Sanctions Top-5 for the week ending 1 February 2019

Here are five things that happened this week in the world of economic sanctions that I think you should know about.

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  1. The US Office of Foreign Assets Control (OFAC) designated Petroleos de Venezuela, S.A. (PdVSA) as a Specially Designated National (SDN) under Executive Order 13850 (as amended by newly issued Executive Order 13857) “for operating in the oil sector of the Venezuelan economy.” The designation was accompanied by the issuance of eight general licenses to facilitate certain activities by US persons involving PdVSA and several new Frequently Asked Questions about the sanctions, including FAQ 660 outlining the US Government’s demand for “the expeditious transfer of control of the company to Interim President Juan Guaidó or a subsequent, democratically elected government.”
  2. The governments of the United Kingdom, France, and Germany made good on their promise to establish a special purpose vehicle to support EU trade with Iran, in defiance of the Trump administration. According to a joint statement, the Instrument for Supporting Trade Exchanges (INSTEX) will “support legitimate European trade with Iran” with an initial focus on pharmaceuticals, medical devices, agricultural goods, and the like, which presumably are beyond the scope of US secondary sanctions.
  3. The US Treasury Department made good on its promise to remove United Company RUSAL, En+ Group, and EuroSibEnergo from the SDN List, in defiance of most members of Congress. According to a Treasury Department news release, the removals were made in exchange for an agreement that lessens Oleg Deripaska’s control over the companies and gives “unprecedented transparency for Treasury into their operations.”
  4. OFAC took steps to secure the nation’s strategic false eyelash supply with a USD 996,080 settlement with e.l.f. Cosmetics, a US-based beauty company. According to the OFAC settlement notice, between 2012 and 2017, the company imported false eyelash kits from China that included materials sourced from North Korea (hopefully not the eyelashes). The case emphasizes the importance of supply chain due diligence in keeping with the July 2018 North Korea Supply Chain Advisory from OFAC and the US Departments of State and Homeland Security.
  5. The government of Florida is moving to add home rental website Airbnb to the state’s Scrutinized List of Prohibited Companies in response to the company’s decision not to list properties in the West Bank. The company announced the decision in November 2018 pursuant to its Framework for Evaluating Listings in Disputed Areas (the company also prohibits listings in the disputed territories of Crimea, South Ossetia, and Abkhazia). Under Florida law, state government entities are prohibited from investing in companies on the list.


Kung Hei Fat Choy, everyone!

OFAC appears to be incorporating some lessons from the RUSAL affair in its approach to sanctioning PdVSA. Like RUSAL, PdVSA is a significant company with exposure to the United States economy. Unlike RUSAL, the PdVSA designation was signaled well in advance. And OFAC seems to have anticipated the fallout with a slew of general licenses and FAQs. Most importantly, the US Government has spelled out exactly what it wants in order for the sanctions to be lifted: transfer control of the company to the opposition. The same type of demand was made as part of the designation of Venezuelan television network Globovision last month. Say what you will about intervening in foreign politics, the Trump administration’s approach to sanctions is transparent if nothing else.

I’ve said it before and I’ll say it again: the European Union is doing the Trump administration a huge favor with INSTEX. Most commentators are playing this up as a conflict. But why? By taking pains to offer Iran some benefit from the Joint Comprehensive Plan of Action (JCPOA), the Europeans are keeping Iran in the deal. That means no nuclear development program — a good thing for everyone. Moreover, INSTEX will initially focus on things like medicine and agriculture, which are permitted under US law. This lessens the argument for secondary sanctions against INSTEX and gives the US State Department a chance to take the high road. (It would also give the US a helpful argument in the International Court of Justice case with Iran.) Talk about threading the diplomatic needle.

No, Airbnb is not sanctioned by the United States. The Florida action would only prohibit the state government from holding investments in Airbnb. Florida and other states have taken similar decisions regarding foreign companies operating in Iran and Sudan. Fun fact: paragraph 25 of the JCPOA required the US federal government to discourage states from using divestment laws to interfere with the JCPOA.

Did I miss something? Send me a message or comment below.

(The views expressed are my own and do not constitute legal advice. Photo from Vladislav Reshetnyak.)

US attorney in Hong Kong specializing in economic sanctions, financial crimes. Sign up for emails: LinkedIn at:

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Nicholas Turner

Nicholas Turner

US attorney in Hong Kong specializing in economic sanctions, financial crimes. Sign up for emails: LinkedIn at:

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