Russia-Iran-North Korea Sanctions: Congress Makes a Statement

In an era when the U.S. Congress can seemingly agree on nothing, both the House and Senate voted overwhelmingly last week to expand U.S. sanctions against Russia, Iran, and North Korea. The ‘‘Countering America’s Adversaries Through Sanctions Act’’ (the Act) passed the House by a vote of 419 to 3 and the Senate by a vote of 98-2, in the process sending a strong message not only to the three countries involved but also to the president of the United States. The bill, with veto-proof majorities in Congress, has now been sent to the president who, despite publicly voiced reservations, has signaled he intends to sign it.

While the bill tightens and, in some cases, expands sanctions on Iran, Russia, and North Korea, its real impact might be the limitations it places on the president’s ability to terminate or waive many existing sanctions. By codifying the executive orders that form the basis for present Russia/Ukraine sanctions, requiring the president to impose certain sanctions (as opposed to simply authorizing imposition), and requiring the president to advise Congress of any intent to end or waive sanctions, the bill makes it much more difficult to ease restrictions once they have been put in place.

The Act is composed of three distinct titles each of which mandates the development of various reports and sets out certain mandatory and discretionary sanctions for implementation by the executive branch. Key provisions of each title, which correspond to the three named countries, are addressed below.

Iran

Styled as the “Countering Iran’s Destabilizing Activities Act,” Title I of the Act targets Iran’s ballistic missile program, activities of Iran’s Islamic Revolutionary Guard Corps (IRGC), conventional weapons proliferation, and adds sanctions for human rights violations. Equally important is what the Act does not do. Namely, it does not rescind or alter the Joint Comprehensive Plan of Action (JCPOA) that eased secondary sanctions relating to Iran’s nuclear program.

In response to Iran’s ballistic missile program, the Act requires the president to impose sanctions to block property and exclude from the United States any person determined to have materially contributed to Iran’s ballistic missile program or any other program supporting Iran’s weapons of mass destruction (WMD) delivery capability. These sanctions may also be imposed upon that person’s successor entity, any person that “owns or controls or is owned or controlled by” that person, or anyone acting on the involved person’s behalf.

The Act also requires the president to impose sanctions to block property and prohibit transactions with the IRGC or foreign persons who are officials, agents, or affiliates of the IRGC due to the IRGC’s responsibility for implementing Iran’s support for international terrorism, as well as its ballistic missile program. Given that the IRGC and its Qods Force are already listed as Specially Designated Nationals for human rights abuses and WMD proliferation, it is unclear how much additional impact this provision will have.

Sanctions are also required to be imposed with respect to any person who has materially contributed to the supply of conventional weapons systems to or from Iran, including helping Iran obtain armored vehicles, warships, artillery or missile systems, and combat aircraft or providing training or maintenance for such systems.

Russia

Title II of the Act, known as the “Countering Russian Influence in Europe and Eurasia Act” and passed largely in response to Russia’s efforts to influence elections in the United States and elsewhere, is the most significant piece of the present legislation and has already had a significant impact. Since its passage, Russia has responded by seizing two U.S. diplomatic properties around Moscow and demanding the reduction of U.S. diplomatic staff by more than 700 persons, with some being ordered to leave the country. It remains to be seen whether this is the culmination of a tit-for-tat diplomacy or the continuation of a deepening spiral in U.S-Russia relations.

In general, the Act expands existing sanctions on Russia relating to its actions in Ukraine and Syria and addresses Russian malicious cyber intrusions. Of perhaps greater import, it codifies many of the sanctions that had previously been issued through executive orders — meaning Congressional action will be required to lift the sanctions. Moreover, it requires the president to obtain Congressional approval before rescinding or waiving the application of many sanctions.

