Experts Predict More Aggressive Sanctions, Growing Role of Congress

The report, published March 27, draws on recent history to analyze the current sanctions climate and predict certain trends, including a more aggressive U.S. stance on deploying unilateral sanctions, the growing role of Congress in imposing sanctions, an increase in unintended consequences as sanctions become more detailed, growing efforts by foreign governments to evade U.S. sanctions, and the importance of weighing the benefits and the weaknesses inherent in the evolving use of technology across many sectors.

Several members of the task force spoke at a March 27 panel to summarize their findings, including Howard Berman, a former U.S. congressman; Paula Dobriansky, former U.S. under secretary of state for Democracy and Global Affairs; and Adam Szubin, former director of Treasury’s Office of Foreign Assets Control. The task force brought together former U.S. policymakers, industry executives and independent experts to analyze sanctions trends and offer suggestions to current U.S. officials.

The task force said the U.S. has recently shown a willingness to use unilateral sanctions more aggressively and quickly, drawing from two recent examples: the “sweeping” round of Russian sanctions Congress passed in 2017 and the president's decision to reimpose sanctions against Iran after withdrawing from the Iran nuclear deal in 2018. In both instances, the report noted, there was no “significant multilateral support” from other countries. Although the task force said multilateral sanctions are still common, such as the joint U.S.-United Nations sanctions against North Korea, there has been a "renewed willingness" toward the U.S. deploying sanctions on its own.

The task force also said Congress should be “restrained in its attempts to manage sanctions implementation,” warning that a “too-tight congressional straightjacket on the executive branch … bears the risk of turning one of America’s few tools of coercive diplomacy into a poor tool to induce change by target countries.” The report said too much congressional oversight can undermine the president's ability to reverse sanctions to reward policy changes by foreign governments, “undermining the power of sanctions to incentivize behavioral change.”

The panel drew on an example of this from March 22, when President Donald Trump appeared to contradict the Treasury Department when he announced the withdrawal of certain North Korean sanctions that had reportedly been imposed one day earlier. Although the move reportedly caused confusion among government officials and some U.S. representatives (see 1903270056), Szubin said sometimes it is “indispensable” for the president to have the power to provide sanctions relief. “It’s appropriate for a president to be able to say, ‘I think this is the right moment to lift North Korea sanctions based on what I’m hearing from the North Korean leader,’” Szubin said during the panel. “If the sanctions are codified in legislation to such a strict degree that they can't be lifted by a secretary of state or a president, then that secretary of state has no leverage when it comes to the sanctions. He can’t bring those chips to the table.” Dobriansky agreed, saying “the secretary of state should have some flexibility and not be constrained in this process.”

The report also mentioned an increase in unintended consequences from U.S. sanctions. The report referenced April 2018 sanctions against Russian businessman Oleg Deripaska that “caused global aluminum prices to soar by more than 20 percent.” The report noted that several current proposals to increase sanctions on the Russian energy sector “could cause increases in global energy prices and have significant adverse impacts on major U.S. and European firms.”

Foreign efforts to evade U.S. sanctions are also on the rise, the report said. The report said there has been a “substantial increase” in initiatives to “develop payment channels and other financial networks that do not touch the United States.” Examples include China’s efforts to invest and establish ”cross-border payment systems” to increase “the role of the renminbi in international trade,” the report said, as well as the creation of a special purpose vehicle for trade facilitation called an Instrument for Supporting Trade Exchange, or INSTEX, a transaction mechanism created by several European countries that allows for trade with Iran despite U.S. sanctions. “U.S. policymakers should monitor the progress of such financial initiatives,” the report said, “and should not underestimate the potential risks, particularly over the longer term.”

The report also detailed the increasing role of technology in sanctions, including the “rapid expansion of publicly available satellite imaging” to track illegal Iranian and North Korean oil shipments. Artificial intelligence and machine learning, the report added, are making it “easier for banks and other large companies to identify and stop suspicious financial patterns linked to money laundering and sanctions evasion.”