action” and re-impose sanctions on Iran broke an international understanding, sanctioned by a UN Security Council Resolution. However, European and other non-US companies dealing with Iran must abide by US law in order to avoid its extra- territorial effects on their US operations. Efforts are being made to help the EU keep its “sovereignty” on sanction issues when there is disagreement with the US, but until now these have not accomplished much. Therefore a new Instrument in Support of Trade Exchanges (INSTEX) was launched at the end of January to ensure the continuation of some trade with Iran. But the only convincing way to allow the EU to increase its autonomy is to boost the role of the Euro in international transactions. Certainly, in today’s unpredictable world, we need more than ever to address the issue of the extraterritorial application of American sanctions – today it is Iran, what if tomorrow it is China?
Topic:
Defense Policy, Nuclear Weapons, Sovereignty, Military Strategy, and Sanctions
Political Geography:
United States, Europe, Iran, Middle East, and North America

13. Europe and Iran: The Economic and Commercial Dimensions of a Strained Relationship

Author:
Cornelius Adebahr
Publication Date:
12-2018
Content Type:
Working Paper
Institution:
Istituto Affari Internazionali
Abstract:
Europe and Iran had begun to invest in a closer commercial relationship just when the United States withdrew from the nuclear deal in May 2018. Since then, Washington has re-imposed its stringent economic sanctions, targeting Iran’s oil exports as a major source of government revenue but also banning financial transactions with the country. This poses an enormous challenge for the EU, which had intended to use the 2015 agreement as a stepping stone to promote regional cooperation and, ultimately, a more comprehensive relationship with Iran. Paper produced in the framework of the IAI-FEPS project entitled “Europe and Iran in a fast-changing Middle East: Confidence-building measures, security dialogue and regional cooperation”, December 2018.
Topic:
Foreign Policy, International Trade and Finance, Bilateral Relations, Sanctions, and Transatlantic Relations
Political Geography:
Europe, Iran, Middle East, North America, United States of America, and European Union

14. Consensus for Action: Towards a More Effective EU Sanctions Policy

Author:
Tom Keatinge and Emil Dall
Publication Date:
11-2018
Content Type:
Working Paper
Institution:
Center on Global Energy Policy
Abstract:
Sanctions are a key tool of foreign policy but have taken on greater salience over the last 20 years as governments have reached for leverage in negotiations but foregone the use of force. During this period, the alignment of the design and implementation of sanctions by the European Union and the United States has, on the whole, been an article of faith as the transatlantic allies have pursued mutual foreign policy objectives. Yet despite the consistency of objectives, the bureaucratic structures, technical mechanisms, and processes by which the European Union and the United States design and implement sanctions differ significantly. These differences—always present—have been amplified by the current stresses in transatlantic relations and may be further exacerbated when the United Kingdom leaves the European Union in March 2019. The reasons behind these differences are myriad and touch upon both structural matters (such as the construction of the European Union and the manner in which its member states can enact policy) and more philosophical matters, as the focus on due process and human rights in EU sanctions policy demonstrates. But given the importance of transatlantic ties and cooperation in managing the sorts of problems that sanctions are usually developed to address, it is important for both the United States and the European Union to work through these differences. Toward that goal, this paper provides a European perspective on US sanctions activity, where there are differences in approach, in particular EU attitudes toward secondary sanctions put in place by the United States, and it explains the complications that may result from the United Kingdom’s withdrawal from the European Union. The paper concludes with recommendations for how the European Union can address the challenges it faces in achieving an effective sanctions policy. In short, it recommends the following: The European Union should work through its structural issues to create a more decisive and effective EU sanctions policy. The implementation and enforcement of sanctions at the member state level must be improved, and a formal EU-level sanctions body is needed to independently monitor compliance with sanctions across the European Union. A clear mechanism for ensuring the coordination and effectiveness of EU-UK post-Brexit sanctions policy must be established. The global centrality of both the European Union’s economy and the United Kingdom’s financial sector combine to present a powerful sanctions force and must thus be closely coordinated to ensure maximum effectiveness. The European Union should directly address the matter of human rights exemptions by incorporating it as a key consideration of the EU-level sanctions body identified in the first recommendation. The European Union should establish a clear channel for human rights exemptions throughout the lifetime of sanctions regimes. The European Union should consider its options to address the ability of non-EU actors to abuse EU-originating supply chains and financial services, which represents a considerable sanctions implementation vulnerability. Finally, though US-EU misalignment on sanctions is growing, policy makers must stay seized of the necessity to maintain and improve communications and coordination to prevent current schisms from having serious long-term effects on international security.
Topic:
Foreign Policy, Human Rights, Sanctions, European Union, and Brexit
Political Geography:
United States, United Kingdom, and Europe

