Overview
This advisory summarizes the Senate’s efforts to pass Iran and Russia sanctions legislation, as well as other recent sanctions-related legislative activity. The Iran sanctions bill would modestly expand existing sanctions – including further sanctioning the Islamic Revolutionary Guard Corps – while seeking to preserve the nuclear deal. The Russia sanctions legislation could have more far-reaching effects by tightening existing authorities, mandating the imposition of sanctions targeting certain energy sector activities and certain energy sector activities and entities, as well as corruption, sanctions evasion, and other activities. The legislation also would authorize the imposition of sanctions targeting other sectors of the Russian economy, including railways and shipping, mining and minerals, and energy pipelines. Congress is also considering legislation to further roll back the Cuba embargo, impose more sanctions on Syria and North Korea, and target terrorism finance activities related to Hamas and Hezbollah.
Iran
The Countering Iran’s Destabilizing Activities Act of 2017 (S. 722) would expand the existing Iran sanctions regime to include new measures directed against supporters of Iran’s ballistic missile program, suppliers of arms to Iran, and perpetrators of human rights abuses in Iran. Additionally, S. 722 would require the imposition of sanctions against Iran’s Islamic Revolutionary Guard Corps (IRGC) for its support of terrorism, in addition to the other activities for which the IRGC is already subject to sanctions. The legislation would also require the executive branch to provide a comprehensive strategy for deterring Iran’s destabilizing activities against the US and allies in the Middle East and North Africa, as well as reports on sanctions coordination between the United States and the European Union and on US citizens detained in Iran.
S. 722 has received broad bipartisan support within the Senate to date. On May 25, the Senate Foreign Relations Committee (SFRC) approved it in an 18-3 vote after softening several provisions to appease Democrats and maintain the bipartisan consensus. On June 12, in response to requests from a bipartisan group of senators, Senate Majority Leader Mitch McConnell (R-KY) introduced an amendment to S. 722 to add the Russia sanctions measures discussed below to the bill so that the Senate could vote on a single, consolidated bill on Iran and Russia sanctions. The Senate adopted this amendment on June 14. As a result of this amendment adding Russia sanctions to S. 722, the prospects for passage of S. 722 are unclear.
Key Provisions of S. 722
Missile and weapons of mass destruction (WMD) sanctions: S. 722 directs the president to impose financial sanctions and a travel ban on individuals and entities who “knowingly engage[] in any activity that materially contributes to the activities of the Government of Iran with respect to its ballistic missile program, or any other program in Iran for…weapons of mass destruction.” Although Executive Order 13382 already authorizes the imposition of sanctions against individuals and entities who materially contribute to the development of weapons of mass destruction (including missile delivery systems), S. 722 would mandate the imposition of sanctions against those who meet the criteria in the bill.
Human rights sanctions: S. 722 directs the Secretary of State to identify individuals responsible for certain human rights abuses within Iran, including extrajudicial killings and torture of human rights dissidents and activists. The bill would authorize, but not require, the president to impose financial sanctions and a travel ban against those designated for human rights abuses. This provision would expand the range of sanctions available under US law against those responsible for human rights abuses in Iran.
IRGC as a supporter of terrorism: S. 722 would apply terrorism sanctions under Executive Order 13224 to the IRGC and foreign persons that are officials, agents, or affiliates of the IRGC. The US already imposes sanctions against the IRGC and individuals and entities linked to the IRGC under other authorities, and the Treasury Department designated the Quds Force (IRGC-QF), the IRGC’s special forces unit, as a supporter of terrorism under Executive Order 13224 a decade ago. Although the sanctions impact of this provision is likely to be limited because of the pre-existing sanctions against the IRGC under other authorities, its symbolic value is significant. S. 722 emphasizes that the entire IRGC, “not just the IRGC–QF,” is responsible for implementing Iran’s international program of destabilizing activities, support for acts of international terrorism, and ballistic missile program.” The language echoes the Trump administration’s proposal to designate the IRGC a Foreign Terrorist Organization (FTO) (a development that Steptoe wrote about in April 2017), and survived committee scrutiny despite criticism from former Obama administration officials that it might imperil the landmark 2015 nuclear deal.
Arms embargo sanctions: The bill supplements the existing UN Security Council arms embargo by directing the president to impose sanctions on any person that knowingly contributes to the supply, sale or transfer of prohibited arms to Iran, including battle tanks, armored combat vehicles, large caliber artillery systems, combat aircraft, attack helicopters, warships, missiles, and missile systems. S. 722 also directs the president to sanction any person who knowingly provides technical training, advice, or financial resources related to the aforementioned arms and related materiel. This provision reflects the Senate’s approval of the executive branch’s continued enforcement against persons that evade UN embargo prohibitions (see Steptoe’s February 2017 client alert for more about the Trump administration’s enforcement efforts).
