Worldwide: US Sanctions Developments Impacting Cuba, Russia And Iran

Keywords Trump, Sanctions, OFAC, Cuban military, Cuba, Russia, Iran

Both President Donald Trump and the US Congress have taken significant steps regarding sanctions in the past few days, with the President announcing a new policy toward Cuba and the US Senate passing a bill addressing sanctions on Russia and Iran. Below we examine the practical effects of these changes and how they may affect the US private sector's activities.

Trump Administration Announces Major Shift in Cuba Sanctions Policy and Upcoming Regulations

On June 16, 2017, President Trump announced in a speech in Miami a major departure from the prior administration's policy of reengagement with Cuba, reinstating certain travel restrictions previously eased by the Obama administration and imposing important new restrictions on commercial activities. The Trump administration's policy and ensuing regulatory changes will chart the course on US-Cuba relations, at least for the near future.

Implementing regulations are expected from the Office of Foreign Assets Control ("OFAC") and the Bureau of Industry and Security in the coming months. Until then, the policy statements do not have the effect of law, although companies should begin assessing potential impact now and consider engaging with the administration to inform the rulemaking process. Frequently Asked Questions issued by OFAC contemporaneously with President Trump's speech highlight a number of areas in which the policy is likely to affect both individuals and companies that have been engaged in Cuba-related activities since the Obama administration began easing sanctions restrictions two years ago. Key changes include:

  • Restricting dealings involving entities related to the Cuban military, intelligence or security services –Depending on the final formulation of the administration's position, restrictions on dealings with the Cuban military and related agencies could have sweeping consequences. Among other things, a blanket prohibition would effectively exclude dealings with military-run conglomerate Grupo de Administracion Empresarial, S.A. ("GAESA"), the single largest player in the Cuban economy, with dozens of companies under its umbrella covering numerous sectors, particularly hospitality, retail and trade. Although other, non-military-run companies do exist, the new policy represents a major obstacle for US companies interested in Cuba, since some of the most significant business opportunities would be off-limits.
  • Reinstating limits on US citizens' and US permanent residents' ability to travel to Cuba – President Trump's policy would revoke the individual people-to-people travel authorization issued by the Obama administration in March 2016. This general license authorized US travelers to visit Cuba on cultural trips without the need to purchase often-costly guided tours. Other existing categories of authorized travel remain in place (family visits; official business of the US government, foreign governments and certain intergovernmental organizations; journalistic activity; professional research and professional meetings; educational activities; religious activities; public performances, clinics, workshops, athletic and other competitions, and exhibitions; support for the Cuban people; humanitarian projects; activities of private foundations or research or educational institutes; exportation, importation, or transmission of information or informational materials; and certain authorized export transactions).
  • Grandfather Provisions for Pre-Existing Commitments – OFAC FAQs indicate that the forthcoming regulations will be prospective and thus will not affect travel arrangements or commercial engagements in place prior to the issuance of the new regulations.
  • Anticipated Publication of State Department List – The US State Department will publish a list of Cuban entities with which direct transactions will not be permitted. It is not clear whether unlisted parties will be conclusively considered permissible or whether US parties will still need to conduct due diligence to determine such unlisted parties' affiliation with the Cuban military.
  • Stricter Enforcement – President Trump indicated in his speech that there will be a stricter enforcement environment with regard to both the embargo on Cuba generally and the tourism ban specifically. US travelers to Cuba are likely to be subject to greater scrutiny by US Immigration and Customs Enforcement on their return to the United States.

US Senate Passes Russia-Iran Sanctions Bill by a Vote of 98-2

On January 16, 2017, an overwhelming majority of the US Senate passed a new sanctions bill targeting both Russia and Iran. Although the law would largely codify and impose new targeted sanctions against Iran, the most striking features of the law would be those that significantly expand the scope of current US sanctions against Russia and impose procedural requirements on the president's ability unilaterally to lift those sanctions. Among the key features of the Russia legislation are features that would impose "secondary" sanctions targeting the activities of third-country (non-US, non-Russia) persons and entities that engage in certain kinds of dealings with Russia. While the Trump administration has indicated a preference for "flexibility" in dealing with Russia, the overwhelming majority in the Senate has sent a clear signal to the administration of increasing bipartisan concern regarding Russia.

To become law, the bill must be passed by the US House of Representatives and then signed into law by the president. It remains unclear at this time whether the House of Representatives will take action on the bill, and what form it will take if they do. House leaders will reportedly meet during the week of June 19 to determine their next steps. If a bill were to pass in both chambers, President Trump could veto it—especially given language in the Senate's bill that would constrain the president's ability unilaterally to take terminate Russia sanctions. If the president vetoed the legislation, the House and Senate could override the president's veto, which might very well be possible given the overwhelming margin with which the bill passed the Senate.

Measures Targeting Russia. The legislation would greatly expand the scope and nature of activities barred by US sanctions against Russia. For the first time, the types of secondary sanctions (restricting actions of non-US persons) currently applicable only to Iran would be authorized with respect to Russia. Key restrictions include the following:

  • Granting the executive branch the ability to impose sanctions on important sectors of the Russian economy, including the mining, metals, shipping and railways sectors, as well as a number of activities relating to the development of Russia's economy, including activities by non-US persons that contribute to or facilitate the privatization of state-owned assets;
  • Imposing a period of congressional review before the president could relax, suspend or terminate sanctions against Russia;
  • Codifying the sanctions on Russia imposed via executive order, making them considerably more difficult to remove; and,
  • Imposing new sanctions with respect to those who deal with corrupt Russian actors, those involved in human rights abuses, those conducting certain cyber attacks, those supplying weapons to the Assad regime in Syria, and those doing business with the intelligence and defense sectors.

Measures Targeting Iran. The Iran measures in the legislation are largely consistent with the existing US sanctions framework against Iran, which remains in place with respect to a range of activities unrelated to the nuclear-specific secondary sanctions that the US eased under the Joint Comprehensive Plan of Action ("JCPOA"). The new legislation focuses on other activities of concern with respect to US national security and foreign policy, including Iran's ballistic weapons development activity, support for international terrorism, and human rights abuses. Key elements of the legislation include:

  • Sanctions against persons engaged in activities that materially contribute to Iran's ballistic missile program and those who have knowingly provided financial, material or technological support for such persons;
  • provision for the designation of the IRGC, its officials, agents or affiliates as Specially Designated Global Terrorists;
  • Sanctions against those responsible for human rights violations against Iranian individuals, and their agents and affiliates;
  • Sanctions against persons that engage in activities that materially contribute to the supply, sale or transfer of arms to or from Iran;
  • Codification of sanctions imposed in Executive Orders 13382 and 13224 relating to the proliferation of weapons of mass destruction and terrorist financing; and
  • A requirement that the president submit regular reports to Congress addressing the coordination of sanctions between the US and EU for activity related to weapons of mass destruction, international terrorism or human rights abuses.

Originally published on 16 June 2017

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