Key Provisions

• Expands Sectoral Sanctions (Executive Order 13662) on Russia’s financial, defense, and energy sectors to include designated state-owned entities operating in the railway or metals and mining sectors of the Russian economy.
• Amends Directives 1 and 2 of the Sectoral Sanctions by reducing the maturity limits of new debt issued by U.S. persons to designated entities within Russia’s financial services and energy sectors.
• Expands Directive 4 of the Sectoral Sanctions. Whereas previously the directive applied to oil exploration and development projects within the Russian Federation, the Act expands Directive 4 to prohibit U.S. persons from providing goods, technology, or services (except financial services) in support of exploration or production for new deepwater, Arctic offshore, or shale projects that have the potential to produce oil anywhere in the world and that involve a designated person with a controlling or non-controlling interest (i.e., 33 percent or greater interest) in such a project. The reference to new projects suggests that it would not be prohibited for U.S. persons to be involved in existing oil projects outside of Russia. Moreover, the 33 percent threshold suggests that the United States will target projects where designated persons have as little as, but not less than, a 33 percent interest.
• Requires the president to block the assets and prohibit entry to the United States of any person determined to be significantly undermining cybersecurity on behalf of the Russian government or that is owned or controlled by such a person.
• Removes presidential discretion and makes mandatory the imposition of various sanctions set out in existing laws relating to Russia’s activities in Ukraine.
• Requires the president to impose sanctions on any persons engaged in significant transactions with Russia’s intelligence or defense sectors.
• Requires the imposition of sanctions on foreign persons determined to have knowingly exported, transferred, or otherwise provided to Syria significant financial, material, or technological support that materially contributes to the Syrian government’s ability to acquire or develop defense articles (including conventional and unconventional weapons and delivery systems).
• Authorizes, but does not require, the president to impose sanctions on any person making an investment or providing goods, services, or technology that contributes to Russia’s ability to construct energy export pipelines. Out of concern for the effects of this provision on projects involving the European Union, coordination with U.S. allies is required before the imposition of any sanctions.

Termination

As noted, if the president wants to terminate, waive, or significantly alter the Russia sanctions, he must first submit to Congress a report explaining the proposed action and the reasoning behind it. Congress then has 30 days to review the report. If Congress passes a Joint Resolution of Disapproval, the president may not take that action for an additional period of 12 calendar days, during which time he will presumably let the resolution stand or veto the resolution. Congress then has 10 days to override the veto and effectively enact the Joint Resolution of Disapproval into law, thus precluding further presidential action.

This provision is undoubtedly the most controversial part of the Act, as it somewhat stands the legislative process on its head. Instead of Congress sending legislation to the president for consideration, it requires the president to send a termination or waiver report to Congress for its consideration. It also insinuates Congress into a greater role in foreign policy that has largely been the exclusive domain of the executive branch.

North Korea

Original “Axis of Evil” member North Korea is cited for expanded sanctions in Title III of the Act in response to its ballistic missile and nuclear programs. Styled as the “Korean Interdiction and Modernization of Sanctions Act,” it largely builds on prior U.S. sanctions and UN Security Council resolutions codified under existing law, notably the North Korea Sanctions and Policy Enhancement Act of 2016. More specifically, the Act expands both the list of activities for which the president is required to impose sanctions and those for which he has the discretion to do so.

As set forth in the Act, the president is required to designate as a Specially Designated National any person who the president determines knowingly:

• Purchases or acquires from North Korea any significant amounts of gold, titanium ore, vanadium ore, copper, silver, nickel, zinc, or rare earth minerals.
• Sells or transfers to North Korea any significant amounts of rocket, aviation, or jet fuel (except for use by a civilian passenger aircraft outside North Korea).
• Provides significant amounts of fuel, supplies, or bunkering services, or facilitates a significant transaction to operate or maintain a designated North Korean vessel or aircraft.
• Insures or registers a vessel owned or controlled by the government of North Korea.
• Maintains a correspondent account with any North Korean financial institution.

In addition to the foregoing, the president has the discretion to designate any person the president determines knowingly engages in a number of activities. A non-exhaustive list of these includes:

• Purchasing or otherwise acquiring from the government of North Korea significant quantities of coal, iron, or iron ore.
• Purchasing or acquiring significant types or amounts of textiles from the government of North Korea.
• Facilitating a significant transfer of funds or property of the government of North Korea.
• Facilitating a significant transfer to or from the government of North Korea of bulk cash, precious metals, gemstones, or other stores of value.
• Selling, transferring, or providing significant amounts of crude oil, condensates, refined petroleum, other types of petroleum or petroleum byproducts, liquefied natural gas, or other natural gas resources to the government of North Korea.
• Purchasing or otherwise acquiring significant types or amounts of food or agricultural products from the government of North Korea.
• Conducting significant transactions in North Korea’s transportation, mining, energy, or financial services industries.
• Facilitating the operation of any branch, subsidiary, or office of a North Korean financial institution.

In addition to the foregoing, the Act prohibits a U.S. financial institution from maintaining correspondent accounts for a foreign financial institution if it is determined that the account is being used to provide significant financial services to any person designated under the North Korea sanctions.

It is noteworthy that most of these sanctions apply to both U.S. and foreign persons (i.e., invoke secondary sanctions). While many countries have limited trade relations with North Korea, nearly 90 percent of North Korea’s trade is with, or at least through, China. Accordingly, implementation of the Act could have a significant bearing on U.S.-Sino relations. Thus far, China’s response to the legislation has been muted.