15. Russia’s National Oil Champion Goes Global

Author:
Edward C. Chow and Andrew J. Stanley
Publication Date:
02-2018
Content Type:
Working Paper
Institution:
Center for Strategic and International Studies
Abstract:
After the Soviet Union collapsed and Russia was roiled by political and economic chaos, many state-owned assets were privatized based on political connections and corrupt practices. The oil sector was a particularly attractive, but by no means the only, target for these privatizations. By the end of the 1990s, almost all of Russia’s oil production was privately owned. In spite of continued nontransparency, the oil sector began to resemble a competitive market with private investors introducing Western technology, financial accounting, and operating and management practices. It also started to attract major foreign investments. The remaining state oil assets were managed by a sleepy state enterprise named Rosneft that, in spite of its name (Russian Oil), produced less than 5 percent of Russia’s oil. Today, majority state-owned Rosneft produces almost half of Russia’s oil. Its daily oil production of 4.6 million barrels, according to its last reported quarterly results, is double that of the world’s largest oil company by market capitalization, ExxonMobil, which last reported daily liquids production of 2.3 million barrels. Rosneft’s rapid rise coincided with the rule of Vladimir Putin, who first became president of Russia in 2000. Its production increases were built largely on the backs of controversial acquisitions of assets previously held by private companies such as Yukos, TNK-BP, and Bashneft. Rosneft’s acquisition spree accelerated after Putin’s close associate and Russia’s then-deputy prime minister Igor Sechin became chairman of its board of directors in 2004. Sechin left government in 2012 to take over as Rosneft’s chief executive officer. Rosneft’s board of directors is now chaired by former German chancellor Gerhard Schroeder. Rosneft’s transformation as Russia’s national oil champion is consistent with Putin’s policy of regaining state control over the commanding heights of the Russian economy, which is more reliant on oil income today than the Soviet Union ever was. Rosneft is Russia’s largest taxpayer and contributed a quarter of government revenue in 2014. Until recently, Rosneft concentrated mainly on consolidating its dominance over the domestic oil patch. It is also Russia’s leading refiner and is increasing natural gas production for direct sales to domestic gas users, producing 67 billion cubic meters in 2016. In 2014, Russia was hit by the twin shocks of a global oil price collapse and Western economic sanctions enacted after its aggression against Ukraine in the Donbas region and annexation of Crimea. These developments affected Rosneft severely since it involved the value of the commodity it produces and sells and restricted Rosneft’s access to international financing when it was heavily indebted from the aforementioned acquisitions. A normal company might hunker down, repair its balance sheet, and wait for external conditions to improve. Instead Rosneft has done the exact opposite and expanded its international business aggressively. As part of the 2014 U.S.-led sanction efforts, Igor Sechin, as the leading figure of Russia’s largest petroleum company and his having “shown utter loyalty to Vladimir Putin,” was directly sanctioned. Further Russian sanctions enacted by Congress in 2017 called on the U.S. Department of the Treasury to submit a detailed report on senior political figures, oligarchs, and parastatal entities as determined by their “closeness to the Russian regime and their net worth.” While the unclassified version of the report released to Congress on January 29 included Igor Sechin, the report was poorly received and largely regarded as nothing more than a “rich list” by Russian experts. However, the report also contains classified annexes, including a list of parastatal entities and supporting analysis, which by definition would have included Rosneft. Although Rosneft’s rapid international expansion is too recent to assess definitely, this paper describes some of Rosneft’s overseas ventures and explores possible motivations, economic and political, behind them.
Topic:
Energy Policy, Oil, Foreign Direct Investment, Sanctions, Gas, Transparency, and Private Sector
Political Geography:
Russia, United States, Europe, and Eastern Europe