Reporting requirements: The bill directs the Secretaries of State, Defense, and the Treasury and the Director of National Intelligence to submit a strategy to Congress every two years for deterring conventional and “asymmetric” Iranian activities that threaten the United States and key allies in the Middle East and North Africa. The strategy must summarize US objectives for countering Iran’s “destabilizing activities,” review the capabilities and contributions of US allies, and assess Iran’s conventional, chemical, and biological weapons capabilities. In addition, the bill directs the president to submit a report to Congress every 180 days that identifies and accounts for discrepancies between sanctions imposed by the EU and sanctions imposed by the United States, and a report every 180 days detailing efforts to secure the release of US citizens detained by Iran.
Relationship with Existing Sanctions and JCPOA Commitments
Supporters of S. 722 maintain that the legislation is consistent with US commitments under the Joint Comprehensive Plan of Action (JCPOA), the 2015 nuclear deal between Iran, the US, the EU, China, France, Germany, Russia, and the United Kingdom. Under the JCPOA, the US and other signatories have eased certain economic sanctions in exchange for limits on Iran’s nuclear program. To avoid undermining the JCPOA, Senate negotiators removed a provision that had appeared in earlier versions of S. 722 that would have imposed sanctions on any party that the president determined “posed a risk of materially contributing” to Iran’s ballistic missile or weapons of mass destruction programs, regardless of the party’s knowledge or intent. Remarking on the broadness the original language, sanctions expert and US JCPOA negotiating team member Richard Nephew posed the question: “What if your car company was used to haul a missile?” As amended, S. 722 would impose sanctions only on parties that “knowingly” contribute to the ballistic missile or WMD programs.
Despite campaign promises to “tear up” the JCPOA, President Trump has thus far declined to pull out of the deal, and, in April, Secretary of State Rex Tillerson certified Iran’s continued compliance with the JCPOA. Nevertheless, much of the pre-JCPOA US sanctions regime remains intact, and since the deal came into force in January 2016, the Obama and Trump administrations have imposed new sanctions against individuals and entities that support Iran’s ballistic missile program. Most recently, the Treasury Department’s Office of Foreign Assets Control (OFAC) added several dozen additional persons and entities to its list of Specially Designated Nationals and Blocked Persons (SDNs) in February and May.
Russia
A flurry of Russia sanctions bills have been introduced in the first six months of the 115th Congress, due to its continued military aggression against Ukraine and cyberattacks during the 2016 US presidential election that US law enforcement and intelligence officials have attributed to the Russian government. On June 13, the Senate leadership introduced an amendment to the pending Iran sanctions bill (S.722) that would create significant new sanctions targeting Russia, described below. This amendment passed the Senate on June 14. At this time, the prospects for passage of an amended version of S. 722 that would include Russia sanctions are unclear, in particular because the House is less enthusiastic about advancing new Russia sanctions and the Trump administration has not signaled its support.
Background
The existing Russia sanctions regime is a product of a series of Obama administration executive orders issued between 2014 and 2016 and the 2014 Ukraine Freedom Support Act (UFSA). In March 2014, President Obama ordered an initial round of sanctions targeting Russian officials linked to the Russian annexation of Crimea and subsequent military intervention in eastern Ukraine. In April 2014, the Obama administration expanded the sanctions regime to include other Russian officials and companies, including state-owned energy giant Rosneft, and in July 2014 extended the sanctions once more to target additional major energy and banking firms. In April 2015, President Obama issued Executive Order 13694, directing sanctions at those involved in “significant malicious cyber-enabled activities,” and in the final weeks of his presidency expanded this order to cover parties involved in election hacking.
The Countering Russian Influence in Europe and Eurasia Act of 2017 (CRIEEA)
On June 12, Senate Majority Leader McConnell, Senate Banking Committee Chairman Mike Crapo (R-ID) and Ranking Member Sherrod Brown (D-OH), and SFRC Chairman Bob Corker (R-TN) and Ranking Member Ben Cardin (D-MD) introduced Senate Amendment 232 to S. 722 – the Countering Russian Influence in Europe and Eurasia Act of 2017 (CRIEEA) – that would add a number of mandatory sanctions directed at Russia and the Putin administration, including:
- Sanctions on foreign persons that knowingly make significant investments in Russian domestic deep-water, Arctic offshore, or shale oil projects, including authorizing sanctions against persons that contribute to Russian energy export infrastructure
- Expansion of existing prohibitions on US persons providing goods, services, or technology in support of exploration or production for Russian deep-water, Arctic offshore, or shale oil projects worldwide
- Expansion of existing prohibitions on US persons transacting in new debt of sanctioned Russian energy companies or financial institutions
- Restrictions on US correspondent and payable-through accounts for foreign financial institutions that knowingly engage in significant transactions 1) on behalf of sanctioned Russian persons and certain other sanctioned persons, or 2) in connection with significant investments in a Russian deep-water, Arctic offshore, or shale oil project
- Sanctioning foreign persons that knowingly assist in a violation of any Russia sanctions or facilitate significant deceptive or structured transactions
- Sanctioning any person who knowingly makes an investment of $10,000,000 that would facilitate the unjust privatization of state-owned assets by Russian government officials
The bill would also codify existing Russia-related sanctions executive orders, impose additional cybersecurity-related sanctions, authorize the imposition of sanctions against additional sectors of the Russian economy like shipping and mining, and require congressional review of any presidential decision to terminate or relax existing Russia sanctions.
