The Biden Administration’s release of inaccessible Iranian funds in exchange for the release of Americans has placed that sanctions regime at the center of both congressional and public attention. Russia sanctions continued to be implemented, with a large designation package and likely future measures to focus on art and child abduction.
During the reporting period, the Biden Administration announced that it has proceeded with its agreement with Iran, which involves issuing a waiver giving Tehran access to $6 billion in oil revenue that the U.S. had frozen through sanctions. Under the agreement, the Administration will also free five Iranians under U.S. detention, and in exchange, Iran will release five Americans it has detained. The agreement resulted in a sharp rebuke from multiple congressional offices and others, as noted below.
The Administration issued the largest designation package in months, with nearly 170 designations from Treasury and State targeting Russia’s defense industrial base, financial institutions, military suppliers, and others. Democratic People’s Republic of Korea (DPRK or North Korea) leader Kim Jong Un’s visit to Russia dominated headlines during the reporting period, and the sanctions designations may have been a response to that meeting. It was reported that Russia is seeking a replenishment of conventional munitions from North Korea, and the Biden Administration has warned North Korea that it could face additional sanctions if these arms deliveries were to take place, as it would violate not only U.S. but also UN sanctions against North Korea. In August, the U.S. designated “three entities tied to a sanctions evasion network attempting to support arms deals between Russia and the Democratic People’s Republic of Korea.” Another area to watch is the UN Security Council, where during the reporting period Russia blocked the extension of Mali-related sanctions, and whether Russia plans any additional actions with respect to UN sanctions against the DPRK.
Russia’s move to a digital ruble (see August Sanctions Watch) will continue to be an issue, and Binance’s reported promotion of its platform in Russia despite an ongoing Department of Justice investigation into Binance for alleged violation of U.S. sanctions with its services in Russia, may refocus attention on this issue. Two areas of potential activity relevant to new sanctions or sanctions enforcement actions center around the art market, and the status of Ukrainian children in Russia. Last month, the Ukrainian government launched an effort to “identify art, collectibles, and luxury goods currently owned by sanctioned persons to alert art market participants if a sanctioned person attempts to transact in the art market.” In July, Canada sanctioned Mikhail Piotrovsky, the Director of the State Hermitage Museum in Russia for supporting Russia’s war in Ukraine. Given the direction both in Ukraine and with respect to Canada, and the Administration’s focus on the art market to evade sanctions, the Administration may increase the number of designations in this particular area. Another area that may see additional expansions with respect to sanctions designations by the Administration is related to Russia’s forced deportation of Ukrainian children. During the reporting period, the U.S. designated two entities and 11 individuals for their respective roles in the deportation of Ukrainian children, and Ukraine is reportedly working on another round of sanctions with a focus on targeting Russian elites involved in the forced deportation of Ukrainian children.
The Administration also continued to focus on Russia sanctions evasion networks, particularly surrounding export controls. The Department of Commerce issued a temporary denial order suspending the export privileges of three individuals and four entities located in Cyprus, Latvia, Tajikistan, and Russia for allegedly being part of a Russia-based illicit procurement network providing U.S.-sourced technology to the Russian military. The Financial Crimes Enforcement Network (FinCEN) also released a financial trend analysis with suspected Russian export restrictions violations drawing attention to the jurisdictions of China and Hong Kong as being particularly important to supplying sensitive U.S.-origin goods to Russia.
Secretary of Commerce Gina Raimando’s trip to China dominated headlines during the reporting period, where she reportedly rebuffed a request from the Chinese government to relax export controls. Of particular importance was the debut of Huawei Technologies Co.’s new smartphone, the Mate 60 Pro, calling into question the effectiveness of U.S. export controls in preventing such advances. During the reporting period, Treasury also expanded the scope of sanctions against Burma to cover any foreign person that operates in the jet fuel sector of the Burmese economy in response to reports surrounding the Burmese government’s use of military jets and attack helicopters against civilians.
During the reporting period, the Administration designated two individuals and one entity for financing North Korea’s WMD and ballistic missile programs. The Administration also remained focused on North Korea’s cyber-enabled crime, sanctions evasion and money laundering, particularly in the aftermath of the designation of Russian national Roman Semenov, a co-founder of the designated virtual currency mixer Tornado Cash (see August Sanctions Watch). During the reporting period, FinCEN hosted a dialogue on combating North Korea’s increasing use of cyber events and cyber-enabled crime. The FBI also announced that it had tracked down an estimated $40 million in cryptocurrency funds recently stolen by the Lazarus Group and APT38, who are affiliated with North Korea.
Appropriations and National Defense Authorization Act (NDAA) Process
With Congress back in session this month, the appropriations and NDAA process will move into overdrive, with the former being the most politically perilous due to the threat of a shutdown. Sanctions-related amendments have already been offered to the House version of the State, Foreign Operations, and Related Appropriations legislation.
The agreement with Iran to release $6 billion in return for detained Americans was met by fairly harsh criticism in the Congress from Republicans and some Democrats, in particular Senate Foreign Relations Chairman Bob Menendez (D-NJ). The House also passed two major pieces of Iran sanctions legislation:
HR 589: The MASHA Act—This legislation expands property- and visa-blocking sanctions on certain foreign persons (individuals and entities) affiliated with Iran. It also requires the Administration determine whether to impose human rights sanctions against (1) the Supreme Leader of Iran and any official in the Office of the Supreme Leader of Iran, (2) the President of Iran and any official in the Office of the President of Iran, and (3) any entity overseen by the Office of the Supreme Leader of Iran which is complicit in supporting human rights abuses or terrorism. It passed in the House by a vote of 410-3 on the anniversary of the widespread outbreak of anti-government protests following the death of Masha Amini at the hands of Iranian government forces.
HR 3152: The Fight CRIME Act—This legislation mandates the application of sanctions to any foreign individuals, entities, and states that are knowingly involved with Iran or Iran-aligned entities in certain missile-related activities, such as (1) acquiring, possessing, developing, transporting, transferring, or deploying missiles or related items and technology that are covered by the Missile Technology Control Regime (MTCR), or (2) developing missile or drone technologies. This is the most significant legislation targeting Iran’s ballistic missile program to pass the House in over 6 years. It passed the House 403-8.
Venezuela emerged as a concern for certain quarters of Capitol Hill. Following reports of a relaxation of the Administration of sanctions against Venezuela, individual Senators such as Senator John Barrasso (R-WY), Ranking Member of the Senate Committee on Energy and Natural Resources, stated that Venezuela sanctions should not be lifted but increased. Similarly, Senator Marco Rubio (R-FL), noting closer ties between Venezuela and China, also cautioned against weakening or lifting sanctions against Caracas.
Finally, approximately 20 senators sent a letter to the State Department laying out expectations for what would constitute a free and fair election in Venezuela, and could be interpreted as a message regarding support for an increase in sanctions against Maduro if political progress again stalls or regresses.
Watch for additional measures by the Administration pertaining to art, in addition to the continued targeting of Russia’s defense-industrial base. In the Congress look for additional Iran sanctions measures both as amendments to bigger pieces of legislation and freestanding.