If an international agreement is violated and no one makes a sound, did it really happen?
by Samuel Cutler
A few weeks ago, the State Department imposed sanctions on Greek businessman Dimitris Cambis and his company, Impire Shipping Ltd., pursuant to the Iran Sanctions Act of 1996 (ISA), for his [...]]]>
If an international agreement is violated and no one makes a sound, did it really happen?
by Samuel Cutler
A few weeks ago, the State Department imposed sanctions on Greek businessman Dimitris Cambis and his company, Impire Shipping Ltd., pursuant to the Iran Sanctions Act of 1996 (ISA), for his role in operating what Treasury Under Secretary for Terrorism and Financial Intelligence David Cohen described as an “intricate Iranian scheme that was designed to evade international oil sanctions.” While OFAC’s designation has been covered at length, less noticed is the fact that the sanctions on Cambis and his companies seem to violate a Clinton-era pact between the US and EU, in which the US pledged to waive sanctions against EU persons under the ISA, known at the time as the Iran and Libya Sanctions Act.
According to OFAC and an earlier story by Reuters, Cambis used a web of front companies to purchase eight aging oil tankers, worth little more than their weight in scrap metal, in order to facilitate the sale of Iranian crude to China. An example provided by Reuters illustrates how the scheme worked: In early December, the Leycothea, one of Cambis’ ships, anchored alongside the Iranian tanker Marigold off the coast of the UAE Emirate of Sharjah, just across the Persian Gulf, from the Iranian shipping hub of Bandar Abbas. Once anchored, a ship-to-ship transfer took place, concealing the origin of the crude and allowing it to be traded on the global market as non-Iranian oil. About a month later the Leycothea made a port call to China’s Zhanjiang oil terminal. Each of these tankers is capable of carrying approximately $200 million worth of oil per shipment.
In the recent past, the EU has reacted strongly to attempts by the US to impose secondary sanctions on its citizens and companies. Following the passage of the Cuban Liberty and Democratic Solidarity Act of 1996, commonly known as the Helms-Burton Act, the EU filed a World Trade Organization (WTO) challenge alleging that secondary sanctions violated US commitments under the General Agreement on Tariffs and Trade (GATT). While the WTO challenge refers only to the Helms-Burton Act, the EU concurrently voiced serious concerns about the ISA. The EU also passed European Council Regulation 2271/96, which contains legal countermeasures against the extraterritorial application of US sanctions and forbids EU persons “actively or by deliberate omission” from complying with the Cuban Democracy Act of 1992, the Helms-Burton Act, and the ISA. In order to settle the dispute, the Clinton administration entered into an agreement with the EU known as the “Understanding with Respect to Disciplines for the Strengthening of Investment Protection.” In exchange for the withdrawal of the WTO challenge, the United States, among other measures, committed to waiving future ISA sanctions against EU persons.
The SDN designation of Cambis and Impire Shipping represent the first sanctions against an EU person under the ISA. Despite the apparent violation of the Investment Understanding, a response by the EU has been nonexistent so far. This reflects a broader acceptance by the EU of US secondary sanctions, at least when it comes to Iran, over the past two years. Since the passage of the Comprehensive Iran Sanctions, Accountability, and Divestment Act (CISADA) in 2010, US and EU Iran sanctions policies have largely come into alignment. The fact that Cambis is a minor player engaged in activities that are sanctionable under both US and EU law likely dampens any enthusiasm for challenging an infringement on EU or Greek sovereignty. In this case, the action might even be tacitly supported by the EU because it allows for the US to do the “dirty work” of imposing sanctions against an EU citizen without granting them the right to present a legal challenge in an EU court, which has recently caused EU policymakers major headaches. What is clear is that at least when it comes to Iran, there are few nations interested in challenging US secondary measures, regardless of past agreements.
– Samuel Cutler is a policy adviser at Ferrari & Associates, P.C., a Washington, DC boutique law firm specializing in US economic sanctions matters.
Photo Credit: U.S. Navy/ Richard J. Brunson
]]>Last Thursday, the Treasury’s Office of Foreign Assets Control (“OFAC”) announced the removal of two parties designated under the Iraq Stabilization and Insurgency Sanctions program (“Iraq Sanctions”). These sanctions were put into law by Executive Orders 13303, 13315, 13350, 13364, and 13438. They target specific individuals and entities associated with [...]]]>
Last Thursday, the Treasury’s Office of Foreign Assets Control (“OFAC”) announced the removal of two parties designated under the Iraq Stabilization and Insurgency Sanctions program (“Iraq Sanctions”). These sanctions were put into law by Executive Orders 13303, 13315, 13350, 13364, and 13438. They target specific individuals and entities associated with the former Saddam Hussein regime, as well as parties determined to have committed, or to pose a significant risk of committing, an act of violence that has the purpose or
effect of threatening the peace or stability of Iraq or the Government of Iraq or undermining efforts to promote economic reconstruction and political reform in Iraq or to provide humanitarian assistance to the Iraqi people.
To date, their remains 218 parties designated pursuant to Iraq Sanctions administered by OFAC. As a result of these designations. US persons are prohibited from engaging in transactions with these parties, and any assets owned or controlled by these parties which come under US jurisdiction are to be blocked. The last time a party was designated pursuant to Iraq Sanctions was over three years ago on December 22, 2009. Since that time, all OFAC actions concerning that program have either been removals or the release of the regulations promulgated pursuant to the above referenced executive orders.
This March will mark ten years since the regime of Hussein was toppled. It has been over six years since Saddam was executed and one year since US troops pulled out of Iraq. So why do we still have Iraq sanctions? Well, sectarian violence is still believed to be rampant throughout the country, which could impact Iraq’s economic reconstruction and political reform. That said, it is interesting to note that the overwhelming majority (around 80-85%) of those designated on the OFAC SDN List pursuant to the Iraq Sanctions have been designated since July 30, 2004, nearly eight and a half years ago, when the new Iraq Sanctions were imposed, and not as a result of an recent ongoing violence in the country.
This phenomenon speaks to one of several conclusions. First, it could be that a large majority of these parties still engaged in the same activities they were engaged in during July 2004 when they were designated. This would suggest that OFAC targeted sanctions have had no impact on changing the behavior of these parties. Taken a step further, this notion would bolster the arguments of those who suggest sanctions do not work. Second, it could be that OFAC just needs to do some house cleaning on the Iraq portion of their SDN List. This is likely, because the agency is obviously geared more towards putting parties on the list than taking them off. Finally, and dovetailing off of the previous point, it could be that none of those parties designated on July 30, 2004 have formally contested their designation by submitting a request for reconsideration pursuant to 31 C.F.R. 501.807. I am unaware of any internal process OFAC has for periodic review of designations, so it may be that as long as the program exists and parties are not contesting their designation, they will remain listed. Regardless of which conclusion is most accurate, the Iraq Sanctions seem to be an atavistic sanctions program, or, at minimum, one that is long overdue for a review.
The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrariassociatespc.com.
Photo: The Treasury Annex, located across the street from the US Department of the Treasury headquarters. Source: “AgnosticPreachersKid” Wiki Creative Commons
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