Update on Ukraine and Other Sanctions - Week of May 5 (with Turza Comment)
The crisis in Ukraine continued to build last week, as pro-Russian separatists in eastern Ukraine rejected Russian President Vladimir Putin's calls to postpone an independence referendum. Though Putin was initially lauded for what was seen as a conciliatory shift, his messages this week were mixed, as he also stated that he had begun to withdraw Russian forces from the Ukrainian border, a claim that was promptly contradicted by U.S. and NATO officials, who reported that they had "seen no change" in Russia's force posture. In addition, Putin appeared in Crimea for the first time as part of the Victory Day celebration commemorating Nazi Germany's surrender to the Soviet Union on May 9, 1945. Putin defended Russia's annexation of Crimea, which the United States and its European allies continue to insist was in violation of international law.
With the specter of the eastern Ukrainian independence referendum looming, the Assistant Secretary of State for European and Eurasian Affairs, Victoria Nuland, appeared before Congress early last week and provided greater clarity on the United States' approach to sectoral sanctions authorized under Executive Order 13662. Following on comments made last week by President Obama and German Chancellor Angela Merkel, Nuland stated in testimony before the House Foreign Affairs Committee that if Russia "disrupts [the May 25] elections, sectoral sanctions will be triggered." She added that another "trigger" for sectoral sanctions would be "a separatist referendum that is recognized by Russia and results in Russian peacekeepers" being stationed in eastern Ukraine. Nuland also provided additional details regarding how the United States would impose sectoral sanctions. She stated that the United States would both focus sanctions on sectors "where Russia needs us far more than we need Russia," and would ensure that any sanctions "slice across a bunch of different sectors at once." Interestingly, Nuland indicated that the decision to target simultaneously multiple sectors of the Russian economy is driven by the United States' need to maintain a unified front with its European allies. She stated that imposing sanctions on various sectors at the same time would be aimed at guaranteeing that the "pain is shared" and would "help keep Europeans together because different ones are vulnerable in different sectors."
Other (non-Ukrainian) Sanctions
a. South Sudan
On May 6, 2014, the Office of Foreign Assets Control ("OFAC") announced the designation of two individuals and entities for their involvement in threatening the peace, security, and stability of South Sudan. The designations were made under the authority of Executive Order 13664, which President Obama signed on April 3, 2014, in response to ongoing violence and instability in the country.
The Department of Treasury's May 6 announcement explained that Marial Chanuong, the commander of the South Sudanese Government's Presidential Guard, was targeted for, among other things, playing a key role in the killing of 29 bodyguards in the service of two opposition leaders, Riek Machar and Gier Chuang. Peter Gadet, identified as the commander of anti-government forces working alongside Riek Machar, was designated for his role in perpetrating violence across the country, including indiscriminate attacks against women and other civilians.
b. Drug Kingpin Designations
On May 7, OFAC announced the designations of individuals and entities alleged to be involved in the trafficking of synthetic drugs, including synthetic marijuana and stimulants, such as so-called "bath salts." The designations included three Canadians – Daniel, Kevin and Francine Louie – and a business associate, Tramayne Primus, a national of Barbados. Four foreign entities – Source1herbs, Research FX Consultants Limited, Leading Edge Sourcing Company Corporation, and Boyle Chemical Co., Ltd. – were designated for allegedly facilitating the trafficking and money laundering operations of the four individuals.
c. Syria
On May 8, OFAC announced a number of designations under Executive Order 13582, targeting individuals and entities alleged to have provided material support and services to the Syrian government, including the country's Central Bank and the state-run oil marketing firm, SYTROL. Most significantly, the designations included Tempbank, a Moscow-based financial institution alleged to have arranged for the transfer of funds to the Central Bank of Syria and supported the operations of SYTROL. Mikhail Gagloev, Tempbank's Management Committee Chairman, was also designated in connection with his work for the bank, including business trips to Damascus to negotiate with the Syrian regime. Other entities designated under Executive Order 13582 included the Banias Refinery Company and the Homs Refinery Company. Meanwhile, OFAC also designated a senior Syrian military commander, Bassam Al-Hassan, and five Syrian government ministers, under Executive Order 13573.
Turza Comment: Despite comments from Russian President Vladimir Putin urging restraint, discussion has continued in the United States and Europe regarding a potential new round of sanctions. These could include sector-based measures and may be announced as early as next week if, for example, Moscow recognizes a vote for independence in a planned referendum in eastern Ukraine on Sunday, May 11. As reflected in the comments of Assistant Secretary Nuland, sector-based sanctions may be designed to have maximum immediate impact on the Russian economy, while allowing the burden to be shared among European countries. As previously discussed, these sectors may include energy and financial services, among others.At the same time, it remains to be seen whether the imposition of sanctions on Tempbank represents a potential new "Syrian front" in U.S. efforts to pressure Moscow. The Syrian regime reportedly has close ties with Russia and Russian financial institutions, and the Obama Administration may seek to use its authority under Executive Order 13582 not only to deprive Damascus of funding, but also to isolate Russian banks providing support to the Syrian government.
Related news: Sanctions Update: Ukraine and Beyond (with Turza Comment) (May 2, 2014).See also: Cabinet Sanctions Page (some materials accessible to Cabinet subscribers only). For more information, please contact Dale Turza, James Treanor or Keith Gerver.