Prospect for Passage
The Senate voted to add CRIEEA as an amendment to S. 722 on June 14. Even if the Senate passes S.722 as amended with the addition of CRIEEA, it remains to be seen if such a bold Russia sanctions bill will survive in the House, where some in the Republican leadership have appeared to take a more cautious stance about imposing additional sanctions on Russia. In early June, Speaker of the House Paul Ryan (R-WI) told MSNBC that he does “think sanctions are called for in this particular case,” but “we already have them.”
Cuba
According to press reports, President Trump is expected to roll out his administration’s Cuba policy in a speech in Florida on June 16. It has been reported that the president may reverse some of the initiatives undertaken in the Obama administration to relax longstanding diplomatic and trade barriers between the US and Cuba. Although the White House has yet to make a formal policy announcement, news outlets have reported that the administration has been working on these changes with Sen. Marco Rubio (R-FL) and Rep. Mario Diaz-Balart (R-FL), who both represent Cuban-American communities in South Florida and were harsh critics of the previous administration’s rapprochement with Havana.
In a series of actions between 2009 and 2016, the Obama administration loosened restrictions on trade and travel between the two countries. In 2015, the United States and Cuba normalized diplomatic relations, and the United States rescinded Cuba’s designation as a state sponsor of terrorism. US citizens are now able to travel to Cuba for limited business, educational, artistic, and humanitarian purposes subject to a general license issued by OFAC, and US-based firms are able to obtain export licenses for an increased number of products and services. Nevertheless, the economic and commercial embargo that prohibits most forms of trade and investment remains in force. In 1996, the Helms-Burton (LIBERTAD) Act codified major aspects of the Cuba embargo, meaning that legislation would be required to roll back most of the embargo, which dates back to the Kennedy administration.
If the president seeks to re-impose travel restrictions to Cuba, he may face bipartisan backlash in the Senate, where 54 members have signaled support for the Freedom for Americans to Travel to Cuba Act of 2017 (S. 1287). Sen. Jeff Flake (R-AZ), a vocal embargo critic, introduced the legislation on May 25, and now counts 43 of 46 Democratic senators as co-sponsors alongside ten Republicans. S. 1287 would eliminate the president’s authority to impose any restrictions on travel to Cuba by US citizens – and consequently is unlikely to find much support in the Trump White House. Additionally, bills aiming to ease trade restrictions with Cuba have received bipartisan support from agricultural state members in both the Senate and the House.
Other Sanctions Activity
On May 4, the House voted nearly unanimously in favor of the Korean Interdiction and Modernization of Sanctions Act (H.R. 1644), which would add new sanctions against North Korea that target the shipping industry, the financial services sector, and the use of slave labor. Under H.R. 1644, ships owned by foreign governments – including China, North Korea’s benefactor – that do not comply with UN sanctions would be barred from accessing US ports and waterways, US financial institutions would be required to ensure that no correspondent accounts are being used by foreign financial institutions to provide financial services indirectly to North Korea, and all products produced in North Korea would be excluded from the United States unless US customs officials can determine that they were not produced using convict, forced, or indentured labor. The bill has been received in the Senate and referred to the SFRC, but to date the Senate has preferred to pressure the executive branch to take action against North Korea.
On May 17, the House voted to impose a new round of sanctions against Syria under the Caesar Syria Civilian Protection Act of 2017 (H.R. 1677). The legislation, which passed the House via voice vote, would extend property and travel-related sanctions against foreign individuals and entities that knowingly provide support to Syria, Syrian government-owned businesses, and the Syrian energy and defense sectors. H.R. 1677, which has been received by the Senate, would allow the president to waive certain sanctions in the interest of advancing peace talks.
On May 25, Rep. Brian Mast (R-FL), House Foreign Affairs Committee Chairman Ed Royce (R-CA), and Ranking Member Eliot Engel (D-NY) introduced the Palestinian International Terrorism Support Prevention Act of 2017 (H.R. 2712), which would impose new sanctions on foreign governments, individuals, and entities that provide support to Hamas, the Palestinian Islamic Jihad, and affiliates. H.R. 2712 directs the president to impose on private parties at least two measures from a menu of sanctions that includes trade restrictions, asset blocking, and access to US credit. Foreign governments found to have supported Palestinian terrorist groups risk being cut off from foreign aid and arms. The legislation may garner more attention due to the ongoing diplomatic crisis between Gulf Cooperation Council (GCC) states, as Qatar has hosted peace talks involving Hamas and other Palestinian factions.
A new round of Hezbollah sanctions may be forthcoming as well. On June 8, the House Foreign Affairs Committee dedicated a hearing to options for attacking Hezbollah’s financial network, and Chairman Royce told the full committee to expect a “Part II” of Hezbollah sanctions legislation. In December 2015, Congress had unanimously passed the Hezbollah International Financing Prevention Act, which imposed sanctions aimed at cutting off Hezbollah’s access to international financial institutions.
We will continue to keep you apprised of sanctions developments. You can also follow us on Twitter @SteptoeIntlReg and the Steptoe International Compliance Blog.