16. Budgetary Sanctions as a Mechanism to Protect the Rule of Law in the EU

Author:
Marta Makowska and Melchior Szczepanik
Publication Date:
09-2018
Content Type:
Special Report
Institution:
The Polish Institute of International Affairs
Abstract:
In the draft multiannual financial framework (MFF) 2021-2027, the European Commission (EC) proposed a political conditionality mechanism through which EU funds could be suspended for countries violating the rule of law. If implemented, it would grant the EC new powers to control the condition of the rule of law in Member States, but it is based on imprecise criteria. Even though the EC has declared that the mechanism is designed to discipline state institutions responsible for breaches, it could be damaging mainly to the final beneficiaries of the funds.
Topic:
Sanctions, Budget, European Union, and Rule of Law
Political Geography:
Europe

17. Filling the Void: How Rouhani’s Government Exploits US Sanctions to Enhance its Position

Author:
FARAS
Publication Date:
11-2018
Content Type:
Commentary and Analysis
Institution:
Future for Advanced Research and Studies (FARAS)
Abstract:
With the second batch of US sanctions on Iran, coming into effect today, the government of President Hassan Rouhani is taking preemptive measures to strengthen its ability to confront sanctions. It seeks to exploit the sanctions to endorse its candidates for the four ministerial portfolios whose ministers were dismissed in the past months, following a no-confidence vote in the Consultative Assembly.
Topic:
International Relations, Government, Sanctions, Donald Trump, and Hassan Rouhani
Political Geography:
Europe, Iran, Middle East, North America, and United States of America

18. Renewed Differences: Repercussions of the Mounting Tension Between Iran and Europe

Author:
FARAS
Publication Date:
10-2018
Content Type:
Commentary and Analysis
Institution:
Future for Advanced Research and Studies (FARAS)
Abstract:
Iran is keen to maintain good relations with the European countries at the current stage because they can help it cope with US pressures. These relations gained added importance after the withdrawal of the US from the nuclear deal and the re-imposition of sanctions on Tehran. However, Iran has not changed some elements of its foreign policy, which continually widens the differences between it and European states and may eventually undercut its ability to contain the repercussions of the US sanctions, with the approaching date of the toughest batch of sanctions, set to start on November 5.
Topic:
International Relations, Treaties and Agreements, Sanctions, European Union, and Donald Trump
Political Geography:
Europe, Iran, Middle East, France, and Syria

19. Going nowhere alone: US sanctions on Iran and the afterlife of the JCPOA

Author:
Fridtjof Falk
Publication Date:
01-2018
Content Type:
Journal Article
Journal:
Harvard Journal of Middle Eastern Politics and Policy
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
On November 5th, 2018, the Trump administration re-imposed severe sanctions on Iran. These sanctions, which President Obama called the “toughest sanctions ever faced by the Iranian government,” were lifted by the 2015 Joint Comprehensive Plan of Action (JCPOA), also known as the Iran Deal. The JCPOA was signed with a view to blocking Iran’s alleged pursuit of nuclear weapons, allowing international inspectors into Iran in return for sanctions relief. Withdrawing the United States (US) from the deal was a prominent promise of Donald Trump leading up to the presidential elections of 2016. In a May 2018 speech that described the deal as rooted in “fiction,” President Trump made good on his promise to leave the JCPOA and to move to unilaterally re-impose sanctions on Iran.
Topic:
International Relations, Nuclear Weapons, Treaties and Agreements, Sanctions, Nuclear Power, and Economy
Political Geography:
Europe, Iran, Middle East, North America, and United States of America

20. Economic Sanction Games among the US, the EU and Russia: Payoffs and Potential Effects

Author:
Dong Yan and Li Chunding
Publication Date:
07-2018
Content Type:
Working Paper
Abstract:
Economic sanction of the US and EU on Russia because of Ukraine crisis in 2014 lasts for a long time and is still a hot policy topic. This paper uses a 16-country or region numerical general equilibrium model with trade cost and exogenous trade imbalance to explore this three-country economic sanction game payoffs, and simulate the effects of sanctions on individual countries. Our analysis find that all sanction involved countries will be hurt, but comparatively Russia will be hurt more, and the US and EU will be hurt less. Sanction measures of EU have larger impacts to Russia than the US measures, and meanwhile Russian counter-sanction measures will generate larger impacts on the EU than on the US. From the economic perspective, the optimal choice for US and EU is to give up sanction measures to Russia, and retaliation is Russia’s optimal choice when faced with sanction measures. Countries out of the sanction game will gain because of trade diversion effects.
Topic:
Economics, Sanctions, European Union, and Economy
Political Geography:
Russia, Europe, and United States of America